‘Shares for Rights’ Would this work for you?

Posted: Oct 12, 2012

George Osborne announced plans to enable employers the right to offer shares to employees in exchange for employment rights.

would you take a reduction on employee rights in exchange for company shares?

The employee ownership scheme would allow owners of all companies, but primarily small and fast growing companies, the chance to offer employees a new style of contract. An employee / owner contract would mean staff trade in their rights in respect of redundancy, flexible working, unfair dismissal, certain maternity rights and time off for training in exchange for shares in the business.

Companies have the option to decide if they want to use the scheme or not from the potential introduction date of April 2013. Companies would however be able to force new recruits to ‘take it or leave it’. They would also be able to offer the new style contract to existing employees, but acceptance of this would be a matter of choice.

Will the plans create a more flexible motivated team of workers or only serve to dilute the value of the company whilst creating business distrust?

There are arguments on both sides, the aim is to create a flexible aspirational workforce with a powerful work ethic empowered to share in the success and wealth of the business in a relaxed employment environment. The alternative is a vulnerable demotivated workforce, suspicious of their employers’ motives who are fearful for their future and as a result unproductive.

How could reduced rights in exchange for company shares impact motivation and morale?

Employment rights out the window!

The plan is also not entirely an escape for businesses from employment legislation, as any ‘shares for rights’ trade would be restricted to UK employment law rights. Any rights protected by EU legislation, such as working times and holiday pay under the working time directive cannot be traded.

There are also other practical considerations, will an independent valuation of the company be required to assess a fair value for shares, otherwise how can anyone really be sure of the real value of the shares they own, what freedom will staff have to sell their shares and whilst £2000 of shares might be a nice bonus its scant consolation if you find yourself dismissed without recourse.

Time will tell how the proposal stands up, current business opinion is certainly split on the viability of the proposal. Will this arrangement help or hinder businesses in attracting the most suitable candidates? In a scarce skills market like the one we currently are experiencing it remains to be seen if this proposal appeals to the Uks top talent or not.

Orion Electrotech offer engineering and technical recruitment consultancy services. Follow us to see our regular employment and recruitment related posts.