• Chancellor proposes ‘John Lewis model minus employee rights’

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  • 8 Oct 2012
  • Comments 14 comments

Employees could soon be offered shares in their organisation in exchange for giving up rights to unfair dismissal and redundancy, Chancellor George Osborne announced today.

Speaking at the annual Conservative party conference, Osborne said: “Today we set out proposals for a radical change to employment law.

“You the company: give your employees shares in the business. You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership,” he said.

“And what will the government do? We'll charge no capital gains tax at all on the profit you make on your shares. Zero percent capital gains tax for these new employee-owners. Get shares and become owners of the company you work for.”

He said the idea would be particularly suited to new start up businesses and small and medium sized firms. He also thanked Adrian Beecroft for his work in this area of policy.

However, Mike Emmott, employee relations adviser at the CIPD, said: “The UK has one of the least regulated labour markets in the world and there is little evidence to suggest that employment regulation is preventing small businesses from taking people on.”

Emmott said that the government’s own research showed that unfair dismissal is not in the list of top ten regulations that deter them from recruiting staff.

He also explained that employees have “little to gain” by swapping fundamental rights for uncertain financial gain and employers have little to gain by creating a two-tier labour market.

“It is far from clear how attractive the offer to give up employment rights in return for shares will be to prospective employees of small firms. More important, it is highly doubtful whether inviting employees to sign away basic employment rights will deliver the motivated, driven, high performing workforce that small firms need,” he said.

Pointing to existing, successful mutually owned firms, Emmott said that they do not work on employee ownership alone, but on the high trust, high engagement, ‘all-pulling-in-the-same-direction cultures’ they have.

“Employee ownership works best where it is accompanied by great management, rather than enhanced job insecurity.”

Working Families chief executive Sarah Jackson agreed and warned employers to think before considering such new style contracts.

“Offering owner employee contracts - where employees effectively sell their employment rights for shares - is unlikely to deliver the highly motivated, engaged workforce you need,” she said.

Jackson also said she would be “alarmed” if jobseekers were required to take up such offers because “we don’t think these would be reasonable jobs for many people to accept”.

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Comments (14)
  • This idea has been described as voluntary, but it would only be optional for the employer, not for the employee.<br/>If a small business was persuaded to create a few extra jobs because of this scheme, then the jobs would only be available with the owner-employee contract. Successful applications wouldn't have the option to say "no, keep your unlisted, untradeable shares thank you, I'll take the job with my basic employment rights intact, please".<br/>The job offers would be 'take it or leave it'. There's nothing voluntary about that.

  • I agree with the majority of posts here that this idea is truly reprehensible and should not be compared with the John Lewis scheme.  All JL employees are partners and enjoy the success of the Company BUT THEY DO NOT HAVE TO GIVE UP ANY EMPLOYMENT RIGHTS.  That is the key difference.

  • I have never heard anything so preposterous and ill thought through as the Osborne proposal! Unless of course he intends to bury other news under the furore of reaction this proposal will engender?! Prior to making these proposals public do any politicians talk with the CIPD and others who really know about these things to check if they are workable and actually will reduce red-tape?<br/>For me it confirms my view that sadly all too few politicians do research or evidence based policy making; rather they think illusions, opinions, and traditional thinking are the best basis. Oh dear!

  • This is a morally corrupt,reprehensible, and cynical proposal to bribe people into surrendering their employment protection rights for a ridiculously low price.  It is clearly targeted mainly at the unemployed, the most vulnerable people in our society who are desperate for a job and likely to accept thereby such conditions, in effect "selling their soul to the Devil".  As there is no evidence that such legal rights are a significant factor in discouraging businesses to employ people or  create jobs any suggestion that such is the purpose of the proposal is simply incredulous.  This is just another political ploy by the party of the very rich to undermine the job security of  ordinary working people as a control measure to "keep the plebs in their place".  It does nothing for job creation, employee engagement, or enhancement of productivity and quality, yet these are the factors which are essential to helping the economy to recover and grow.  Obviously the idea should be binned quickly, but now we know with absolute clarity where this government is coming from, and that the leopard has not changed its spots.

  • I see that the Government is still running with the recommendations made by Adrian Beechcroft.  I read the report and his rationale was based on the fact that in a company he was working in a HR Director took the company to ET and won 120,000 for breach of employment rights.  This has no co-realation to small businesses taking on new employees who at the most will only be paid £22,000.  Small businesses take two years to break even and if they fail then forget about any shares in anything.  This is a load of codswallop and does not make any sense.  Instead of attacking employment rights the Government should be looking at the pay structures in the Financial industry. Their Admin managers are earning the same salaries as Directors in small firms, figures close to £80,000 for doing what a junior worker does in a small business.  But we all know that these are jobs for the boys and the Government won`t touch them.

  • Yet another poorly thought through proposal from Ozzy... He should stick to solving the country's funding deficit rather than dabbling in an area he clearly knows little about.

  • I don't think the idea of new style of employee contract scheme is a good one. if any employer accept the law is of their own interest. i mean they will lose the respect and honest their employee have for them. before accepting the law they should think about the implication of the idea.

  • I am the founder of the National Center for Employee Ownership in the U.S., where broad-based employee ownership plans are very common. I obviously think employee ownership (done correctly) is a great idea, but I think the Osborne proposal is just awful. No rational person should give up employment rights to get a capital gains tax break on several thousand pounds.

  • Are employers also going to give up their rights to dismiss people on the basis of locking people in to share ownership, i doubt it! I cannot see this working for anyone..back to the drawing board Mr Osborne!

  • Have your say.<br/>Another politically motivated attack on basic employment rights that has no supporting research. ( apart from a special advisor focus group) ?

  • I agree with John Anzani on this one - share ownership confers, I suspect in the majority of cases, only minority company ownership with little if any say in how the business is conducted. Why then give up employment rights for share schemes starting at £2,000? It makes no sense at present and it is early days in the development of this idea to vote with or against such an idea. When more detail comes out then possibly we might be in a stronger position to make more worthwhile comments. As for the present - the scheme does not appear very attractive.

  • Is John Lewis relevant here?<br/><br/>Is there any evidence that John Lewis Partnership doesn't consider that employment legislation covers their partners?  Or is the name of the company increasing being used a lazy shorthand by [sub]editors whenever there is any slight mention of some form of co-ownership.<br/><br/>The shares in JL are owned owned by a trust whose beneficiaries are the current partners.  If Osborne's scheme is implemented as outlined in the speech the employees would simply be individual [minority] shareholders quite different to the situation in JL.<br/><br/>Whatever merits there may be in this latest initiative please can you be more accurate in the comparisons/allusions you draw when discussing it.

  • One step forward in offering shares to workers - two steps backward inemployment relations. long term should reverse the decline in TU membership!

  • It's an interesting proposal - For example, how long do I need to wait to sell my shares? 1 year? 2? Will there be a forfeit period, in that if I'm dismissed within 6 months I lose my shares?<br/><br/>If not, I can already see certain types taking up these contracts and then leaving, and taking up another from a different company - Do this a few times, and you have a large number of shares, in a large number of businesses, essentially for free. <br/><br/>If there is, I can see less than honest organisation dismissing before the qualifing periods kick in. There lies in the problem though? If I don't already have the shares, then surely my basic employment rights stand? <br/><br/>Hmm, think a more detailed read of this proposal is in order...