From 4 August 2000, a company offering its employs the chance to buy partnership shares in an employee share option plan must provide a statutory notice about its effect on the employee’s entitlement to statutory sick pay, statutory maternity pay and contributory social security benefits.
Partnership shares are shares which an employee buys himself to match shares provided free by the employer. The cost of these shares is deducted from the employee’s gross pay which has the effect of providing tax relief at source.
The deduction also has the effect of reducing gross pay for the purposes of certain benefits. For example a reduction in gross pay for the eight-week reference period for statutory maternity pay will reduce the 90% of gross pay that the woman receives for the first six weeks of her maternity pay period.
The position is more serious if the reduction has the effect of reducing the weekly pay below the lower earnings limit so that the employee loses completely any entitlement to statutory sick pay, statutory maternity pay and to certain social security benefits. The employee could lose entitlement to jobseekers allowance if subsequently unemployed, and could find that the year does not count towards the state retirement pension. In practice, this will usually not be the case as employees who participate in these share schemes are likely to have earnings well above the lower earnings limit for social security. However the duty to provide the notice is a statutory one. The employer must follow the exact wording provided.
The notice must state:
“Deductions from your pay to buy partnership shares under this agreement may affect your entitlement to, or the level of, some contributory social security benefits, statutory maternity pay and statutory sick pay.
“They may also have a similar effect in respect of some contributory social security benefits paid to your wife or husband.
“With this agreement you should have been given information on the effect of deductions from your pay to buy partnership shares on entitlement to social security benefits, statutory sick pay and statutory maternity pay. The effect is particularly significant if your earnings are brought below the lower earnings limit for National Insurance purposes, and is explained in the information: it is therefore important that you read it. If you have not been given a copy, ask your employer for it. Otherwise a copy may be obtained from any office of the Inland Revenue, the Department of Social Security, or, in Northern Ireland, the Department for Social Development. You should take the information you have been given into account in deciding whether to buy partnership shares.”
The Employee Share Ownership Plans (Partnership Shares —Notice of Effects on Benefits, Statutory Sick Pay and Statutory Maternity Pay) Regulations SI 2000 No 2090.
[2000]