Tories’ ‘rights for shares’ scheme blasted by employment lawyers

Employment lawyers have reacted with some scepticism about Chancellor George Osborne’s ‘rights for shares’ scheme proposals at the Conservative party conference.

George Osborne
George Osborne

Tom Flanagan, partner and head of employment at Irwin Mitchell, welcomed moves to encourage employee engagement and commitment to businesses, but questioned the “bizarre package” of signing away rights to claim unfair dismissal, flexible working, training and maternity leave.

Flanagan said: “This smacks to me not of helping to encourage employment engagement and productivity, but making the removing of employment rights more palatable.”

Flanagan said that the “headline-grabbing” scheme is not too different from shared-ownership and shared-option schemes.

But he added that the rights to be waived as part of the proposed contracts are protected in primary statutory law and that it would need a significant change in legislation to enable such agreements to be legal.

He said: “As things currently stand, there is no reference in this simplistic presentation of how this can be done. It remains to be seen whether it will. The chances of getting this done by April 2013 are pretty slim.

“The whole point would appear to be to make hiring and firing easier. But if you create a system with a combination of complicated shareholding agreements and tax breaks, smaller businesses are not going to do this – it is just not worth the time, trouble or indeed the cost.”

The Chancellor unveiled the plan for workers to give up a string of employment rights in return for shares in their employer worth up to £50,000. Staff would not pay capital gains tax on profits from the shares. However, Flanagan said this was fine in a good economy, but that many companies are not recording profits and that is is not common for smaller single-shareholder or family businesses to give away a slice of their ownership.

Virtual Law employment specialist Jane Moorman said “innumerable complexities” with the scheme made an April 2013 implementation “inconceivable”.

She said: “As an employment lawyer I see an enormous correlation between women becoming pregnant and selected for dismissal. Women continue to need that protection and I can see any suggestion of removing maternity rights being open to a judicial review.

“I can’t see this is an attractive proposal for either employers or employees. Notionally, it may look like a good idea, but I wouldn’t trade the security of an unfair dismissal claim and other employment rights unless I was very confident about my employer and very confident of my position in organisation.

“And if it’s too costly and complex for small and medium businesses, they are more likely to take their chances with the burden of possible unfair dismissal claims.

“This sounds like a crowd-pleasing announcement that has not been thought through.”