Protecting workers’ rights: Give your views on Osborne’s shares for rights

Time is running out to take part in the Employee Share Ownership Consultation, which ends on 8th November 2012. Please complete this consultation and help the Lib Dems send a message to Osborne that workers’ rights are not up for grabs.

The full consultation document sets out the proposal for a new employment status of employee share ownership, but where the employee gives up employment rights in exchange for company shares. There is also a summary of the proposal on the treasury website.

Some points to consider:

The government suggest this scheme is voluntary, but what about those on Job Seekers Allowance who would have no choice but to accept the job or lose their JSA. And it’s not as if there is an abundance of jobs to choose from for most people. Also the summary suggests that companies can choose to offer ‘only’ this type of employment. So what makes it voluntary?

How will the shares be valued at distribution and buyback? Employees must sell the shares back to the company if they leave. Without an independent valuation the system is open to abuse of over-valuing or under-valuing shares.

Will the fear of losing your job without the protection of unfair dismissal or redundancy payment rights make employees reluctant to spend money in the economy? We need growth for the economy to recover; this will not help to promote growth.

This proposal is primarily aimed at new startups and small companies?  But isn’t there enough flexibility in the system already? The government has already changed the rights on unfair dismissal so it doesn’t come in until you have been employed for two years rather than one. Right to redundancy payments is also after two years. Requests for flexible hours and training are already at the discretion of the employer. So how will losing these rights altogether make any difference? Sure two years is enough time to decide if an employee is suitable?

This proposal is clearly Osborne’s way of getting the already rejected Beecroft proposals through the back door.  Over 200 Liberal Democrat members have already signed this letter against the measures.

Please take part in the consultation now before it’s too late.

* Tracy Connell is a member of the Liberal Democrats in Newcastle City, and a regional officer.

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17 Comments

  • Martin Pierce 6th Nov '12 - 3:20pm

    I have just completed the consultation. It’s very long (30 questions) and many of the questions are leading questions (e.g. do you think the benefits of this scheme will favour individuals or businesses more?). As a micro business owner, I can’t see how it would net benefit me, even leaving aside the moral dimension of it, as the cost/admin nightmare of valuation shares in small private limited companies will be substantial and people will still be able to bring claims of legal discrimination – and might just do that instead of traditional unfair dismissal. But one additional key thing to remember – it’s all very well saying we should “send a message to Osborne that workers’ rights are not up for grabs” – but this consultation is run by BIS, the proposal was set out in a joint BIS/Treasury press release and Vince has actively supported the proposal here on LDV. Let’s start by sending a huge message to OUR OWN CABINET MINISTER on this and tell Vince this is unacceptable. What on earth is he thinking of?

  • This is a naked attempt to create an alternative category of employees who fall outside the usual protection of the law. The share values involved, I understand, can be as little as £2000. If one looks at it in its most positive light, it’s trying to reduce employment costs and thus stimulate hiring; however as presently constituted it could lead to an entire class of workers who find their conditions much harsher and their rights truncated. Pass.

  • Tracy Connell 6th Nov '12 - 3:28pm

    Thank Martin.

    You are spot on about the questions of the consultation being skewed to the positive. It tried to not give you the opportunity to write the negative points, but you can wangle them in.

    Long consultation, yes, but hopefully worth doing if we can get our message through.

    Yes Vince is culpable in this too, though Osborne is the originator of the idea. We need to give Vince reason’s/evidence which he can use to throw this out. Though it totally beats me how he could even think of agreeing to it after he so adamantly kicked out the Beecroft proposals.

  • Tracy Connell 6th Nov '12 - 3:31pm

    Indeed Christian.

    The thing is that there is already flexibility. Rights don’t kick in for two years anyway. I don’t see how trading workers rights for shares can be advantageous to small companies and start ups. This is clearly for large established companies who want the power to fire at will. It is Beecroft by the back door.

  • Tracy Connell 6th Nov '12 - 4:00pm

    Lib Dem MP Martin Horword has a go at attacking the shares for rights proposal:

    http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm121105/debtext/121105-0003.htm

    “Then we come to the extraordinary clause 23. I proposed a policy on employee ownership and workplace democracy to this year’s Liberal Democrat conference. I would strongly commend the contents of that and its many recommendations to Government, including the option to bid for employee ownership at the time of transfer of an undertaking, which we believe could result in a step change in employee ownership. However, we strangely overlooked the need to link that to the trashing of people’s employment rights. Why should we remove the right to request training, when we are supposed to support training? Why should we allow more unfair dismissal, when we support fairness? Why should we remove the right just to request flexible working, when we are supposed to support flexible working? I have worked in business, and I have employed many people, and I have never found it very motivating to threaten my team’s employment rights. These rights have never deterred me from employing anybody. This looks like a nasty, vindictive little clause and Ministers should chop it out completely.

    …….

    The Bill in its current form seems guaranteed to generate cross-party opposition, however. Some of its planning ideas look half-baked and undemocratic. It unnecessarily threatens people’s employment rights. None of it was in the Liberal Democrat manifesto or the Conservative manifesto, and none of it was in the coalition agreement. It is unworthy of this Government, and it is very uncharacteristic of this Secretary of State. We should pause it and rewind, and rewrite it along the lines of the Heseltine report. Until we do that, I cannot support the Bill.”

    More of this from our MPs please! I hope they will all vote against it.

  • Tracy Connell 6th Nov '12 - 4:00pm

    Sorry, Martin Horwood*

  • This proposal should be shoved firmly straight back into the rubbish bin labelled Beecroft from where it was fished out.

  • Having visited the BIS page on this consultation, I am very concerned by the language used:

    “This consultation seeks views on how the government will implement the employee owner status in practical terms. ”

    Not “whether to” but “how”.

    This looks like being railroaded through with scant regard for whether anyone wants it. It must be opposed very strongly.

  • Someone else who’s not impressed by the very leading questions in this consultation.

    I remain utterly unconvinced by the rationale behind this though. New businesses don’t benefit because of the vesting period of the rights. Small businesses don’t benefit because the costs to administer the expanded shareholder base and to value the shares are definitely non-trivial. Large businesses should be managed by expereinced enough professional managers not to have enough problems with unfair dismissal and similar claims for this to benefit. Companies of any size who are worried about the effect of cyclical downturns requiring redundancies among new hires are already able to use temporary workers and fixed-term contracts.

    All told it seems a badly misjudged policy with little basis in evidence of real benefit that seems to mostly exist to push Conservative buttons. It should be quietly forgotten, and as soon as possible.

  • We are on the case, RC. It’s a red line for us and it will be stopped one way or another. We will not let Beecroft through by the back door. Trade off on workers rights is not needed to achieve employee ownership and will not advantage new startup companies at all. It’s clearly a Tory proposal to get ‘fire at will’ through.

  • >This proposal is primarily aimed at new startups and small companies?

    That is what has been reported, but having been through the consultation documents and responded with respect to my own experience of business startup’s, and now watching events unfold at Comet, I think a more truer intent is that the target is companies who desire a more flexible workforce – this is explicitly clear in the Background section of the Equality Impact assessment: “It is envisaged that the employers that might be most likely to employ employee owners would be fast growing companies with a requirement for a flexible workforce.” [Available on the Consultation page http://www.bis.gov.uk/Consultations/consultation-on-implementing-employee-owner-status?cat=open ] The words “fast growing” are just padding to make it sound okay.

    I believe there are two main rationales to these proposals:

    1. They are (a bribe?) to encourage companies to set up Employee Share schemes.
    This is made clear in para 51. of the consultation: “We would expect a company which chooses to have employee owners usually to implement this through an employees’ share scheme which is an established concept within company law.” and para 52 “We therefore do not propose to make any amendments to the Companies Act 2006 to make special provisions for the new employee owner status.”

    Hence the employee would be giving away rights to get something a company could given them today (including the Capital Gains tax exemption), if they were so motivated to do so.

    2. To make it easier for ‘investors’ ie. banks and venture capitalists, to recover more of their investment when things go wrong – and as we all know (but don’t like to admit) more companies fail than succeed! We can see this being played out at Comet now, where the primary investor is trying to do everything to maximize their returns whilst minimising the payout to staff. Which takes us back to Beecroft …

  • Thanks for that Roland. Some good points. Indeed I think it is for more established companies to make things easier for them. Since employee rights don’t kick in for 2 years, the measures to not help new startups at all imho. It’s obviously Beecroft by the back door.

  • As an important part of this is employee shareholding I recommend readers to also read and respond to the related consultation:

    Employee Ownership and Share Buy Backs – Consultation on implementation of Nuttall Review recommendations
    http://www.bis.gov.uk/Consultations/employee-ownership-share-buy-backs-implementation-nuttall%20review-recommendation?cat=open

    Which closes on 16-Nov-2012.

  • Tracy Connell 9th Nov '12 - 12:00pm

    Corey, your knowledge and experience in this area could be very useful. Perhaps you could pass on what you know to our ministers Jo Swinson and Vince Cable?

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