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Published on October 20th, 2012 | by Isabelle Mngadi
Image © [caption id="" align="alignnone" width="566"] George Osborne's new owner-employee proposal signals a dramatic change for the workers of this country © Lulybelle[/caption]   During the Conservative Party conference last week, Chancellor of the Exchequer George Osborne announced a new owner-employee contract, allowing business owners to offer employees shares of their company worth between £2,000 and £50,000, in exchange for employees giving up some of their rights. Tax-free shares will be handed over in exchange for: the right to claim unfair dismissal, the right to a statutory redundancy payment, the right to time off for training, and the right to request flexible working hours. Under this agreement, women would also be required to give 16 weeks’ notice on their return from maternity leave, rather than eight weeks as was previously required. Although the announcement came dressed in typical Tory optimism – with Osborne urging the “workers of the world [to] unite!” – the questions of whether businesses, employees, and the overall economy will see the benefits, and whether or not someone is being stealthily handed the short end of the stick, are pertinent ones. Most criticisms of the contracts revolve around the cost and value of shares, versus that of dismissal claims. But what about the deeper consequences of trading in one’s rights for money; how could such an exchange affect the next generation of aspiring business employees, and should such a trade-off even be considered? The intention behind the agreement is to stimulate jobs and encourage the growth of businesses by allowing “fast growing small and medium sized companies […] to create a flexible workforce.” According to the Prime Minister in his closing conference speech, the Tories have already created one million jobs in the private sector. Therefore, the hope is that as this sector grows so do the number of employment opportunities it produces. But just what is the real meaning, and what are the lasting implications of a “flexible workforce”? Essentially, it means that redundancy will become more common, and easier to process. Not only is this bad for the working people of Britain, and an awful climate for the upcoming youth to enter into as they seek first-time employment - it is also unwise in the context of the aim to boost the economy by encouraging the circulation of money: an increased awareness of precariousness will lead many to be more careful with money, and to spend less, not more, resulting in a less stimulated economy. This is why even Osborne’s argument that the lack of capital gains tax on share profits would benefit "owners, workers and the taxman all [...] together" is flawed. The power remains completely in the company’s hands, and builds up the middle class of business owners rather than the larger number of employees who may make quick money on some shares, but are liable to lose out on their long-term source of income at the drop of a hat. It is a shame that despite the on-going fight for workers’ rights, at home and around the world, such rights are now being so causally traded in, in a way that may be compulsory for new employees, if businesses choose to instigate the measure in such a way. This means that many may have their rights forcibly revoked, in exchange for shares in a growing and therefore unstable company, which will then make them sell their shares back ‘at a reasonable  [read devalued] price’, when later they are summarily made redundant. One poll revealed that 86% of people would not give up their rights for shares in a company, but according to the Treasury, soon they may not have a choice. Another alleged benefit of the new contract is that by making redundancy easier to process, companies will avoid having to pay unfair dismissal awards at employment tribunals (the average unfair dismissal award currently stands at £9,000).  But the cost of such processes will not necessarily be avoided; the new measure may even result in more claims if the contract is offered to some employees and not others: “For example, if an employer offers the contract only to job candidates who women of childbearing age, those women may complain they are discriminated against by being shut out of the job security that male candidates would receive. But the male candidates might also complain that they are discriminated against because they are not offered the tax break!” Ultimately, the injustice in establishing the owner-employee contract is that it allows businesses and the government to profit off of the current economic situation and fierce competition for jobs, knowing that many will take unstable employment if they can. The fall-out for young people is potentially even greater, as youth unemployment rates continue in the hundreds of thousands: the number of people out of work overall may have recently gone down, but this is hardly a win if the consistent success of the next generation cannot be ensured. Whilst already ministers are telling youths that the only way to progress is to take unpaid work experience, because not enough opportunities are being provided, the owner-employee contracts signal an ominous future, in which young people – who are already more likely to enter a cycle of unpaid internships and work experience – are led towards trading in their rights, in the misguided hopes that this short-term opportunity will result in long-term success.

1

Owner-employee contracts: the short-term pay-off for a lifetime of flux

George Osborne’s new owner-employee proposal signals a dramatic change for the workers of this country © Lulybelle

 

During the Conservative Party conference last week, Chancellor of the Exchequer George Osborne announced a new owner-employee contract, allowing business owners to offer employees shares of their company worth between £2,000 and £50,000, in exchange for employees giving up some of their rights. Tax-free shares will be handed over in exchange for: the right to claim unfair dismissal, the right to a statutory redundancy payment, the right to time off for training, and the right to request flexible working hours. Under this agreement, women would also be required to give 16 weeks’ notice on their return from maternity leave, rather than eight weeks as was previously required. Although the announcement came dressed in typical Tory optimism – with Osborne urging the “workers of the world [to] unite!” – the questions of whether businesses, employees, and the overall economy will see the benefits, and whether or not someone is being stealthily handed the short end of the stick, are pertinent ones. Most criticisms of the contracts revolve around the cost and value of shares, versus that of dismissal claims. But what about the deeper consequences of trading in one’s rights for money; how could such an exchange affect the next generation of aspiring business employees, and should such a trade-off even be considered?

The intention behind the agreement is to stimulate jobs and encourage the growth of businesses by allowing “fast growing small and medium sized companies […] to create a flexible workforce.” According to the Prime Minister in his closing conference speech, the Tories have already created one million jobs in the private sector. Therefore, the hope is that as this sector grows so do the number of employment opportunities it produces.

But just what is the real meaning, and what are the lasting implications of a “flexible workforce”? Essentially, it means that redundancy will become more common, and easier to process. Not only is this bad for the working people of Britain, and an awful climate for the upcoming youth to enter into as they seek first-time employment – it is also unwise in the context of the aim to boost the economy by encouraging the circulation of money: an increased awareness of precariousness will lead many to be more careful with money, and to spend less, not more, resulting in a less stimulated economy.

This is why even Osborne’s argument that the lack of capital gains tax on share profits would benefit “owners, workers and the taxman all […] together” is flawed. The power remains completely in the company’s hands, and builds up the middle class of business owners rather than the larger number of employees who may make quick money on some shares, but are liable to lose out on their long-term source of income at the drop of a hat. It is a shame that despite the on-going fight for workers’ rights, at home and around the world, such rights are now being so causally traded in, in a way that may be compulsory for new employees, if businesses choose to instigate the measure in such a way. This means that many may have their rights forcibly revoked, in exchange for shares in a growing and therefore unstable company, which will then make them sell their shares back ‘at a reasonable  [read devalued] price’, when later they are summarily made redundant. One poll revealed that 86% of people would not give up their rights for shares in a company, but according to the Treasury, soon they may not have a choice.

Another alleged benefit of the new contract is that by making redundancy easier to process, companies will avoid having to pay unfair dismissal awards at employment tribunals (the average unfair dismissal award currently stands at £9,000).  But the cost of such processes will not necessarily be avoided; the new measure may even result in more claims if the contract is offered to some employees and not others: “For example, if an employer offers the contract only to job candidates who women of childbearing age, those women may complain they are discriminated against by being shut out of the job security that male candidates would receive. But the male candidates might also complain that they are discriminated against because they are not offered the tax break!”

Ultimately, the injustice in establishing the owner-employee contract is that it allows businesses and the government to profit off of the current economic situation and fierce competition for jobs, knowing that many will take unstable employment if they can. The fall-out for young people is potentially even greater, as youth unemployment rates continue in the hundreds of thousands: the number of people out of work overall may have recently gone down, but this is hardly a win if the consistent success of the next generation cannot be ensured. Whilst already ministers are telling youths that the only way to progress is to take unpaid work experience, because not enough opportunities are being provided, the owner-employee contracts signal an ominous future, in which young people – who are already more likely to enter a cycle of unpaid internships and work experience – are led towards trading in their rights, in the misguided hopes that this short-term opportunity will result in long-term success.

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About the Author

Isabelle Mngadi

Isabelle has recently graduated from the University of Kent, with a degree in Comparative Literature. She has completed work experience with her local MP, Ann Keen, and during her time at university, a significant portion of her studies were dedicated to exploring neo-colonialism and post-colonial development in Africa and Latin America. She has a background in working with young people from the UK and all around the world, and is passionate about helping them express their voice and be a positive influence to those around them. She is mostly interested in discussing international politics, particularly the intricacies of conflict resolution, globalisation and the establishment of human rights.



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