What is an employee shareholder? What employment rights do they have? Do they have to pay taxes on their shares? Your employment status may be an employee, in which case you are entitled to certain rights. Then, if you also become a shareholder, you will receive shares of the company in which you work. Your Benefits will tell you everything you need to know about being employee shareholders.
What is employee shareholder status?
An employee shareholder works under employment contracts. More specifically, an employment contract. Additionally, the employee needs to have a minimum of £2,000 in shares in the company of your employer or their parent company.
If you are an employee, you can become an employee shareholder. In fact, this is the case if both you and your employer agree for this to become true. Furthermore, there are certain things that need to be true and happen in order for an employee to also become a shareholder.
Some people may not understand why an employee or employer may want employee shareholders. The reason for it is because these types of employees are directly impacted by the performance of their company. The better the company does, the higher the value of the shares. The worst the company does, the lower the values.
Can I become an employee shareholder?
Employee shareholders can be hired. However, existing employees can become employee shareholders. For this to be true, certain things need to apply
In order to become an employee shareholder, 6 conditions need to apply to the employer and employee. Otherwise, the employee may not become a shareholder. The 6 conditions are detailed below.
Note that if your employer proposes for you to become an employee shareholder, they will pay for independent advice. Then, you will have a third party assess the pros and cons of becoming an employee shareholder for your situation.
If you are not eligible to become an employee shareholder, you will remain an employee. Then, you will have mostly the same employment rights as an employee. However, note that although the employment rights of employee shareholders and employees are similar, they are not exactly the same.
Lastly, note that there are a lot of good reasons to become an employee shareholder. However, there are also many drawbacks. As such, make sure that you weigh all the pros and cons before making a decision. Your employer will also have to provide you with an independent adviser to help you decide.
Rights of an employee shareholder
Furthermore, employee shareholders have the same employment rights as workers and employees. More specifically, you have to right to:
- Not be discriminated against;
- Have rest breaks;
- Not be treated worst because you are a part-time or fixed-term worker;
- Receive paid annual leave;
- Not have your wages be illegally reduced;
- Receive at least the National Minimum Wage;
- Receive time off in case of emergencies;
- Have a minimum notice period if your employer is terminating your employment, or dismissing you;
- Not be dismissed for reasons based on discrimination (see your protected characteristics below), or for reasons based on your safety or health;
- Statutory paternity leave and pay, maternity leave and pay, and adoption leave and pay;
- Statutory Sick Pay.
You also have another right: transfer of undertaking (TUPE) as well as collective consultation. What this means is you will have protections in situations when the owner of your business changes.
Does an employee shareholder not have certain employment rights?
An employee shareholder has the same rights as a worker and employee. However, there are certain rights that an employee shareholder does not have. More specifically, this is the following:
- Being able to ask for flexible working (however, note that you can request flexible working for the 2 weeks after you come back from your parental leave);
- Statutory Redundancy Pay;
- Being protected against unfair dismissal (however, you cannot be dismissed because of discrimination, or for reasons related to your own safety or/and health)
- Statutory rights (some, not all) related to asking to take time off to take part in training.
You cannot be discriminated against. Furthermore, you cannot be dismissed because you are discriminated against. In fact, you have some protected characteristics. Indeed, they are as follows:
| Protected characteristics in the UK in 2022 | |
|---|---|
| Characteristic | Is it a protected characteristic? (and thus illegal to discriminate against it) |
| Sexual orientation | Yes |
| Personal belief or religion | Yes |
| Sex | Yes |
| Race (which includes national, ethnic origin, nationality or colour) | Yes |
| Being pregnant, or on a benefit like maternity leave | Yes |
| Having a disability | Yes |
| Being in a civil partnership or marriage | Yes |
| Having undergone gender reassignment | Yes |
| Age | Yes |
| Education | No |
Even if you are an employee shareholder, you may receive more leave or pay than the statutory amount (like the National Minimum and Living Wage, or types of leave). In fact, your employer can allow you to have more employment rights than the legal minimum. This differs from employer to employer.
Can employee shareholders get tax relief or have to pay taxes?
Employee shareholders can receive certain tax relief. More specifically, they can get tax relief on the first £2,000 that they receive. More specifically, £2,000 worth of shares. Additionally, they must have received them prior to 1 December 2016.
An employee shareholder still has to pay taxes. In fact, this is the case for shares that are sold and bought. However, the shares that your employer gives you need to be fully paid for. As such, they should not make you pay for them. In fact, it is a condition for employers of employee shareholders.
Employee shareholders: what are the 6 conditions?
You can apply to become an employee shareholder. Then, you would need to apply for a job where you would be able to apply as such.
You could be a regular employee. Then, your employer may want to change your employment contract, in order to make you an employee shareholder. If this is the case, but you do not want this to happen, you do not have to accept the changes.
You may receive Jobseeker’s Allowance. Additionally, Jobcenter Plus may have told you about an employee shareholder job. Then, note that you do not have to apply to this job. In fact, if you do not, you will still likely continue to be able to receive Jobseeker’s Allowance.
You may also be an employee shareholder. In fact, this could be true even if you are an existing employee. However, there are certain conditions that need to be true for your situation. More specifically, the following 6 conditions need to apply:
- You must not pay for the shares that you will receive;
- Your employer has to put in writing what being an employee shareholder will mean;
- You and your employer must agree on you becoming an employee shareholder;
- You must receive at least £2,000 worth of shares from your employer, for their or the parent company, and the shares must be completely paid for;
- Your employer needs to pay for an independent adviser, which will advise you on the conditions of becoming an employee shareholder. This is regardless of if you agree to become one or not;
- You must agree or disagree to the offer 7 days or later. You cannot agree to become an employee shareholder earlier than 7 days after the offer is made.
What are employment rights?
Employment rights are things that you are protected from as an employee or worker. What this means is that your employer cannot treat you in certain ways, and if they do, you have some recourse.
If your employment rights are violated, you have some recourse. For example, you could take your employer to court. This is the case if you were discriminated against. In fact, discrimination against any type of worker or employee is strictly prohibited.
Employee must receive more employment rights in return to shares offered. They may sell their shares, not outlined in a written statement. This is regardless of income tax, type of employment, shares in the employer’s company, attach to the shares exempt from capital gains tax, independent legal advice, majority shareholders, and voting rights attached.
