Contractors already deliver flexible and low risk support to the UK’s entrepreneurs, providing start-ups with the expertise and experience they need, without the added burden of employment rights and costs. So, why does the government feel the need to introduce a new class of worker, alongside ‘employees’ and ‘workers’? And why has it not recognised that a third class of ‘worker’ already exists, in the form of contractors and freelancers?
The Growth and Infrastructure Bill currently progressing through Parliament introduces provisions for a new form of employment status, the ‘employee shareholder’. Branded as “slavery” by peers when the bill was rejected by the House of Lords, the House of Commons proceeded to reinstate the scheme.
According to the government’s proposals, ‘employee shareholders’ will sacrifice certain employment rights, such as unfair dismissal and redundancy rights, flexible working and time off for training, in exchange for shares worth between £2,000 and £50,000 in their employer’s business. Assuming the profits remain below £50,000, the new class of worker won’t be required to pay capital gains tax when the shares are sold.
Talking to Outlaw.com, Pinsent Masons’ share plan expert Matthew Findlay believes the government’s decision to proceed with the plan is politically motivated: “The proposal was launched with much fanfare at the Conservative Party conference last year and is widely understood to be a 'pet' project of the Chancellor,” he says.
But the government is determined to drive through the legislation, despite widespread business cynicism and the attempt of peers to halt the plans. Enterprise minister Michael Fallon has defended the proposals, claiming that young companies will be better positioned to attract “high-calibre individuals who can have a disproportionately positive impact on how the company performs”.
Realistically, for employees to benefit from share ownership schemes, the company either needs to be floated on a financial market or sold. With the amount of time employees are spending working for a single company reducing, the chances of cashing in share options for positive gain are slim.
And many young companies already offer share options or attract entrepreneurially minded executives with offers of ‘sweat equity’. So, what is the purpose of adding a further layer of paperwork and a completely unnecessary new class of worker? Contractors can already step into the breach and deliver the UK’s growth companies with the expertise they need, without the need for messy and complex share schemes.
Fallon has acknowledged that the ‘employee shareholders’ concept would “not suit all companies or individuals”. But the government intends that the legislation will be introduced on 1 September 2013 anyway.
By forcing the legislation through the Commons, and failing to listen to what businesses want, the government is ignoring the fact that entrepreneurs can already secure the support they need from the UK’s world-leading flexible workforce of knowledge workers.
Employees don’t need shares that they are unlikely to be able to benefit from; they need employment rights. And entrepreneurs don’t need more employment legislation when they can already hire contractors.