Employee-Shareholder Contracts
I commented on George Osborne’s plans for a new type of “employment contract” on 10 October 2012.
Since the proposal for this came to light the reviews have been mixed. In fact, it would be fair to say that the response has been rather unenthusiastic.
It is notable that 92% of respondents surveyed in the Government’s 3 week consultation (not the customary 12 week consultation that we are used to) responded in a negative or mixed way.
The Government has now responded to the consultation and, despite the somewhat pessimistic reaction, intends to go ahead and implement the policy. The Government has set out a number of modifications to its original proposals, most notably that people may lose their state benefits if they reject an offer of work on an employee shareholder basis. The other major change is that the scheme has been renamed as “employee-shareholder” contracts rather than an “employee-owner” contract, perhaps because the former name is misleading and gives the employee an unrealistic representation of the true value of their shares.
I accept the rationale behind the proposals and to some extent, they are commendable; to encourage employers to recruit, which should in turn help bring us out of the recession that is now predicted by the Chancellor to last until at least 2018. The logic being that employers are of the view that ‘red tape’ dissuades employers from recruiting. However, it is apparent from the consultation that those replying to this question of red tape, 81% considered that the scheme would have “no impact” on the desire of employers to recruit and only 11% of respondents thought it would have a “positive” effect.
Given there is such weak evidence to support the Government’s argument that red tape is preventing employers from recruiting, it does bring the logic of the scheme into question. Ironically, the introduction of share ownership for employees is more likely to bring with it additional procedural burdens and “red tape”; the very thing that the Government wanted to free employers from.
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Tom Moyes
