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Providing tax-free shares to forgo employment rights

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Image: adamr / FreeDigitalPhotos.net

Interesting employment law developments are happening in the UK. Beginning in April 2013, British employees will be offered a new option in employment contracts, where they may own shares in the company they work for and in exchange, will forgo certain workers’ rights.

Tory Chancellor George Osborne introduced the new legislation earlier this month. The changes will be fast-tracked so as to be implemented quickly, allowing workers to opt-in within six months.

The new law will give employees, within their employment contracts, the option to own shares within their parent company between the value of £2,000 and £50,000 at the expense of protection from wrongful dismissal and redundancy within that company. The premise insinuates that employees who have a personal financial investment in the company greater than their salary will endeavour to take greater care with their work, while being rewarded by the overall success of the company.

These employee-owned shares will also be exempt from British Capital Gains Taxes. The loss for the U.K. government however will not necessarily be great from this tax exemption, as the legislation is aimed toward small and new businesses, likely to generate a relatively smaller revenue overall. The shares for rights options will be available to larger businesses, as well.

While the changes have been called innovative while also best-suited to a niche market, it will be interesting to watch how these changes mitigate employment standards in England. The changes themselves lean toward the far right in economic principle, and were received well by business owners. However, they may very well benefit employees who are already working under conditions that may be precarious in terms of job security, with long hours, and without the potential prospect of financial growth.

Many businesses across Canada offer company shares as hiring incentives, though employees for these companies are still protected under provincial employment and labour standards and have their rights as workers intact, regardless of their stake in their workplace’s financial prosperity. While the overall employment outlook is generally sunny (according to reports from the: OECD) at least in terms of global context, the appeal to employers could cotton on.

What do you think? As an employer, would you be interested in employees having ownership in the company, in exchange for their rights as workers? As an employee, would the trade be potentially worthwhile?

Lauren Bride
First Reference Human Resources and Compliance Editor

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Lauren Bride

Writer and editor at Hudson's Bay Company
Lauren Bride, B.A. (English Literature / Philosophy) is a writer, copywriter, and editor, working in both fiction and nonfiction. She has done extensive writing and editing for commercial, private, and government clients, as well as story editing and fiction publication. Lauren also volunteers with the not for profit group NABORS (Toronto). Read more
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