MPs have shown support for Government plans to allow businesses to offer company shares to employees in exchange for reduced employment rights.

The initiative was initially rejected in the House of Lords before MPs voted to reinstate it on April 16.

Michael Fallon, Business Minister, said the shares-for-rights scheme was a good deal, particularly for start-ups.

Under the scheme, employees will receive at least £2000 worth of equity in exchange for giving up certain employment rights, such redundancy pay and the ability to claim unfair dismissal.

Fallon said the scheme would be “wholly voluntary,” and added that individuals on Jobseeker’s Allowance would not be forced to accept jobs that carried mandatory enrolment in a shares-for-rights arrangement.

Shadow business secretary Chuka Umunna labelled the initiative an “ill-thought-out and bad idea” and said that Labour would continue to oppose its introduction.

MPs voted in favour of the bill by 277 votes to 239. The initiative will now go back to the House of Lords.

The Trades Union Congress said the scheme “defies logic.” General Secretary Frances O’Grady said: “This proposal should have been quietly killed off today. It has no support among employers and was heavily defeated in the House of Lords by a wide coalition including prominent Conservative and Liberal Democrat peers.

“Employment rights should not be for sale. Employers do not want to buy them, and employees will not want to sell them. What is worse is that it’s only real practical use is as a tax dodge.

“We will continue to lobby peers to defeat this proposal again in the next round of parliamentary ping-pong.”