Britain’s ‘rights for shares’ plan stirs controversy

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The British government is posing a controversial question that could revolutionize the workplace. Would workers be willing to give up some of their employment rights in return for an ownership stake in their employer?

The concept is known as "rights for shares" and it involves employees forgoing things like most unfair dismissal rights, statutory severance pay, requests for flexible time off for training and some maternity benefits. In return, these workers would become "employee owners" and receive at least £2,000 ($3,192) worth of shares in their company employer. Any gain on those shares, up to £50,000, would not be subject to capital gains tax. The program would be voluntary and the shares could carry votes, dividends and other rights.

The proposal "will give staff a stake in their firms' future success and give firms greater choice about the contracts they can offer to individuals," the government said in its 2012 autumn statement Wednesday, which is a kind of mini-budget. It added that the program is aimed mainly at fast-growing companies and entrepreneurs, which the government believes need greater employment flexibility to prosper.

The government raised the idea with great flourish at a Conservative Party conference in October. "Workers of the world unite," George Osborne, the Chancellor of the Exchequer, told the conference. "Workers: Replace your old rights of unfair dismissal and redundancy with new rights of ownership … Owners, workers and the taxman, all in it together."

However, since then the plan has been a tough sell.

Trade unions slammed the idea, saying it was open to abuse and could leave workers vulnerable and potentially stuck with worthless shares. "We are concerned that it creates an open goal for bad employers to mistreat and sack staff," said Brendan Barber, General Secretary of the Trades Union Congress. "Second-class workers may also find that their second-class shares are virtually worthless if they try to leave or are kicked out of the door."

Even some business groups gave the plan lukewarm praise, saying few companies would take up the idea. The Federation of Small Business also worried about complications, costs and how it would be administrated. Other groups questioned how shares in private companies would be valued and what would happen to the stock if an employee quit?

The government's own consultation on the plan didn't go well either. A division of the Treasury Department received 209 submissions from businesses, individuals and a variety of organizations during a six week consultation process this fall. According to a report on those submissions released Tuesday, the overwhelming response was negative.

"Whilst a very small number of responses welcomed the scheme and suggested they would be interested in taking it up, a number of specific issues were raised through the consultation," the report said without specifying how many respondents opposed the plan. "There was a strong concern that individuals were losing important employment protections and that they might be coerced to take on employee owner status. There was also a concern that employee owner status could be misused by businesses, and that the tax advantages could be abused."

The government has agreed to consider changes to simplify the scheme. It will also increase the minimum value of shares to be granted from £2,000. And it will open the program up to foreign companies operating in Britain. And despite the opposition, Mr. Osborne made it clear Wednesday, the government isn't backing down and will continue to develop legislation to make the plan a reality.