Owner-Employee Contracts – A New Kind of Employment Relationship?


The new owner-employee contracts announced on 8 October 2012 by George Osborne at the Conservative Party conference are likely to be of interest to small or fast-growing businesses with a need to incentivise key employees and who prefer to be able to dismiss employees quickly, if needed, without having to following lengthy dismissal procedures. The proposals are designed to change the mindset of employees from being “just” workers to being owners of the businesses in which they work. The proposals will come into effect in April 2013 for employers who choose to implement them for new employees.

Owner-employee contracts -

Businesses can opt to give employees shareholdings worth between £2,000 and £50,000 as part of a contract under which the employees waive certain employment rights in advance, notably the right not to be unfairly dismissed and the right to a statutory redundancy payment. Both of these rights are currently available to employees after they have served two years’ service. Other rights which owner-employees could be required to waive are the right to request to work flexibly and the right to request time off for training. Female owner-employees could also be required to give 16 weeks’ notice to return from maternity leave instead of eight weeks’ notice.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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