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Cath Everett

Sift Media

Freelance journalist and former editor of HRZone

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News: Chancellor’s shares-for-employment-rights scheme ‘open to abuse’

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The Chancellor’s plans to enable staff to sell employment rights in exchange for company shares could be open to abuse by unscrupulous employers, experts have warned.

George Osborne in his Conservative party conference speech today said that, as of April next year, employees who are given company shares worth between £2,000 and £50,000 will no longer be liable to pay capital gains tax should they soar in value.
 
But in return for the chance of such tax-free windfalls, employees would have to forgo a number of traditional employment rights such as the right:
 
  • To claim unfair dismissal
  • To redundancy pay-offs
  • To request flexible working and time off for training
  • For mothers to give eight weeks’ notice of when they intend to return from maternity leave – the figure would double to 16 weeks.
 
The aim, Obsorne said, was to create a new breed of “employee owner” among start-ups and small companies, who would be rewarded if the firm they worked for succeeded. This incentive would, in turn, motivate them to perform more highly and boost engagement.
 
But the move would also free the start-ups themselves from some of the risks involved in hiring and firing key staff members, he said.
 
Shares for rights
 
The proposed new legislation will be fast-tracked to enable employers to offer the contracts to jobseekers by next April and the Treasury expects “hundreds of thousands” of people to take them up. Although such contracts will be optional for existing staff, organisations will have the option to offer them as standard.
 
But Sarah Jackson, chief executive of charity Working Families warned working parents to “think long and hard before accepting such a one-way deal”.
 
“Shares can go down as well as up. You could end up with no job security or employment rights and worthless shares,” she said. “We would be particularly alarmed if jobseekers were required to take up such offers as we don’t think these would be reasonable jobs for many people to accept.”
 
Such an approach also flew in the face of everything that was known about productivity and employee engagement, she added.
 
Jonathan Exten-Wright, a partner in law firm DLA Piper’s employment group, was equally concerned that employers of all sizes could use the proposed legislation to insist that workers took up jobs on a ‘shares for rights’ basis in future – even if the new laws were clearly aimed at start-ups.
 
“There is nothing in the proposal which suggests it will be limited to certain types of employer. Accordingly, any employer with share schemes might be minded to offer modest participation and the exclusion of such rights as the only path to employment,” he said.
 
Exten-Wright also warned that, although the scheme might protect them from unfair dismissal claims, staff would still have the right to bring other types of claims against them such as discrimination, however.
 
 
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Cath Everett

Freelance journalist and former editor of HRZone

Read more from Cath Everett
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