Employment Rights For Sale

Employment Rights For Sale


George Osborne has today announced a new type of employment relationship – the “owner-employee”.

From April 2013, employers will be able to use new “owner-employee” contracts. Under these contracts, employees will receive shares worth £2,000-50,000, which will be exempt from Capital Gains Tax. In return, employees will give up some fundamental employment rights, including unfair dismissal, redundancy payments, the right to request flexible working and will have to give twice as much notice of a return from maternity leave.

Early indications are also that employers could choose only to hire staff on this new type of contract, i.e. to refuse to hire people as a 'normal' employee.

This represents perhaps the most significant potential change to UK employment regulation since the UK joined the EU. However, there are many questions to be addressed. For example:

  • Who will decide the value of shares given to a particular employee?
  • How will this be applied to private companies, partnerships and LLPs where there is no market for shares and no simple way to value them?
  • For financial institutions, will these share awards be covered by the FSA Remuneration Code?
  • Will other shareholders be offered shares so that their shareholding is not diluted?
  • Will it really be better for employers who dismiss someone to be left with a disgruntled minority shareholder rather than a potential unfair dismissal claim (the average unfair dismissal award in the UK is £9,000)?

It remains to be seen whether these questions will be addressed as this policy takes shape, but there is no doubt that this has the potential to significantly change employee relations in the UK.