Osborne: “Give up your employee rights and own a slice of the company”

George Osborne resurrected controversial plans to dilute workers’ rights by announcing at the Conservative Party Conference that employees can give up some of their legal rights at work in return for shares in the company.

Already being called “Beecroft by the back door”, referring to the divisive report on employment legislation by venture capitalist and Tory party donor Adrian Beecroft earlier this year, George Osborne risks accusations of eroding employees’ rights.

From April 2013, employers will be able to negotiate with existing staff and offer between £2,000 and £50,000 in tax-free shares, on the condition that they waive their rights to claim unfair dismissal and redundancy pay, and to ask for flexible working and time off for training. Maternity leave would also alter in return for the shares; women on maternity leave would be required to give 16 weeks’ notice of intention to return to work instead of the current 8 weeks.

In return these employees would not have to pay capital gains tax on any profit if they sold the shares.

It gets a little confusing when one examines which companies will be permitted to bring this in. The proposal is that new firms – i.e. start-ups – could make such contracts obligatory. Employees of existing companies would not be forced to sign up – but new employees of existing firms might. It has the potential to be a tricky piece of legislation.

George Osborne optimistically hopes that a huge chunk of the workforce will want to become “employee-owners” but immediate responses to the proposal from the CBI suggested this was very much a “niche proposal for hi-tech and creative start-ups” but which was “unlikely to be adopted by the vast majority of companies.”

Whilst Adrian Beecroft’s “fire-at-will” proposals were blocked by the Liberal Democrats, keen to protect employee rights, Nick Clegg seems amenable to the “employee ownership” idea because it fits in with the Liberal ethos, and is voluntary.

Beecroft naturally welcomed Mr Osborne’s announcement yesterday, commenting: “This is a creative and exciting version of proposals that I made in my report. This is a significant step towards rebuilding Britain’s enterprise culture and is a real shot in the arm for Britain’s entrepreneurs.”

However, unions are angry that the Coalition Government has resurrected this part of the Beecroft proposals.

Brendan Barber, General-Secretary of the TUC, commented: “We deplore any attack on maternity provision or protection against unfair dismissal.”

Paul Kenny, from the GMB union, added: “Slashing people’s employment rights under the guise of ownership schemes won’t create jobs and it won’t create growth.”

Tom Street of Do I Have A Case comments:

“Even if this proposal is agreed by parliament and allows an employee to waive their rights to an unfair dismissal claim, it cannot remove any potential race, sex or age discrimination liability. Again it seems like a proposal which is more likely to increase potential discrimination claims in the future.

“The idea that employees can sign away their employment rights for as little as £2,000 in equity hoping to make a killing on the long-term profit of share ownership seems a little tenuous. Unless the shares are quoted they are not really tradeable, and are therefore worthless as they can only be sold with the consent of the Board of Directors. The Treasury has also confirmed that the value of these shares in a private company when an employee leaves or is terminated will be determined by the board of directors, who can set a “reasonable price” for buying back the shares. This could result in an unpleasant surprise for ex-employees if they have a differing definition of “reasonable”.