Chancellor announces plan to enable employees to trade employment rights for shares in their company
George Osborne has set out plans to enable employees to buy shares in the companies they work for if they give up their employment rights.
In his speech to the Conservative Party conference today, the chancellor said the government would consult on the plan, which could also see the shares being exempt from capital gains tax.
Osborne said: “It’s a voluntary three way deal. You the company: give your employees shares in the business. You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership.
“And what will the Government do? We’ll charge no capital gains tax at all on the profit you make on your shares. Zero percent capital gains tax for these new employee-owners. Get shares and become owners of the company you work for.
“Owners, workers, and the taxman, all in it together. Workers of the world unite.”
Osborne said the plan was “particularly suited to new businesses starting up; and small and medium-sized firms”. He described it as “a radical change to employment law”.
In a statement, Treasury said the new kind of employment contract would be called an “owner-employee” and that, although any company could use the contract, it is was “principally intended for fast growing small and medium sized companies that want to create a flexible workforce”.
Treasury said employees would be given between £2,000 and £50,000 of shares that are exempt from capital gains tax.
In exchange, they would give up their UK rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training, and would be required to provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual eight.
HM Treasury said: “Owner-employee status will be optional for existing employees, but both established companies and new start-ups can choose to offer only this new type of contract for new hires.
“Companies recruiting owner-employees will continue to have the option of inserting more generous employment conditions into the employment contract if they want to.
The Treasury said the government would consult on some details of the contract later this month, with legislation to bring in the new owner-employee contract to be put in place later this year so that companies could use the new type of contract from April 2013.
However, CBI director-general John Cridland said the shares-for-rights scheme would only be useful to certain niche sectors.
Speaking on Sky news, he said: “I think there a few businesses for whom this might be quite attractive: in the telecoms market, in IT, in creative industries. Sometimes workers and owners are moving very swiftly to grow a business, and employment rights aren’t their biggest priority, So it’s an interesting idea, but I think it’s about a nice part of the economy, it’s not about the main economy.
“I think for most businesses employment rights are something that employees value, and I doubt they would give them up for shares. He was talking about those entrepreneurial, cutting edge businesses; perhaps the creative companies in Soho, in London, for whom this could actually be a welcome initiative.”
As expected, Osborne also used his speech to rule out the Liberal Democrat’s ‘mansion tax’ proposal.
Her said there was a need to find extra savings overall of £16bn in 2015/16 to meet his own fiscal targets, and suggested cutting housing benefit for unemployed under-25s and reductions to child tax credits as ways of meeting the target.
He added that the government would be “relentless activists, building infrastructure, roads, power plants and broadband”.
“We’ll be activists for high speech rail and airport capacity, for new scientific research, for cutting through delays and red tape,” he said.
He also announced a plan to consult on a “generous new tax regime for shale so that Britain is not left behind as gas prices tumble on the other side of the Atlantic”.