The government has published a consultation on controversial plans for its 'employee owner' scheme - widely dubbed as a charter to swap employee rights for shares.

The move follows chancellor George Osborne's (pictured) announcement about the proposed new scheme on 8 October. It aims to empower companies with the option to increase the flexibility of hiring and firing as their businesses grow.

Under the new employment contract, employees will be given between £2,000 and £50,000 of shares, of which any profits would be exempt from capital gains tax. In exchange, they will give up their rights on unfair dismissal, redundancy, and the right to request flexible working or 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.

Owner-employee status will be optional for existing employees, but both established companies and new start-ups would be able to offer only this new type of contract for new recruits. Companies hiring owner-employees will continue to have the option of inserting more generous employment conditions into the employment contract if they want to.

Business minister, Jo Swinson, said: 'We know that engaged employees are more productive and motivated. This scheme increases the options for business and brings greater flexibility to companies and employees in determining their employment relationship.

'By responding to the flexible needs of fast growing companies, it will help them take people on, providing a real incentive for employers and employees.'

Martin Griffiths, associate in the tax group at Charles Russell, said: 'Other than the exemption from capital gains tax, there is not a great deal of other detail on the tax aspects in the consultation. What we do know is that owner employees will be treated as employees for tax purposes. The government has also confirmed the shares will be subject to income tax and NICs under the normal rules and will not be eligible for any tax-advantaged employee share scheme.'

Legislation to bring in the new employee owner contract was introduced today (18 October) through the Growth and Infrastructure Bill. If approved, companies could offer the new contract from April 2013.