Employees owning shares in their employer is good for the business and can help drive the right behaviours. At first glance this new proposal seems simple and generous, and will be of particular interest to start-ups. But its success will depend on the detail and consultation will be crucial. For example, since start-ups are not generally listed, they may not have an easily accessible share valuation. Preparing valuations could be costly and time consuming. Another issue is whether or not acquiring the shares in the first instance will cause an income tax liability for the employees. Generally, unless individuals pay full value for shares acquired from an employer, the value of the shares will be a taxable benefit. The government has a real opportunity to make this an attractive plan by either waiving any income tax on acquisition or deferring this tax until the shares are actually sold.
Carol Dempsey is a partner at PricewaterhouseCoopers.
The employee-ownership scheme may appeal to a few high-growth start-ups but it probably won’t make much difference to most companies, whose big problem is a lack of demand rather than red tape. The CBI has said it is “a niche idea and not relevant to all businesses”. It’s not clear why parts of the coalition government are so concerned about employment rules and other regulations on businesses. The UK has one of the least regulated labour markets in the OECD and, according to a recent survey commissioned by the business department, just 6 per cent of SME owners think that regulation is the main obstacle facing their business. Rather than fiddling around with employment law, the chancellor would be better off focusing his attention on boosting growth with a major programme of infrastructure investment.
Kayte Lawton is a senior research fellow at the IPPR.