George Osbourne has skaken-up employment law by proposing shares be given to employees joining a new company in exchange for some of their entrenched and hard-earned employment rights. Is this a trap for naive but desperate-for-work employees or a progressive and innovative opportunity for the average Joe to gain a job as well as some corporate equity to boot?
The logic behind this move is to encourage businesses to employ more people, and thus help kick-start the economy, without the always-looming threat of redundancy payouts or employees making expensive and time-consuming claims for unfair dismissal. The carrot of tax-free shares in the company in exchange for foregoing such employment rights is deemed to be an attractive package for the forlorn job-seeker.
A general employment law shake-up is one of the Coalition's mantras and last week's proposal has been preceded by other significant changes, such as the period of continuous employment needed to bring an unfair dismissal claim in an employment tribunal being extended from 1 year's service to two year's service, as of employment post April 2012. Again this is a measure to protect employers and supposedly fuel recruitment.
While the new government's efforts to drag the country out of its economic pit are admirable, is this all at the expense of the employee? Shouldn't rights that underpin modern society be galvanised and consolidated rather than sold-off for tempting packages?
Certain potential problems do seem to emerge when the proposal is placed under the microscope. While Osbourne has effused that this mechanism would be attractive to big businesses, surely this could create problems with their current shareholders, who may, for example, choose to vote against the proposals and thus scupper any majority needed to alter the company's Articles of Association or Shareholder Agreements. Such shareholders may also be none too pleased at the potential dilution of their shareholder rights and share value.
It is also probable that shares offered to new employees could be defunct of any voting rights and furthermore be almost impossible to realise financially. This could especially be the case for small businesses if the powers that be decide to not release dividends due to a 'poor' quarter or refuse to accept acquisition offers which would increase share value. Some companies may also never grow large enough to float on a stock exchange nor generate enough profit to make such employee shareholding significant in terms of monetary value.
In reality, such shares may amount to less money than could be available for statutory redundancy pay or an award in an unfair dismissal claim. The government has said that the value of such shares via the new scheme could be between £2,000 and £50,000. Considering awards in an Employment Tribunal for unfair dismissal claims can be up to almost £80,000, such an offer may actually benefit the employer more than the employee.
Even the CGT tax break on the employee relieving themselves of such shares may be a pyrrhic victory of sorts, as if the shareholding is meagre such disposals would fall within the nil-rate band anyway, thus being a phantom benefit masquerading as a benefit already automatically acquired!
Osbourne's Marx-esque rallying cry of 'workers of the world unite', although intended to benefit employees (likely those employees who can negotiate a good shareholding in a solid corporate outfit with prospects), may turn out to be the damp squib that some commentators have predicted. Indeed, the Confederation of British Industry has described the move as 'a niche idea and not relevant to all businesses'. Just as Marx's socialist ideal hit the buffers when put into practice by the Politburo, let's hope that these new measures do not put too much power into the hands of the employer at the expense of the already long-suffering job seeker.
