UK Government’s ‘Shares for Rights’ Proposal Will Help No One

The UK Conservative Government announced in a party conference its measures to continue deregulating business and cutting red tape.

The proposal revealed by Chancellor George Osborne includes plans to implement a new form of employment contract enabling staff to effectively give up a large majority of their statutory employment rights in return for shares in the company they work for. The scheme has been dubbed ‘rights for shares’ or more formally, the ‘owner-employee contract’ and is to be implemented by April 2013.

Present laws in the UK ensure employees have access to a significant number of employment rights to protect their status. Crucial measures include the right not to be unfairly dismissed once an employee has worked for a company for two years, the right to take leave for training, the right to a redundancy settlement, all of which would be required to ‘trade in’ if employees decided to adopt the new contract.

Female employees would also 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 legislation.

The gimmick is to offer employees who choose to sign up with a reward of an allocation of shares in the company, acquiring between £2,000 and £50,000 worth of shares, while businesses would enjoy greater commitment and not to mention the increased legal security they would inherit.

Where the fault lies

On the surface the plan seems like a great initiative, however I’m worried the majority of employees will fail to see the real consequences in signing the new contract. Firstly, shares in small businesses are notoriously difficult to value. Employees may have little to no experience with the law regarding share ownership, and businesses would face a difficult and expensive path in determining what type of shares staff would be entitled to.

My opinion is the proposal could be devastating as losing key employment rights has the potential to disadvantage UK workers in favour of larger corporations with some key consequences for employers as well.

The Government changes open the door for employees to take alternative legal action such as filing discrimination charges or assault in lieu of unfair dismissal. They may also be more inclined to attempt to settle their cases in the European Court. These scenarios can take far longer than a tribunal, and often cost businesses much more in terms of legal costs and compensation, so I fail to really understand the benefits of removing these rights for employees or organisations.

About the author: Carl Moran is a Partner on the JMW employment solicitors’ team, specialising exclusively in employment law and unfair dismissal claims. For more information visit http://www.jmw.co.uk/services-for-business/employment-law/ or call 0845 872 6666.