The government intends to introduce a new type of employment contract – the ‘owner-employee contract’ – whereby new employees may be required to surrender their employment rights on unfair dismissal, redundancy , the right to request flexible working and time off for training in return for shares in the business for which they work worth between £2,000 and £50,000. Any gains on these shares would be exempt from capital gains tax.
And owner-employees would have to provide 16 weeks’ notice of their date of return from maternity leave instead of the existing 8 weeks’ notice. April 2013 is the intended start date and the government will be consulting on this proposal later this month.
Such owner- employee status will be optional for existing staff but organisations will be able to require new staff to work under such contracts. While the expressed intention is for their use by SMEs, it is clear at this stage that companies of any size will have the option of using such contracts.
Reactions and comment
While we’ve yet to see the consultation on these proposals, it’s probably fair to say that the reaction so far has not been overly enthusiastic. Apart from the British public, two-thirds of whom don't like the idea according to a YouGov poll, expert commentators have not exactly heaped praise on the idea:
- The CIPD has said that ‘share ownership is no substitute for employment rights and good people management’.
- John Philpott, who used to be the CIPD’s Economic Adviser, has said that such a concept 'risks sullying employee ownership'.
- GQ Employment Law has said the proposals have the potential radically to change employee relations but there are a host of unanswered questions, see ‘Employment Rights for Sale’.
- John Cridland, the CBI’s Director General said: ‘In some of Britain's cutting-edge entrepreneurial companies, the option of share ownership may be attractive to workers, rather than some of their employment rights. But I think this is a niche idea and not relevant to all businesses'.
- Tim Thomas, the EEF’s Head of Employment Policy, said: ‘A quid pro quo approach linking employee share ownership to increased flexibility on employment rights could boost take-up of the former and be of benefit to some employers. But it is unlikely to be a game changer for manufacturers and the government should not lose focus on the need for wider employment law reform in areas such as employment tribunals and protected conversations’.
- The New Statesman reckons that ‘Osborne’s “employee-owner” plan is Beecroft through the back-door’.
- Working Families warns employers to beware: ‘Offering owner employee contracts - where employees effectively sell their employment rights for shares - is unlikely to deliver the highly motivated, engaged workforce you need’.
- Darren Newman (see 'Trading rights for shares - the latest big idea') comments that 'the reality is that it allows employers to buy out an employee’s rights at a bargain basement price'.
- Law firm DKLM (see 'George Osborne's ill thought out plan') doubt that the lure of owning shares is a fair exchange for surrendering employment rights.
- Michael Scutt (see 'One nation of Shareholders Without legal Rights?') thinks that the proposal might be attractive in small start-up companies but doubts its usefulness or purpose in large corporates.
- Simon Jones from Ariadne Associates (see 'The Bus Driver and the Shareholder') draws on a previous experience where staff were given shares and says that employee ownership is 'not some sort of magic bullet that will solve business and HR problems, and it can create significant other issues. It can work as part of a well-planned strategy with good management, but won't without either of those things'.
- The IDS Eye blog (see 'Owner-employees - worse news than Beecroft?') is unimpressed: 'it would be sad to see years of employment law progress being swapped for £2,000 worth of shares which can be bought back on dismissal at "a reasonable price" '.
- Thompsons Solicitors (see 'Owner-employees: workers united, or trading a cow for a handful of half-baked beans?') think that this new scheme has nothing to do with flexibility: 'it will simply allow employers to fire at will'.
- Karen Teago (see 'Workers of the world unite') looks what what George Osborne said, what the press release said, what commentators have said and what she thinks.
- Flip Chart Rick (see 'Shares for employment rights - another quack remedy') doubts George Osborne's proposal will ever make it to the statute book: 'it will most probably get shot down during the consultation process as business leaders, civil servants and, eventually, even government ministers come to see that it is more trouble than it is worth'.
- Paul Statham (see 'Employee owners: fair shares or half truths?') thinks that this proposal may be used to pressure vulnerable workers to sign away their employment rights.
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