Shares for rights plan finally approved - update

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Employers will finally be able to offer shares to their staff in return for giving up certain employment rights, after the proposals were passed between the commons and Lords several times.

As reported by our sister publication BusinessZone.co.uk, Conservative and cross-bench peers packed down yesterday (24 April) after the government added an amendment stipulating that employees will only be able to swap their rights in areas such as redundancy, unfair dismissal and flexible working for shares once they have received free, independent, legal advice.

In recent months the shares for rights scheme has caused controversy and led to several debates in parliament after the Lords, in an unusual move, rejected it twice.

Business minister Michael Fallon said...

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25th Apr 2013 18:24

I'm pleased it was defeated

Allowing unfair dismissal, and loss of other rights, would be abused by some ruthless employers.

If the government want to push ahead with this idea it needs a radical rethink.

EDIT: I've just seen your update.

BOO! I think some employers will abuse this get out of jail free card, which will cost them just £2K.

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26th Apr 2013 11:42

What is the point of this legislation?

I seriously do not get the point of this legislation. Why would any business worth it's salt want their staff to give up their employment rights? I am considering introducing share ownership within my organisation but would certainly not expect my employees to forego their employment rights in return! I want to run a sound organisation where my employees are incentivised to build a solid and long term profitable company where they will stay for years to come. I can only see that such legislation would encourage businesses to be run with a short term and gung ho mentality where employees can be offloaded cheaply when things go wrong. I also see contradictions with this legislation and the "useless" IR35 legislation. When is an employee an employee with rights?? The government cant have it both ways!!

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26th Apr 2013 12:19

Shares for Rights

What a Shame!

What a shame that this initiative was defeated. I am all for employees having fair and reasonable rights but over the years I have seen the pendulum swing from employers have too much power (to hire and fire at will) to employees who short change their employers because of the way in which employment law operates in practice. My experience is limited largely to SMEs which often lack the resources to have systems and procedures in place to deal with employees who do not perform in one way or another. It is very difficult to deal with an employee who works half-heartedly, spends a lot of time doing their own stuff on the internet, is tardy, frequently late, resists training etc. Most small companies cannot dismiss these kind of employees easily and so put up with it.

The defeated proposal would have helped small companies but hey, let them just die out and let the multi-nationals flourish.

Disappointed.

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By johnt27
26th Apr 2013 12:21

Only good for non-contracted directors

The only people I can see this legislation appealing to will be non-contracted directors of owner managed businesses who could issue shares to themselves or family members to reduce capital gains exposure. Not sure what the legislation says about anti-avoidance but this could easily be abused unless there are rigerous provisions in place! No employee in their right mind would give up employment rights unless they had reasonable expectation of making it worth their while and in the Chancellor's economy that seems unlikely.......

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26th Apr 2013 14:27

Struggling to see particularly in private companies employees or employers being keen on this other than as Shirley says a few unscrupulous ones. What value will an employee get out of their shares? May never get a dividend and no choice who to sell their shares to when they want out. Will they be voting shares? Given the ongoing recession why would an employee want to give up any rights at the moment?

Why would an employer want to give away part of his stake in the business unless he can create a separate class of shares for this and if he can why would an employee want them?

Apart from a anything else morally it doesn't sit well with me effectively selling rights for cash. And is the CGT exemption likely to be an issue for the majority of employees?

What a mess for an employer if some accept and some don't and then the business has to make redundancies etc.

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By Ian Bee
26th Apr 2013 14:41

Disaster round the corner

So what happens when the company needs to make redundancies, and if these are start ups that is not impossible.

You have a disgruntled ex employees who are shareholders. But I suppose there will be a clause that requires the sale back at some valuation. Even if this is market value, that might not be very high if the company is not doing well, so there's no value in the shares, no CGT which there would not be anyway, but no employment rights either. It's lose lose.

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26th Apr 2013 16:24

Employee rights

I disagree with the posts above. I dont see why employees should have any rights whatsoever.There right is to tip up at 9.00 stay till 5.30 do what they are asked to do and get their pay. If they dont like it they should go work somewhere else.

I cant see why ( other than because its the law) a small firm  employer pays someone for not being there ie holiday or sick pay. None of my clients give me any money to go on my holidays or because I am sick, Why should employees get this. Same for maternity pay and paternity pay and redundancy and unfair dismissal.

If one of my clients decide to go to another firm of accountants...what do I do... take them to a tribunal and sue them for £10k...yet I cant change staff...the whole thing is proposterous.

 

Its all smoke and mirrors put in place by the labour  government on the whim of the trade unions  to try and  grind  businesses out of existence.

 

Seriously. the rules should only apply to companies that are considered medium sized under the audit limit criteria as I can see how some dim wit middle manager in a big firm  could well act counterproductively out of spite.

 

Whose with me on this????

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