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December 4, 2012 7:13 pm
The coalition is going ahead with George Osborne’s “shares for rights” scheme despite the plans receiving a poor welcome.
Out of 209 responses from companies, business groups, individuals and other interested parties, only a “very small number” welcomed the scheme and said they were interested in taking it up, the government has admitted.
Just 11 per cent of those involved in the official consultation thought the scheme would encourage employers to recruit. Most thought it would have low take-up.
Under the chancellor’s scheme, staff would give up rights on unfair dismissal, redundancy pay, flexible working and time off for training, in return for capital gains tax relief on £2,000-£50,000 worth of shares.The scheme would be voluntary for existing workers but employers could choose to offer new staff only this type of contract: unemployed people who refused such terms could lose their benefit.
The government’s response to the consulation was slipped out quietly by the Department for Business, Innovation and Skills, which is responsible for employment relations – in contrast to the fanfare when the chancellor announced it at the Conservative party conference.
Mr Osborne believes his scheme will appeal to fast-growing companies but Vince Cable, the Liberal Democrat business secretary, appears lukewarm. The plan is a variant on employment law reforms proposed last year by Adrian Beecroft, a venture capitalist and Tory donor.
The government said respondents had expressed “strong concern” that individuals were losing important employment protection and might be coerced into adopting employee owner status. There was also concern that the scheme could be misused by businesses and tax advantages could be abused.
More than half of respondents warned that, with individuals no longer able to bring unfair dismissal claims, there would be a rise in claims for discrimination or whistleblowing. There was particular concern that the scheme would be complex and costly to operate, with uncertainty over valuation of shares and income tax implications for individuals, which would deter employees from taking it up.
The government said it was considering options to reduce income tax and national insurance contribution liabilities that arose when employee owners received shares. It plans to provide more clarity through guidance for individuals and businesses and by amendments to the growth and infrastructure bill, through which the scheme is being enacted.
These would clarify the nature of the shares awarded, remove specific risks of liability on the employee owner and ensure that shares were issued without charge to them. They will be renamed “employee shareholders” instead of employee owners.
Ed Stacey – head of employment at PwC Legal, a branch of the professional services firm – said: “Removing employment rights, such as unfair dismissal, is not an attractive option for businesses or employees and will not achieve the aim of increasing companies’ appetite for recruitment.”
The Employee Ownership Association, a network of more than 100 companies, said in its response to the government consultation that there was “no need” to dilute workers’ rights to increase employee ownership and no data to suggest that doing so would significantly boost the number of employee owners.
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