Why these fundamental changes to the “Employment Rights Act 1996” were implemented by Pickles’ Department for Communities and Local Government and not by Iain Duncan-Smith’s Department for Works and Pensions perhaps exposes a low Duncan-Smith was not prepared to go down to. In April 2013 the bill became law, and from September 2013 these new employment contracts can be written and employees’ rights endure the following beating:
Among the rights lost are the right to training; the right for flexible working; protection against unfair dismissal; the right to redundancy payment:
An employee who is an employee shareholder does not have—
(a) the right to make an application under section 63D (request to undertake study or training),
(b) the right to make an application under section 80F (request for flexible working),
(c) the right under section 94 not to be unfairly dismissed, or
(d) the right under section 135 to a redundancy payment.
In return, the employer is supposed to give the employee between £2,000 and £50,000 (can be more, but tax protection is limited to £50k) of “shares”. However, these aren’t shares as we know them. The employer can decide whether these pieces of paper do or do not have the rights shares usually have:
- Voting rights.
- Rights to dividends.
- Rights to a share of surplus assets if the company is wound up.
- Right to be sold (the employer can place restrictions on who can buy the shares – e.g. they can only be sold back to the employer. And whether the shares have ‘drag along’ or ‘tag along’ rights when the company itself is being sold)
Quite apart from not having rights to vote, dividends, etc. this creates another key weakness for these ‘shares’. Because they have fewer rights than real shares they can’t be valued against real shares. So they are worth pretty much whatever the employer says they are worth when he takes them back (at the time of your sacking).
In short, what do you call a share that has no votes, no dividends, and can only be sold to whomever the employer says? Answer: bog-roll.
The prime beneficiaries of this change in employment law will be companies that tend to get into hot water with current employment law. The Department’s own impact assessment states that the cost benefit for companies that don’t have to pay out for breaching employment law is just £43 per year per employee – that’s 83 pennies a week:
"Not including tribunal awards and settlement payments, our estimated expected avoided cost per individual that a company employs as an employee shareholder rather than an employee is around £43 each year. This avoided cost is related to the fact that an employee shareholder does not have certain statutory employment rights."