Shares-for-rights Plan Divides Business Opinion

When the Chancellor of the Exchequer, George Osborne, announced his radical "shares-for-rights" programme at the Tory Party Conference in Birmingham last week, the proposals received a mixed reception.

Shares for Rights Explained

Osborne’s shares for rights plan is intended mainly for start up businesses and Small and Medium-sized Enterprises (SMEs). The scheme proposes that employees give up certain employment rights in exchange for shares in the business.

Employees are expected to give up their right to fight against unfair dismissal, give up their rights to flexible working, give up their rights to time off for training and give up the right to redundancy pay for a capital gains tax free share of between £2,000 and £50,000 in their employer’s business.

Female workers will also have to giver their employer 8 weeks notice of their intention to return from maternity leave rather than the current 16 weeks notice.

Shares for rights plans are expected to be available from April next year (2013) although they are expected to be taken up by new firms whilst being optional for existing small and medium-sized businesses.

The idea behind the owner-employee status is that workers who have a financial share in their business are expected to be more interested in its performance and, as stakeholders, work harder.

Mixed Reaction to Shares for Rights

British Business groups have had a mixed reaction to the proposals.

Simon Walker, Director General of the Institute of Directors (IoD) was positive about the announcement, saying:

“This scheme has the potential to reduce the employment law burden on companies and make employees better off at the same time.”

Other business groups, whilst seeing the positives, urged caution.

John Walker, National chairman of the Federation of Small Businesses (FSB) was also positive, announcing;

“We believe it will promote share ownership and loyalty to those companies which offer this initiative, with potential benefits following in terms of greater productivity.”

But Walker was cautious, adding:

“However, we suggest that the number of businesses who adopt the scheme may be small and we look forward to seeing the details.”

The Confederation of British Industry (CBI) and the British Chambers of Commerce (BCC) were equally reserved, with John Longworth of the BCC calling it a "useful option" but that it was unlikely to be a "game changer". The CBI’s John Cridland called shares for rights "niche" and "not relevant to all businesses".

However, in other quarters the response was less than positive with Paul Kenny of the GMB workers’ union condemning the move by saying:

“Slashing people’s employment rights under the guise of ownership schemes won’t create jobs, and it won’t create growth.”

The full details of the shares for rights plan have not been finalised.

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