Osborne Announces Owner-Employee Contracts

Speaking at the Tory party conference yesterday, George Osborne, the Chancellor of the Exchequer, announced plans for a new owner-employee employment contract.

Osborne’s idea proposes that employees can have the option to take shares in the business they work for in return for giving up some of their employment rights.

The Chancellor’s "shares for rights" scheme intends to offer workers a stake in their company, exempt from capital gains tax, if they give up some of their maternity rights and all of their rights to claim against unfair dismissal.

The new "employee-owner" position is expected to be optional for current employees of businesses but new workers and new firms could make this a compulsory employment status with no options at all.

John Lewis Economy

The Chancellor’s idea is not new; back in January the deputy Prime Minister, Nick Clegg, spoke at an event saying that he thought employee-owned firms performed better and were therefore would be a boon to the economy.

Clegg called the notion "responsible capitalism" and said:

"We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like."

The deputy PM believes the idea of employee-owned businesses is "hugely under-used" as a tool that could "unlock growth" for the British economy.

The John Lewis Partnership is the largest employee-owned company in the UK and has 81,000 partners – all have a say in how the business is run and all have an equal percentage share in the group’s profits.

Mixed Reaction

The announcement has been received with a wide range of responses from the business community.

Back in June the Beecroft report was published, with its author, Adrian Beecroft, a Number 10 adviser and private equity firm head, saying that deregulation of the employment market would help businesses to freely hire and fire people.

The Chancellor’s new contract idea, to be fast-tracked through Parliament and which could be implemented as early as April 2013, is seen as a mix of the Beecroft proposals and Clegg’s notion of "responsible capitalism".

Will Butler-Adams, the Chief Executive Officer (CEO) of the folding-bike company, Brompton Bicycles, called it a "win-win for employers and employees" with Stuart Rose, Marks and Spencer’s former CEO, using the exact same term, saying that entrepreneurs and owners of SMEs "need a flexible dedicated workforce focused on growth."

The CBI’s Director General, John Cridland, said that employee-ownership might be an attractive proposition to some startup small businesses but that it was a very niche idea and probably not relevant to all firms.

However, the plans could meet opposition from Brussels where the employee-owner contracts could breach EU legislation; working time regulations, maternity leave and flexible working rights are part of the European directive and have filtered through to protect British workers over the years.

Mark Serwotka, head of the Public and Commercial Services Union, branded the scheme as "laughable" and said that he hoped it would "sink without a trace".

A spokesman for the John Lewis Partnership was more reasoned and added:

"Though not applicable to established employee-owned businesses such as the John Lewis Partnership, we are interested to hear the Government’s announcement and will be looking closely at the detail of their proposals"

Related Articles

For further business advice look at our selection of articles on the Working Time Regulations and Dismissing Employees.

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>