With trade union leaders already writing off George Osborne’s brainchild, the “employee-owners contract”, is there any chance it won’t sink without a trace?
Presenting the employee-owners contract in a keynote speech at the Conservative Party conference on Monday, the chancellor promoted the idea of a “fair” society where, “those who put something in should get something out.” Osborne outlined a “radical change in employment law” aimed at fast growing SMBs wishing to create “a flexible workforce.”
The scheme, which will be launched in April 2013, bears uncanny similarities to Adrian Beecroft’s draft of employment reforms, which was suggested – and rejected – earlier this year.
The bare details are: employees will be given between £2,000 and £50,000 of tax-free shares; however, the shares come in exchange for reduced employment rights on unfair dismissal, redundancy, and flexible working hours and days off for training, whilst women will be required to provide double the notice when taking maternity leave.
If “an ‘owner-employee’ leaves or is dismissed, the company is not able simply to take the shares back but is able to buy them back at a reasonable price” says the HM Treasury press report. Employees will only reap the benefits of the profit when they sell their shares at an unknown “reasonable price”.
“The proposals will be unpopular with employees because the chances of benefitting are so slim, and unpopular with employers, especially privately controlled companies, because of the risks imposed to the share structure,” commented Rebecca Briam, partner at Gannons Solicitors. “Far from saving on payroll expenses, the total costs for an employer may well increase.”
There’s backlash from the unions, too. “His [George Osborne’s] attempts to dupe the electorate that he knows what he is doing have been rumbled,” Paul Kenny, the general secretary of the GMB union, argues. “George Osborne has as much knowledge about economics as a stick of rhubarb.”
On the other hand, the Employee Share Ownership centre, ESOP, welcomed Osborne’s announcement. “It is good to see new thinking on employee ownership,” comments ESOP chairman Malcolm Hurlston. “Where employees can freely choose more risk in return for the chance of a tax-free capital reward, there is little to quarrel with.”
Judging by muted applause in the conference hall, the plans may need further work. Will many employees jump at the chance to trade in their employment rights for the possibility of a few grand? We shall see…