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Employee shareholder contracts: confused and pointless

Posted by Darren Fell on Aug 29th, 2013

First announced by George Osborne at last year’s Conservative Party Conference, the much-maligned ‘shares-for-rights’ scheme finally is coming to fruition next week.

Labelled a ‘mad dog’s breakfast’ by one Lord and ‘ill-thought through and confused’ by another, it’s fair to say that this initiative has not proven Osborne’s finest hour. Both business and Parliamentary figures have poured scorn on the scheme and its feasibility to operate within the workplace, but from September 1st it’ll be in force for any company willing to take it up.

Crunch, I’m happy to say, won’t be amongst them as like so many others, I’m struggling to find its logic.

For those of you not up to speed on the legislation, it’ll give employees the option to forego certain workplace rights in exchange for a stake in a company; an eyebrow-raising assortment of rights drifting into the ether should employees opt to take shares in their employers’ firm. Unfair dismissal, redundancy pay, the right to request training and flexible working are all on the chopping block.

A small silver lining from the employee’s perspective is that any profits made on their shares will be spared from Capital Gains Tax.

A legislative hotch-potch, Employee Shareholder Contracts (as they eventually became known) took three attempts to get through the Lords, and only passed with the proviso that employees are given access to legal advice before entering the scheme.

What surer sign could there be that this scheme is fraught with problems? Bear in mind the aim of this legislation at its inception was to reduce compliance costs and red tape for small businesses – yet still we’re seeing it loosed on an unsuspecting public despite obvious problems, and the potential to create more bureaucracy than it eliminates.

The Treasury believed that around 6,000 companies would be signing up originally. It now looks like they’ll get a fraction of that; and a minuscule fraction, too. According to a report by the FT back in June, a mere six companies (yes, six) had shown interest and, with the legislation going live next week, I’d be surprised if that’s risen higher. But regardless, spin still emanates from Whitehall, endeavouring to spare the Government’s blushes.

Rather than wasting more time and money on propping up this daft piece of legislation, Parliament ought to set about scrapping it and developing more coherent policies. Some thorough consultation wouldn’t go amiss in the future, as it’s clear they failed to here; the CBI suggests that Employee Shareholder Contracts will struggle to attract business, and the BCC has labelled it ‘niche’.

That’s something Osborne ought to bear in mind when drawing up his next scheme. If you’ll pardon the pun, this just won’t cut it George.

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