The facts ..
The government will be consulting on a new type of ‘owner-employee’ contract this month. In it employees will be given a bundle of shares in the business they work for, valued between £2,000 and £50,000, in return for giving up their employment rights. These rights include: unfair dismissal, redundancy, the right to request flexible working, time off for training and an increase to the amount of notice required of return to work after maternity leave - from 8 weeks to 16 weeks.
The planned start date for this new contract is April 2013, and would be optional for existing employees but could be enforced for new employees.
Our point of view ..
This seems a huge step back in employee rights, and although in some new start-up businesses owner-employee contracts may be appropriate, for the vast majority of companies this seems a wrong turning. In tough economic times, when jobs opportunities are scarce, people may feel they have no option but to take this type of contract. This is most likely to be the case with lower earners. The worst case scenario suggests it could be a manifesto for unscrupulous business owners to take advantage of less sophisticated workers who don’t understand the value of what they are losing. From a business perspective, the implications of former employees floating about the job market with parcels of unsaleable shares is unattractive for most small businesses, who will want to retain some control on their share capital ownership. The change seems unjustified from the Government’s own research – in a recent study by BIS (March 2012) only 7% of respondents reported legislation (including employment legislation) as a barrier to growth.
From our perspective, we firmly believe that a strong physiological contract is the basis of a motivated, engaged workforce. We recognise the value of share-based ownership schemes in the workplace as a conduit to making employees more productive, happier and longer-serving. But all of this comes with a foundation level of trust between employee and employer. If you unilaterally take away one side of that deal, what’s in it for the employee? When businesses are unable to give employees the incentive of a good bonus or pay review, it’s the softer benefits and working environment that can keep your employee motivated and engaged in the business. This policy has the potential to damage that and erode the employee/employer relationship further.
We’ll certainly be watching this story develop with interest.
