The Chancellor of the Exchequer, George Osborne, has announced the introduction of a new type of contract of employment to try and assist a number of businesses in dealing with employees and their rights. The proposals do not however appear to have gone down quite as well as he had planned.

Under the new proposals, employees would be offered shares in the business in return for waiving their UK legal rights on unfair dismissal, redundancy, as well as the right to request flexible working time.

In addition, employees would have to give 16 weeks notice of their intention to return from maternity leave (as opposed to the usual 8 weeks).

To compensate for the loss of rights, employees would have a part ownership of the business in the form of shares in the business that they work for. Any financial gains on the shares would be exempt from capital gains tax.

This structure is primarily intended for new small to medium sized companies which are fast growing as it allows a degree of flexibility. An employer is able to move forward without a number of the usual employee law pitfalls which can prohibit the development and growth of the business. These new style contracts will however be available for all businesses to use.

Employees will be offered between £2,000 and £50,000 of shares. There is some concern regarding the valuation of the shares. For example, who will set the value and what happens if an employee does not agree?

Legislation to allow these new employee-owner contracts will be seen later this year with the intended start date being April 2013. It remains to be seen how these contracts will be approached by businesses, and certainly we are sceptical as to the benefit derived, and indeed whether owners of businesses in the SME market will really want to share the ownership of their business with staff.

Along with the change to length of continuity of service for unfair dismissal claims, there is little doubt that the current government is attempting to give employers some leeway in the minefield which is employment law. Whether it is sufficient remains to be seen.

For more information, or for more information about employment matters generally, contact us on 0118 9756622.

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