Would you share your rights?

Fresh from a booing at the Paralympics and a pasting over his pasty tax, George Osborne took to the stage in October of last year for his annual Autumn Statement, keen to appear more Iron Chancellor than incumbent chancer.

Speaking in front of Parliament, he delivered a speech outlining his plan to initiate growth, sowing the seeds for the ‘aspiration nation’ outlined in March’s Budget. Amongst the usual pushes for austerity, Osborne incorporated a few surprises into the speech, one of his more off-the-wall suggestions being the ‘shares for rights’ scheme – a radical change British employment law.

Only recently has the legislation found its way through The Lords, reflecting the controversy it has courted since its announcement last year. A frankly ludicrous scheme, it has all the hallmarks of a legislative hotchpotch, an amalgamation of ideas thrown together by those who know little about the realities of business.

Essentially, the scheme involves a tradeoff, with staff given the option of shares worth between £2,000 and £50,000 in return for the loss of certain rights and protections, including unfair dismissal, statutory redundancy pay, and the right to request training and flexible working.

Driving this change appears to be a desire to make the British workplace more American in nature, easing up the hiring and firing ability of Britain’s SMEs.

Indeed, smaller businesses can be dissuaded from taking on staff thanks to the stringent rules surrounding employee rights, but what employee in their right mind would take up this offer? And what sort of third party would recommend it, as large swathes of the Lords has requested they do?

Exchanging rights for shares is inherently risky in a small company, both thanks to the high rates of startup failure and the uncertainty involved with growth. Growing businesses are likely to go through rounds of funding, meaning that employees could be faced with the prospect of losing shares and thus forced to pump more money in, so as to stave off share dilution.

Whilst good for the business, that’s bad for staff and I sense that this scheme is destined for failure. If both parties aren’t happy in business, then a deal won’t be done. This scheme is a one way street and smart staff will realise that, shunning it en masse. No doubt there’ll be some unscrupulous operators who’ll use and abuse the scheme though, exploiting less astute employees and buying their rights for a pittance. While we’re on the subject, how do you put a ‘price’ on your rights?

From an employee’s perspective the only saving grace is that any gains will be spared from capital gains tax (should any significant gains occur). The Office for Budget Responsibility hasn’t been too happy about this though, suggesting that this move could leave the Treasury with a £1bn hole come the end of the decade.

I wouldn’t worry too much if I were them, I can’t see the scheme being taken up by too many. Whilst it’s refreshing to see the coalition thinking of small business for a change, the shares for rights scheme really doesn’t cut it…. if you’ll pardon the pun.