George Obsorne "Shares for Rights" Proposals

 A SWAPSHOP of employee rights in the workplace in return for company shares is the latest move by a Government intent on de-regulating the labour market.

George Osbourne announced proposals to nurture a new breed of companies based on a model which allows the employer to circumnavigate the most basic employee workplace rights by replacing them with a share incentive for the worker.

Rights such as unfair dismissal, requests for flexible working, time off for training, maternity rights, redundancy pay and so on would be sacrificed by the employee for a share of the business which could be as little as £2000.

This new “employee-owner” status would be voluntary for existing workers but for new hires companies could make the rights opt-out compulsory. Basically forcing the employee to take the share option of a company which has no proven track record of profit or face a continued search for employment. And losing employment rights which may prove much more valuable in the long term. Fast track legislation means that these contracts could be on the table as soon as April of next year.

Isn’t this just de-regulation by the back door? Isn’t it just a different type of packaging for the same product: a return to the hire and fire proposals of Vince Cable which were so greatly criticised by employees and business owners alike. Proposals which would leave an employee’s job security in a permanent state of vulnerability to a brisk tap on the shoulder and a dismal view of the door. Or is it just a compromise agreement in reverse? Employers already have the option of dismissing someone in the first two years of employment courtesy of recent legislation introduced in April of this year which means during this period worker are not eligible to make a claim for unfair dismissal.

Osborne revealed his plans at the Conservative party conference in Birmingham in which he promised that he would not admit defeat in the face of economic crisis. Critics believe the proposals will result in almost every new small firm sidestepping hard-won workplace rights with a £2000 bonus which in the future could be virtually valueless for the employee. Osbourne markets the idea to the masses as the employee’s “new rights of ownership” with no capital gains tax on the profit workers make from their shares.
Good management should not have a problem with the existing laws and if they think the current legislation is too restrictive, then the Government should alter it rather than introducing “incentive schemes” which are really bribing employees out of their rights.
The question this scheme throws up for small to medium sized businesses are endless: Will it be a special class of shares? What if the company go into liquidation leaving an employee with no redundancy pay and valueless shares? Will the employee have voting rights or rights to dividends? Who monitors the shares? What if an employee leaves: can he keep the shares? If not, who will want to buy the shares? Will the company have to borrow to buy the shares back?...............Again, like Vince Cable’s proposed measures, the wider operation of these proposals has not been carefully considered or crafted before being articulated to the general public.

If you would like further information on this subject please feel free to Contact Christina Reed on 01772 555 176 or email christinareed@vslaw.co.uk