Business blog: New employees waive rights
By Jahad Rahman of Rahman Lowe Solicitors in One Canada Square
George Osborne, the Chancellor of the Exchequer, has announced radical plans for the introduction of a new type of employment contract, known as an 'owner-employee' contract.
Under this new type of contract, new employees would give up their employment rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training.
They will also be required to provide 16 weeks' notice of a firm date of return from maternity leave, instead of the usual 8.
In return, they will be given between £2,000 and £50,000 of shares which will be free from capital gains tax.
Mr Osborne said: "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."
The Institute of Directors, welcomed the proposals, and businesses of all sizes are likely to welcome the opportunity to buy off basic employment rights in exchange for £2,000 of shares.
The Government has yet to provide any detail on whether there might be a requirement on companies to issue a minimum amount of shares, depending on the employer's size, determined for example by revenue or headcount.
Whilst the proposed owner-employer contracts may prove popular with businesses and give them more flexibility to dismiss workers, employers could still face a tribunal claim if the newly contracted out employees felt their dismissal was discriminatory.
In particular, the requirement to waive flexible working rights and stricter maternity rights is likely to have a disproportionate effect on women.
There are also questions about how the scheme will work in practice because it is not yet clear how businesses will calculate an employee's entitlement to shares on termination, who will pay for the valuation of shares and what will happen if a fair price for the shares cannot be agreed. Also, what if employees cannot sell their shares?
The devil will be in the detail. The Government will consult on "some details" of the contract later this month.
Legislation to bring in the new owner-employee contract will come later this year so that companies can use the new type of contract from April 2013.
Jahad Rahman is a Partner at Rahman Lowe Solicitors, a niche employment and discrimination law firm based in Canary Wharf, London. Go to rllaw.co.uk for further information.