December 2012 Selling Employment Rights

02/12/2012
Under plans announced by George Osborne it will be possible for employers or employees to exchange some of their employment rights for shares in the business they work for, any gains on which will be exempt from capital gains tax (CGT).

CGT is currently charged on the difference between an asset’s value at the time it is acquired and its value when it is disposed of.  So, for example, if a person were given £5,000 of shares and sold them later for £10,000, the gain would be £5,000.  Currently, CGT does not kick in until a person has made at least £10,600 from selling assets.
 
Under current proposals, employees could be given between £2,000 and £50,000 of shares exempt from CGT.  In return they will give up their rights on unfair dismissal, redundancy and the right to request flexible working and time off for training, and will be required to provide 16 weeks' notice of a firm date of return from maternity leave instead of the usual eight.
 
At present, employees who have been unfairly dismissed can, within three months, take a claim to a tribunal if they have been with a company for at least two years, unless they were employed before 6 April 2012 in which case it is a year.
If they have been dismissed for an "automatically unfair" reason they can make a claim regardless of how long they worked for their employer.
In addition, employees have a statutory right to ask for flexible working – for example, if they have a child under 17 and have worked for longer than 26 weeks at a company.  Employers must seriously consider an application and only reject it if there are good business reasons for doing so.
 
From April 2012 companies of any size will be able to offer the new type of contract as an option to existing employees, but will be able to force it on new recruits if they choose.
In theory this means any large company could employ people on the new-style contract, potentially resulting in hundreds of thousands of workers across the country losing their employment rights.
And the bad news doesn’t stop there.  Firstly, the maximum statutory unfair dismissal compensation of £72,300 is to be slashed.  The proposed replacement is the lower of either an individual's annual net salary or the national median average earnings which is presently £26,000.
People wishing to lodge a claim in the employment tribunal will also for the first time have to pay and further payments will need to be made along the way (including when the case is listed for hearing).  It is proposed that unfair dismissal and discrimination claims will cost £250 to issue and a further £950 to get a hearing date.  Such payments are likely to depend on the financial circumstances of the claimant, but it is not clear how this will work.
The following measures are also due to be introduced:

Tribunals are to be streamlined to make it easier for judges to dismiss weak cases at an early stage.

The government intends to work with conciliation service Acas to simplify its guidance on disciplinary and grievance matters which small companies supposedly find confusing.
 

All the proposals are still in the consultation stage.

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