Is the lure of owning an amount of shares, and not paying capital gains tax on the profit that those shares make (if any) a fair exchange for surrendering some of your employment rights?
The Chancellor’s proposal has about as much detail as a child’s sketch of a cloud so let’s consider the following scenario:
You are invited to an interview for a new job. You are nervous. Your interviewer explains that the company will give you some shares in return for which you will not be able to bring any claims against the company in the future for unfair dismissal or redundancy. What would you do?
Perhaps if you have been out of work for a period of time, then the promise of a salary (and shares to boot) might fill you with evangelical rapture; but I think it unlikely. Perhaps you will feel pressured to sign, or you think that there will be a line of job applicants behind you who will sign that agreement?
What if you are a current employee – and not one of the new wave of employee shareholders that you see sprouting up all around you, perhaps you are over 60 and wondering how long you are going to continue working – would you want to get in on the action?
What if you were assured that ‘everyone is doing it these days’. Is it not foreseeable that employees will be bull-dozed into signing up to such terms without seeking legal and financial advice?
Dividing or uniting a nation?
Surely unscrupulous employers (and yes, there are some out there) could simply give their employees a token amount of non-voting shares (say £2,000 worth); or even vote to amend the classification of shares later on, and then send those lambs to the slaughter as and when they choose. What will those employees do then?
They will not be able to bring a claim in the employment tribunal for unfair dismissal/automatically unfair dismissal/redundancy. So it may be that unless they can tie their dismissal to a protected characteristic under the Equality Act 2010, or another strand of employment law, they may be without a remedy.
It is highly unlikely that there will be lines of shareholders outside the High Court seeking to issue expensive unfair prejudice petitions.
If the purpose behind the idea is to give workers a vested interest in the business, with the carrot of not paying capital gains tax on any profit that those shares make, then there are already existing schemes in operation such as the Executive Management Incentive scheme.
What of the charge to income tax, and national insurance – will these disappear? They were not mentioned by the Chancellor. This idea might seem like an early Christmas present to some tech and start-up companies in Tech City; but is it going to apply to public companies – with all the statutory restrictions on what they are allowed to do?
As a one size fits all proposal for ‘one nation’ it is sadly lacking. Perhaps the proposal could more accurately be described as dividing rather than uniting the nation.
Philip Henson is partner and joint head of employment law at commercial law firm, DKLM.
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