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Employee Benefits Scheme: Is dignity at work for sale?

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One of the most enduring myths about the Palace of Westminster is that deaths are forbidden there.

There may, however, have been a mercy killing in the House of Lords last week as George Osborne’s Employee Benefits Scheme appeared dangerously close to biting the dust. The clause that would have created it was removed from the Growth and Infrastructure Bill.

“I have never witnessed a government policy with less support, not only in parliament but within the government themselves,” proclaimed Labour peer Lord Adonis. “To remove this clause would be an act of mercy to the government.”

The aforementioned parliamentary myth holds that, should anyone expire in a royal palace, they would be, technically, entitled to a state funeral. In this case, reports of a legislative death could prove to be exaggerated. It’s clear that, if the Scheme were to come to life, it would be on the back of damning criticism and, apparently, no discernible interest from UK Plc.

The peers, with many and varied objections, pointed out that employment rights were created to protect employees and should not be a bargaining commodity. There are also concerns about whether employees really understood what rights they would be giving up.

In an earlier debate, Lord Morris of Handsworth commented: “When will the government understand that some things are not for sale? Workers’ rights are not for sale and cannot be traded. Dignity at work is not for sale and cannot be traded.”

Meanwhile, the Conservative Lord Deben scoffed that he could not imagine “any circumstances in which the scheme would be of use to any business.” He also pointed out that the government’s own consultation had shown a massive lack of interest. Of the 209 respondents, 184 answered the question on whether they would take it up. Only three said they would.

Conservative peer, Baroness Wheatcroft warned that the Scheme could damage the reputation of existing successful shared ownership schemes, which do not require employees to give up their rights.

Of these established schemes, the most widely used is Save as you Earn (SAYE) – also known as Sharesave or Savings Related Share Option Schemes. This government-backed initiative was launched in 1980 and offered generous tax breaks to encourage employees to take a direct stake in their company.

HM Revenue figures show that the number of firms offering SAYE schemes has declined, but there are still more than 800 companies giving people this perk. Sainsbury’s, for instance, has almost 31,000 employees saving between £5 and £250 a month into 63,000 Sainsbury’s Sharesave contracts.

So, what was Osborne thinking – and will he reinstate the clause when the Bill returns to the Commons in April?

Under the Growth and Infrastructure Bill, employee shareholder status – formerly named “employee owner status” – has been proposed as a new third strand of employment status, in addition to the longstanding statutory status of “employee” and “worker”.

The radical concept would allow existing and new employees to take shares of between £2,000 and £50,000 in the employer company. In exchange, employees give up certain statutory rights, such as unfair dismissal, redundancy, the right to request flexible working and time off for training. Any growth in value of the shares would be exempt from Capital Gains Tax.

The 2013 Budget also confirmed that the first £2,000 of shares will be free from income tax and NICs.

Osborne believes the new status would offer employees a greater choice in employment, reduce the regulatory burdens on business and promote business and employment growth.

Employment lawyers are inclined to counter that employment status is a hugely complex and grey area, borne out by the plethora of case law on the subject. By adding a brand new status, it will inevitably further complicate this area of employment law and cause confusion for businesses

Since the government originally only consulted how to implement the status and not whether it was a good idea, this suggests that the House of Commons will just about vote in its favour. The Bill will be eventually passed, albeit with some amendments.

Stephen Robinson is a specialist in employment law and a partner at Laytons Solicitors.

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