TUC warns against ’employee owner’ proposals going before House of Commons today

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Government plans to strip workers of basic employment rights in return for potentially worthless company shares will turn working parents into second-class staff, the TUC warns today.

The government is planning to introduce a new ‘employee owner’ employment status in the Growth and Infrastructure Bill, which is having its Second Reading in the House of Commons today.

‘Employee owners’ will have to give up the right to protection from unfair dismissal, forgo redundancy pay and flexible working and training requests, while mothers returning from maternity leave will have to give 16 week’s notice of their return to work.

In return for losing these benefits ‘employee owners’ will receive a tax-free allowance on company shares – though capital gains of up to £10,600 are tax-free anyway – that have no voting or dividend rights, or any guarantee that they will increase or even hold their value.

The TUC is concerned that by having to give up these basic rights, ‘employee owners’ will become second-class workers. Working mothers in particular will find it incredibly tough to work in these conditions and are likely to be put off applying for these jobs.

‘Employee owners’ will also be far easier and cheaper to sack than any other worker. Given that the scheme is targeted at new businesses, most of whom last less than five years, workers are more likely to lose their jobs when the company is struggling and the value of their shares are down.

Long-standing staff could find themselves sacked for no reason and penniless – without any right to challenge their dismissal, no redundancy pay and only worthless shares to show for all their work.

The lack of protection given to ‘employee owners’ is worse than anything proposed in the notorious Beecroft report, which at least offered compensation if bosses pursued ‘no fault’ dismissals, says the TUC.

Staff are likely to become ‘employee-owners’ through force rather than choice, says the TUC. Companies can force new staff to have second-class employment status while existing employees have little protection against being dismissed and re-employed on this contract.

Given the recruitment problems, reputational damage and complicated legal and equity raising issues that would arise from taking on ‘employee owners’ the TUC doubts that any sensible employer would ever take up the scheme. Chief Executive of J Sainsbury Justin King recently criticised the proposals and raised concerns about their impact on the reputation of businesses.

Businesses that want to offer shares to staff can and already do so without having to strip them off basic employment rights. The Employer Ownership Association – the leading voice for co-owned business in the UK – says that “there is absolutely no need to dilute the rights of workers in order to grow employee ownership.”

However, the TUC is concerned that the proposals are an open goal for unscrupulous employers who feel that mistreating staff and impromptu sackings are a necessary way to expand their business.

TUC general secretary Brendan Barber said: “Shares for rights already looks like a party conference announcement about which little more should be heard. The best that can be said for it is that it will be an irrelevant scheme ignored by 99 per cent of new businesses.

“However, we are concerned that it creates an open goal for bad employers to mistreat and sack staff. 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.

“If the scheme does somehow take off it will be disaster for working parents and cause huge reputational damage to companies that already offer employees shares without stripping them of their rights.

“With responsible business leaders attacking it, and Lord Heseltine dismissing deregulation as a spur to growth, it’s a policy that needs putting out of its misery.”


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