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United Kingdom Proposes to Introduce New Owner-employee Contract

(Sunnyvale, CA)- With the intention of implementing new rules in April 2013, the UK government has announced a proposal to introduce a new kind of employment contract called the “owner-employee contract”. A participating owner –employee may be offered shares in the company, in exchange of the employee forgoing some of his employment rights. These shares would be exempted from capital gains on sale.

The employment rights that can be given up by such employees may include following:

  • unfair dismissal,
  • redundancy,
  • flexible working and
  • time off for training.

The shares so granted may range from minimum of GBP 2,000 to maximum of GBP 50,000.

Owner-employee status, however, will be voluntary for existing employees of organizations. An employer will have the freedom to choose if all, or selected new employees would be offered owner-employee status. It should be noted that an employer may give more liberal employment benefits to owner-employees, than the least standards specified under new rules.

The new employment “owner-employee contract” will have a provision for the employer to buy back the shares at a reasonable price in case where the owner-employee quits the organization, under certain prescribed conditions.

It must be noted that employee share ownership schemes like the enterprise management incentive (EMI) would still be available for those enjoying an owner-employee status.

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Published: December 10, 2012. The information provided on this page is intended merely to highlight issues for general information purposes only. It is not comprehensive nor does it provide legal advice. Any information is subject to change without notice. No liability whatsoever is accepted by Nair & Co.


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