“Shares 4 Rights” scheme mooted by Chancellor of the Exchequer

by Redmans Solicitors on October 15, 2012

  • SumoMe

The pandemonium that is the Conservative Party conference engulfed Manchester last week. As is usual, the major party political leaders gave their speeches, with George Osbourne announcing something particularly interesting – the launching of an employee-ownership scheme which has been dubbed “Shares 4 Rights” in some quarters. This has received quite a bit of analysis (see here, here, here and here) but in this post we’re going to take a look at the “bare bones” of the scheme and look at what this means for both employers and employees. We’ll therefore look at the following issues:

  1. What is the “Shares 4 Rights Scheme”?
  2. Why does the Government think that this might be a good idea?
  3. Is the Shares 4 Rights scheme a good idea?

What is the Shares 4 Rights Scheme?

Under the Shares 4 Rights scheme new employees will be able to swap employment rights that they currently possess for shares in the business that they work for, from a minimum value of £2,000 to a maximum value of £50,000. Any gains on these shares will be exempt from Capital Gains Tax (“CGT”).

So, which rights will employees waive when they sign up for this scheme?

  1. The right to claim unfair dismissal
  2. The right to protection under TUPE (a possibility)
  3. The right to a statutory redundancy payment

The first (and potentially biggest) right that employees are waiving is their right to claim unfair dismissal, a right which employees possess under the Employment Rights Act 1996. They may also have to give up their right to claim protection under TUPE if their employment is transferred from one business to another, although the details of this have yet to be worked out. They will also be required to forfeit their right to claim a statutory redundancy payment if they’re made redundant from their employer. These are important rights to sign away so if you’re thinking of making a claim for unfair dismissal solicitor advice is essential.

Why does the Government think that this might be a good idea?

The Government is currently on a drive to reduce red tape in the economy (link) so as to improve economic growth. Whether this is actually a good idea has itself been questioned but quite a few MPs are attached to it. The line of thinking is that reducing the administrative and economic burdens on businesses will allow them to focus their energy and resources on making a profit instead of on internal management. It engenders a “hire and fire” environment, the aim of which is not dissimilar to the Beecroft report which was so thoroughly smashed to pieces earlier this year.

Is the Shares 4 Rights Scheme a good idea?

This really depends upon your point of view. It has receive much criticism from some of the afore-mentioned bloggers, including the fact that:

  • Employers may become entangled in distracting minority shareholder disputes
  • The fees for setting up a scheme such as this will probably be fairly high
  • The benefit of this scheme will probably be focussed on insular industries such as the financial services industry, which already has a fairly vicious “hire and fire” culture
  • The value of the shares will probably be outweighed by the amount of compensation that an employee could claim through the Employment Tribunal
  • The scheme doesn’t stop employees from claiming discrimination, harassment or victimisation (among other things)
  • The legislation will be particularly fiendish to devise and could take a couple of years to get right
  • Unscrupulous employers could manipulate the scheme to their advantage

The long and the short of it is that any employee that is thinking of entering into this scheme would be well-advised to take employment law advice from a specialist employment lawyer.

Redmans Solicitors are compromise agreement solicitors and employment lawyers based in Richmond, London.

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