27 October 2012 – ThomsonReuters – The Conservative Chancellor George Osborne used his address to his party’s conference in Birmingham last week to reveal further measures aimed at deregulating business and cutting red tape.
The latest proposal from the coalition is a plan to implement a new form of employment contract, which would enable staff to give up some of their basic statutory employment rights in return for shares in the company they work for. The scheme has been dubbed ‘rights for shares’ or the ‘owner-employee contract’, and the coalition proposal is that it be implemented by April 2013.
At present employees in the UK enjoy wide-ranging rights to protect their employment status. Crucial measures include the right not to be unfairly dismissed once an employee has worked for a company for two years. This would be one of the rights that employees would be required to ‘trade in’ if they decided to adopt the new owner-employee contract.
Other employment rights that would be forfeited include the right to flexible working hours and the right to have time off for training. Owner-employees would also forfeit a right to a redundancy settlement, and female employees would be required to give 16-weeks notice of their intention to return to their job whilst on maternity leave, twice as long as is required under current law.
The owner-employee contract would see those employees who chose to sign up rewarded with an allocation of shares in the company they work for. Employees could acquire between £2,000 and £50,000 worth of shares, which would be allocated free from capital gains tax.
The Chancellor was keen to emphasise the perceived benefit of the scheme to staff, who would gain a valuable asset, and to businesses who would seemingly enjoy greater commitment from their newly incentivised workforce.
However the plans to allocate shares have received considerable criticism, not least because shares in small businesses are notoriously difficult to value. Employees may have little or no experience with the law regarding share ownership, and businesses would face a difficult and potentially expensive path in determining what type of shares staff would have, which would decide whether they could vote on important company matters or not.
Some employment law solicitors have reacted angrily to the government’s proposal, with some highlighting the potentially devastating effect that losing key employment rights could have on company morale. Employment lawyers have also pointed out that part of the proposals would see women effectively lose the right to claim unfair dismissal if fired for getting pregnant, a practice which is still common even with current legal protection. It is thought this aspect of the proposal could be challenged in the European Courts, something that has led many commentators to question whether an April 2013 implementation date is at all achievable.