Is trading employee rights for share ownership really a way forwards?

I have been attending the Conservative Party conference this week - a first for me to attend any of these sorts of events, but important in helping to engage and get some of our messages out. We have had lots of positive discussion for example about our Learning to Work campaign, and many fringe meetings on the topic of skills and youth employment.

Party conferences are a bit different from business conferences. Firstly, there is a huge range of people representing various bodies, think tanks or interest groups, all of whom are trying to get their voice heard alongside politicians which is quite a challenge. Employers are here, but in relatively small numbers. It does make for lively discussions though. Also lots of bright young things - policy advisors, researchers, chaperones and others which add to the colour!

The main topic of wider debate today for us has been reactions to George Osborne's announcement about allowing employers to offer employees share options in return for giving up most of their employee rights.

This is an outcome from the Beecroft report that asserted too much employment regulation was holding back small business from hiring and growing. Our view has consistently been that there is scant evidence that regulation of this kind is holding back small businesses, and indeed the OECD points to the UK as being one of the least regulated labour markets in the world. So is this proposal addressing a real problem and what anyway would be the likely uptake from either employers or employees?

Employees would potentially be risking a lot by waiving their rights for uncertain outcomes in notional share performance of their employer. How does the market for shares work in these circumstances and what controls might be needed? As new employees come on board, does that mean that existing employees are continuously diluted?  How would employees be managed fairly where some have opted for this and others haven't?

There are many ways in which employees can more directly participate in the performance of the company, in particular profit share and performance related bonus schemes. A critical part of strong and sustained business performance is working with your employees, engaging them effectively, building their skills in line with your needs and strategy. Will the right of an employer to almost do what they want with their employees, firing at will and so on, really make for better business? It certainly is big ask for employees to want to take the risk and I think can detract from a focus on helping smaller enterprises to manage their people more effectively and to get the most out of them.

Scepticism about the level of uptake is the most common reaction from commentators so far. But obviously some do view this as positive and will cite examples of fast growth tech startups and the like as benefiting.  Lets see what happens.

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  • Thanks for this post, Peter.

    Worth noting that this topic has generated (so far) 40-odd responses from CIPD members on this discusion thread. Overwhelmingly sceptical (although not unanimous) voices, so far.

  • It might have some place for small start ups but I would imagine the application and take up will be limited. Overall it will cause as many complexities as it solves. Overall a gimmick and not a scaleable way to engage employees.

  • On an objective basis, one can understand the premise of the proposal. However, many of the Employment Rights represent and are in fact "best practices" in relation to Employer-Employee Psychological Contract, which impacts Engagement and Morale in the workplace. It's about fairness and justice. The Employment Rights are derived from the ILO Charter and translated into EU Regional laws which are extended to Local legislation.

    We have come a long way and it seems that this may be taking us backwards. As many have alluded to, Employment regulations are not necessarily the reason for the slowing economies and unemployment. Some of the Employment Regulations may have some effect on SMEs but then there are some provisions that exempt SME's based on size. Those restrictions have already been taken care of. Also, it will lead to a two-tier work environment, which really is not beneficial to the same Employer/Business that we are trying to protect.

    I fully agree with your concerns and viewpoint.