Employee shareholder status came into effect on 1 September. Early indications are that the government’s attempt to encourage growth and allow more flexibility to hire and fire may be a bit of a damp squib, but with the John Lewis model such a success, will it meet with more approval from the retail and consumer goods sector?

Under the new regime, an employee can agree to give up rights in return for shares with a market value of at least £2,000. Those rights are: time off for study or training, flexible working (except parental leave), unfair dismissal, statutory redundancy pay and longer notice periods after maternity leave.

The new status may be attractive to those wanting to take advantage of capital gains tax savings. But provisions introduced to protect employees make the process more onerous, time-consuming and expensive. The employer must explain in writing what rights are being sacrificed and the employee must take advice, which the employer has to pay for, and be given a seven day cooling off period.

Existing employees will be protected from dismissal or unfavourable treatment if they don’t agree, but offers to new hires can be conditional on them becoming employee shareholders.

Concern has also been raised about how shares that are not traded publicly are to be valued, with limited guidance on this. Companies will either need to introduce a scheme to deal with this new class of shareholder or amend an existing scheme, and consider what rights attach to these shares and what will happen when the employee’s employment is terminated.

Will companies welcome this new status, given the risk of being seen to undermine workers’ rights? The John Lewis approach offers the ‘carrot’ of greater employee involvement and ownership but without the ‘stick’ of reduced employment rights. Sainsbury’s chief executive Justin King is reportedly not a fan, which doesn’t bode well. It is the potential for tax savings that has garnered support.

So, perhaps this is one for higher-paid executives and smaller, owner-managed companies and start-ups.

Bernadette Daley is a partner at law firm Mayer Brown