Growth and Infrastructure Bill

Memorandum submitted by UNISON (GIB 70)

A. OVERVIEW

1. UNISON is the UK's largest public service trade union with 1.3 million members. Our members are people working in the public services, for private contractors providing public services and in the essential utilities. They include frontline staff and managers working full or part time in local authorities, the NHS, the police service, colleges and schools, the electricity, gas and water industries, transport and the voluntary sector.

2. UNISON is fundamentally opposed to the Government’s proposals to permit employers to trade key employment rights for shares in a company. In our opinion, these proposals represent an unjustified attack on employment rights.

3. The Government argues these measures will provide increased flexibility for businesses and give ‘employee-owners’ an increased stake in their company. In practice, the proposals will strip employees of basic workplace rights. Employees will lose out on protection from unfair dismissal and the rights to redundancy pay, making it easier and cheaper for employers to sack them. The Government’s proposals will also substantially weaken family friendly rights for ‘employee-owners’, by limiting the right to request to work flexibly and imposing longer notice periods for women returning from maternity leave. In return, individuals will receive shares valued at between £2,000 and £50,000, though they will not be guaranteed the same voting rights or dividends enjoyed by other shareholders. There is also no guarantee that the shares will increase or even hold their value.

B. LOSS OF THE RIGHT TO REQUEST TIME TO TRAIN

 

4. UNISON is concerned about the removal of the right to request time to study or train in Clause 23 of the Bill, which will leave employees’ access to training dependant solely on an employer’s own policies and practices. UNISON questions the Government’s confidence that companies who choose to have ‘employee-owners’ will fully integrate training; The UK Employer Skills Survey 2011 showed that 41% of UK employers say they did not train any of their staff and 46% of UK employees (around 13 million) did not receive any training. The removal of rights to request time to train for ‘employee-owners’ is unlikely to buck this trend.

 

C. LOSS OF UNFAIR DISMISSAL PROTECTION

 

5. UNISON questions the decision of the Government to remove basic unfair dismissal protection from ‘employee-owners’ in Clause 23 of the Bill as it is currently drafted. We believe that this will leave employers free to sack employees for arbitrary reasons and leave them able to ignore established fair procedures when doing so. Employers will only need to take steps to avoid dismissing individuals for discriminatory reasons or for an automatically unfair reason.

 

D. LOSS OF THE RIGHT TO STATUTORY REDUNDANCY PAY

6. UNISON believes that the removal of the right to statutory redundancy pay in Clause 23 of the Bill will mean that many individuals and families will be substantially worse off should businesses decide to make staff redundant. For example, under current legislation an employee on average earnings who is 41 years of age or older and has worked for a company for 10 years would be entitled to £6450 in statutory redundancy pay. If the same individual had traded their entitlements for £2,000 worth of company shares, they would need to see the value of their shares increase by over 300% over the 10 year period before they would receive equivalent compensation.

 

7. In addition to this, in circumstances where businesses become insolvent an employee’s shares will have very limited value or more likely will be worthless. However, unlike other employees, ‘employee-owners’ will not be entitled to recover any redundancy payments from the Redundancy Payments Office (RPO), meaning they will not receive any compensation for the loss of their employment.

 

 

E. LIMITING FAMILY FRIENDLY RIGHTS

8. UNISON feels that the extension of the maternity notice period to 16 weeks for employee-owners in Clause 23 will not benefit employers. Instead, it is likely that more women will end up taking longer leave than they otherwise would and fewer women will return from maternity leave at all.

 

9. New mothers who are employee-owners would also face further barriers to their return and remaining in work if excluded from the right to request flexible working. The BIS Work-Life Balance Survey found that women were twice as likely as men to request flexible working.

 

F. SHARE VALUES

 

10. UNISON is extremely concerned that the proposals in the Growth and Infrastructure Bill could see employees trading valuable protections at work for shares in a company that could be almost worthless.

 

11. When the Chancellor announced this initiative it was stated that it is principally intended for fast growing small and medium sized companies. He also noted that new start-ups could choose to offer only this new type of contract to new recruits. Small, fast growing companies and start-ups can find their fortunes going down as well as up very quickly, and UNISON believes there is a significant risk that employees who traded their rights for shares in these and other companies could find their shareholding worth very little over time.

 

G. IMPACT ON EXISTING EMPLOYEE SHARE OWNERSHIP SCHEMES

 

12. In July, the Deputy Prime Minister Nick Clegg launched a review of Employee Ownership conducted by Graham Nuttall. Since then, the Government has conducted a consultation on implementing proposals from the Nuttall Review. When launching the review the Deputy Prime Minister made no mention of trading rights for shares, nor did the Nuttall Review, nor does the Government’s consultation on implementing the Nuttall Review.

 

13. UNISON believes that the proposals in Clause 23 which will see employees give up employment rights in exchange for shares contradicts significant bodies of evidence about how employee ownership schemes can achieve benefits for both employers and employees. The Nuttall Review, which was whole-heartedly endorsed by the Government, argued that: "The key condition under which employee ownership is recognised to succeed best is when it allows "employee-owners" to exercise their voice internally. It is this combination of share ownership and employee engagement that drives higher performance." [1]

 

14. UNISON believes that asking employees to trade key employment rights for shares will not create the conditions for the sort of employee engagement that the evidence clearly shows is a necessary condition for employee ownership to lead to improved business outcomes.

 

15. The proposals for employees to trade rights for shares also risks creating confusion among both employers and employees about employee share ownership schemes more broadly, and will undermine existing schemes. Employees will rightly be wary of an initiative that seeks to strip them of their rights in exchange for shares, and may assume that all employee ownership schemes work in this way. These proposals therefore contradict the Government’s wider agenda for broadening the scope of employee ownership schemes. The CEO of the Employee Ownership Association Iain Hasdell has made the following comment on the proposals in Clause 23 of the Bill:

 

"There is absolutely no need to dilute the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost employee ownership." [1]

 

H. ‘EMPLOYEE-OWNERS’ RELATIONSHIP WITH THEIR SHAREHOLDING

 

16. UNISON believes that it will also be very difficult for an ‘employee-owner’ to forecast the longer-term prospects of their employer company and the potential future value of any share options. If the Government decides to proceed with the proposals as currently drafted, it is essential that employees are provided with independent legal and specialist financial advice before being asked to sign an employee-owner contract. The employer should also be required to cover the costs of providing such advice, although the employee should be free to determine the source of the advice.

 

December 2012


[1] Sharing Success, The Nuttall Review of Employee Ownership , July 2012, Point 2.3, Pg.22 http://www.bis.gov.uk/assets/BISCore/business-law/docs/S/12-933-sharing-success-nuttall-review-employee-ownership.pdf

[1]

[1] Accessible at http://www.employeeownership.co.uk/news/press/bis-consult-3/

Prepared 10th December 2012