The Sunday Times - Business Doctor: Taking on a member of staff as employee shareholder

Peter Done: Managing Director and Founder

October 24 2016

PP Writes: I am thinking of taking on a member of staff as employee shareholder.  Assuming the member of staff is willing, how do I go about doing this? Employee shareholder is a separate employment status for a person working under an employee shareholder employment contract. Anyone can be an employee shareholder so long as certain conditions are met. Firstly, both the individual and the employer must agree that the individual will be classed as an employee shareholder. The employee must be given fully paid up shares in the company, or parent company, which have a minimum value of £2,000 and a written statement of particulars of an employee shareholder. The written statement has to include information such as: the employment rights maintained and given up by the employee shareholder; that a minimum of 16 weeks’ notice of an early return to work from maternity and adoption leave is required; and, whether any voting or dividend rights are attached to the shares. The individual must get advice from an independent adviser on the terms of the written statement and the employer has to pay for this. Once advice has been received, the individual cannot accept the role until seven days have passed. The seven day period begins on the day after advice is received. Only once the seven days have passed, and the conditions have been met, will the individual be an employee shareholder if they accept the role. As the status of employee shareholder is different to ‘normal’ employees, it is essential that employers are aware of the differing rights employee shareholders have, especially those which they do not have. An employee shareholder has the right to statutory payments, including sick pay, minimum notice periods, national minimum wage, paid annual leave, rest breaks and to not be discriminated against. The rights that the employee shareholder does not have should be included in the written statement. The most important difference is that an employee shareholder does not have the right to not be unfairly dismissed, unless the dismissal is for a reason which is automatically unfair, discriminatory or in relation to health and safety. They also lose their statutory rights to a redundancy payment, to request flexible working except in the two week period after returning from parental leave and to request time off for training. The employee shareholder will also have to give minimum notice to return early from maternity or adoption leave. Employers can choose to offer contractual rights that are more beneficial than this, but are not required to do so.

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