Thoughts On The New Employee Shareholder Contracts

Contract

As of yesterday (1st September 2013), new legislation has come into force which allows employers to offer shares to employees in return for them giving up certain benefits. The benefits lost may include redundancy payments, their right to claim unfair dismissal and time off for training or studying.

In a recent article in HR Magazine Tom Flanagan, partner and head of employment law at law firm, Irwin Mitchell says “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.”

I strongly agree with Tom Flanagan and feel the idea is completely flawed. It reminds me of when Trades Union members were offered improved pay and conditions but only IF they left their union. The word that springs to my mind is blackmail. Despite what many people think money is rarely an employee’s main motivation. The offer of company shares (that could go down in value as well as up) in return for signing away key employment rights doesn’t sound like much of a motivator to me at all.

Even if these new contracts are ‘optional’ for existing staff, you can be assured that they will be introduced as ‘expected’ if not compulsory for new hires! Management pressure (they will all sign up obviously) will be applied to their direct reports and they will be encouraged to cascade the take up benefits to their people in turn. This will cause unease and fear as the psychological pressure will be on for them to ‘sign up’ or face the prospect of being pushed out.

I predict these new contracts will damage, irreparably in some cases, the many years spent on building ‘employee engagement’. Rather than encourage and motivate through money, employee engagement seeks to motivate by giving people more responsibility and autonomy to use their own common sense and discretion. It also gives employees a real chance to say what they think and come up with solutions themselves. The case for employee engagement (when done properly) is proven, this latest legislation is not.

My other concern is one of trust! Sales people have a reputation for being untrustworthy as everyone knows they will make commission on what they sell to you. This may lead to them giving you advice that is better for them financially, rather than the best deal for you. Will all employees now be tarred with a similar brush?

So where do you stand? Would the motivation of share ownership outweigh the loss of your employment benefits? Are you under pressure to sign up? Let us know.

For more information on these developments please visit: https://www.bbc.co.uk/news/business-23920163

Many thanks

Mark Williams

Head of Training

MTD Training | Management Blog | Image courtesy by Jeroen van Oostrom of FreeDigitalPhotos.Net

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