Small Business & Shares For Rights

It’s certainly an interesting idea and it’s had its fair share of negative press. With the scheme now active, what will be its effect on small businesses in particular?

It’s entirely possible that this scheme may give small businesses the ability to compete against larger companies for top level staff. The SMEs might not have the money to pay the rates other places do, but by offering shares instead they might come across as a more attractive option.

Working for small firms can be very attractive to top earners especially when they see a lot of potential. They might not be so bothered about their rights either meaning shares may seem like a good trade off. It’s certainly a route now open to small businesses trying to woo new employees.

There’s another positive in regards to disruption as well. If an employee does give up some of their rights for the scheme, they have to give a notice period of 16 weeks to their employer if they wish to quit. This means a company has a decent amount of time to find a replacement and ensure there’s a smooth handover.

Obviously money is a big concern for all businesses and the smaller you are the more important it gets. This scheme could enable the companies to lower their salary costs dramatically. This can free up some cash and ease the pressure on businesses to stay afloat.

Of course, all this could make things much more complicated for small businesses. Time is valuable, so having to spend extra time working out the details of a share for rights plan for employees (all of which could differ) is a HR headache. Especially so for businesses that don’t even have a HR department.

Now that any potential employee can put in a request for this scheme with their new employer, a cycle of admin for accepting or rejecting is never far away. Negotiations will be much more complex. The question arises about what happens when an employee leaves. Even if a company decides to reject all requests, it still takes up time that could be used better elsewhere.

If an employer does allow people to take up the scheme, they’ll end up with a split workforce. While at first this may not cause any problems, it’s not hard to imagine these divisions becoming more apparent as time goes on. An event, such as a couple of firings, could bring the differences to the fore and cause friction between employees. Once rights come into play, it may come as a shock to those who waived them just how important they are, especially when those who kept theirs put them to use.

Then again, all this discussion might be for naught. Very little interest has been shown in the scheme so far. This means that all the issues mentioned above may never even happen. It’s likely that there will be some requests for it, but overall it looks as though it may be a bit of a flop.

It’s not exactly unsurprising. Your average worker isn’t exactly jumping to give up their employment rights for some shares. To most, it just isn’t really an attractive offer. People want to feel secure and shares in a small business can be a bit of a gamble. In the end, it looks like the best bet for George Osborne is to just let the scheme pass quietly by to save face. His idea certainly hasn’t caught on like he hoped.

Joshua Danton Boyd is a copywriter for the online accountants Crunch.