25 April 2013

After a prolonged fight between the House of Lords and the government, the widely unpopular shares for rights scheme announced by Chancellor George Osborne is to come into law.

What is the shares for rights scheme?

Under the new law, employers will be able to set up an 'employee-ownership' scheme whereby workers agree to give up fundamental rights to redundancy pay, to claim unfair dismissal, and to request flexible working conditions and training in return for £2,000 in shares.

The government insists the scheme is voluntary, but it has been repeatedly highlighted that those who are desperate to gain employment - and with 2.59 million people unemployed, the number of people this applies to is huge - may feel they have no other choice but to accept the terms of the programme. Furthermore, employers may rescind job offers if an employee refuses to sign up to the scheme.

How unpopular is the shares for rights scheme

When the government ran an incredibly short three-week consultation on this enormous change to UK employment law, 209 responses were submitted from employers, workers' organisations and others. Of these, five reacted positively to the plans. Everyone else - including employers - warned the Coalition that the idea was dangerous and damaging to job security in the UK and employer-employee relations.

The House of Lords voted the shares for rights scheme out of the Growth and Infrastructure Bill twice before finally letting it pass yesterday (24 April 2013), reasoning that there was little more they could do to force changes to the policy and the government were determined to push it through into law. However, 168 peers still voted against allowing the scheme to pass into law, against 275 who agreed to let it pass.

What are the dangers of the shares for rights scheme?

Workers accepting the shares for rights scheme will have no legal protection should their employer dismiss them for no good reason. They will also receive no compensation if they lose their job due to redundancy. With many of those being made redundant in today's struggling economy losing their jobs due to business insolvency, the £2,000 in shares they once owned will have lost considerable value.

Job security will be lost, employers suggesting the scheme to workers may be distrusted, and what good relations there are between workers and their bosses may become strained.

What justification has been given for the shares for rights scheme?

The proposals were entered into the Growth and Infrastructure Bill on the justification that they will provide growth. However, it is not clear exactly how the government expects the plans to lead to a boost in the economy. In a Department for Business Call for Evidence in 2011, fewer than 1% of employers said they were put off hiring new staff due to unfair dismissal legislation. Yet it seems the government believe excluding staff from these regulations will encourage businesses to expand their workforce.

The ideological driver behind the scheme becomes more clear in light of the recommendations of Adrian Beecroft, venture capitalist and owner of payday loan company Wonga, which the Coalition has been following carefully.

Beecroft by the backdoor

As part of his report to the government, Beecroft proposed 'compensated no-fault dismissals'. These regulations would have allowed micro-businesses (those with fewer than 10 employees) to sack staff for no good reason so long as they provided them with monetary compensation. After news of the recommendations leaked, a public outcry forced the government to u-turn on its support for Beecroft's plans. However, as so-called 'employee owners' on the shares for rights scheme will receive no compensation when they are dismissed without reason, the news proposals are effectively even worse.

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