Workers 'turned-off' by employee shareholder contracts, say employment lawyers

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The introduction next week of employee shareholder contracts is likely to be a "damp squib", according to employment lawyers.

The controversial contracts come into force on September 1 and several employment lawyers have told HR magazine they expect take-up to be "extremely low".

Chancellor George Osborne's introduced the plans March's budget as part of the Growth and Infrastructure Act 2013.

In return for company shares between £2,000 and £50,000, an employee will give up their statutory rights over unfair dismissal, redundancy and requests for flexible working and time off for studying or training.

Employees will also be required to provide twice as much notice of a return from maternity - 16 weeks instead of eight.

Tom Flanagan, partner and head of employment law at law firm, Irwin Mitchell, said the proposal for owner-employee contracts is almost "universally unpopular".

"I have always queried this proposal and questioned whether it is really about encouraging productivity and rewarding effort or, instead, part of a drive to make the removal of employment rights more palatable," said Flanagan.

"There is a fear that this is not about helping employers but something which is ideologically driven.‎"

John Lewis approach

Bernadette Daley, employment partner at Mayer Brown, said Osborne wants to create a "John Lewis style of ownership" but said it's "unlikely employers will welcome this with open arms".

"The John Lewis approach offers the carrot of greater employee involvement and ownership but without the stick of reduced employment rights," said Daley.

Chris Weaver, solicitor in the employment department at Payne Hicks Beach said while the John Lewis model is attractive, it mustn't come with the "erosion" of workers employment rights.

Greater risk

Riverview Chambers employment specialist Gary Morton said the scheme puts "huge swathes" of jobs at greater risk.

"The implementation of this legislation is taking Britain back towards pre-1963, before statutory employment rights were introduced," said Morton.

He also sent a warning to employees who are thinking of giving up some of their employment rights for shares. "Employees will need to think about the risks of joining such a scheme," he said.

"What happens when the business hits hard times, who do you imagine will be the first to be dispensed with?"

Daley urged HR practitioners to fully evaluate the new contracts.

Tomorrow HR magazine will provide advice and information for employers on the employee shareholder contracts.

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