Is the Chancellor really that far out of touch?
The Government has opened a consultation on its proposed "employee-owner" status, designed to "give businesses greater choice about the contracts they can offer individuals", while ensuring that "appropriate levels of protection" are maintained.
Under the proposals, the Employment Rights Act 1996 would be amended to create a third tier of employment status: employee owners, who would receive shares of between £2,000 and £50,000, exempt from capital gains tax, in return for giving up specified employment rights. It is unclear how the share issue is to be funded.
Employee owners would not have the "ordinary" unfair dismissal protection after two years' continuous service. However, they would be protected from being dismissed for nearly all of the automatically unfair reasons, such as making a protected disclosure. Employee owners would also retain protection against discrimination, including in relation to dismissal.
Employee owners would be unable to make statutory requests to work flexibly or in relation to study or training, and would not be protected against dismissal for making either of these statutory requests, except in relation to a flexible working request on return from parental leave, in accordance with the minimum EU requirement. The relevant EU Directive is silent on how long parents should have after returning from parental leave to make a flexible working request, and the Government proposes to restrict this to four weeks.
Employee owners would not be eligible for statutory redundancy pay, and would also have to give 16 weeks' notice to return early from maternity or adoption leave, as compared with eight weeks for employees.
This is all too real…
Imagine a situation where employees take advantage of this scheme next year and receive shares in their company. All goes well for a time but then the company hits a sticky patch caused by increased price competition from Eastern Europe. The company executives have to make the tough decision on redundancies.
How do they select for redundancy? Do they protect ‘employee-owners’ and dismiss ordinary employees?
What happens if they have to let go some ‘employee-owners’ who are no longer entitled to redundancy payments and whose shares are no doubt under water? It is financially disastrous for these people. And can you imagine the wrangling over share value?
It is sometimes hard to continue to motivate employees who participate in existing share schemes when their shares are worth less than they paid for them, but at least they have some employment protection and if the worst happens, a redundancy payment.
And of course there are better, more practical and pragmatic ways to ensure your workforce is properly aligned with business objectives and committed to making things happen.
Somehow I don’t think this is going to fly, George.