Tuesday, 29 January 2013

Protect your company - and your shares

Employers should steer clear of new plans to award company shares to staff in exchange for employment rights.

That's the warning from our employment law specialist, John Mehtam, who said the new plans that come into force in April could see employers needlessly giving away shares in their company.

"The new type of contract says that in return for shares in your company, the employee would give up their rights on unfair dismissal, redundancy, the right to request flexible working and time off for training.

"But in fact, when it comes to new staff, they are not actually entitled to unfair dismissal or redundancy rights until they've worked for you for two years.

"So they're only really giving up the right to request flexible working and time off for training, and in reality they don't have an automatic right to either - more importantly, these rights don't even begin from the first day they join you."

John warned though that even more worryingly, if someone on the new type of contract left the company or had to be sacked, the employer would not automatically get their shares back.

"So anyone who left under a cloud, or who wanted to be awkward, could hold you to ransom because you'll have to pay to get the shares back."

The new owner-employee contracts will be open to all new staff if the company wants to implement them, but they will be optional for existing employees.

"Clearly even though these contracts may seem like a good idea, as an employer you would be giving away far too much with very little in return," said John. "Employers should make sure they are fully informed of the tiniest details before taking this approach - or you may risk your company's future without any need to do so."