The founder of a Leicestershire-based HR administration company has spoken out against government plans for a new kind of employment contract.
Peter Abraham, director of HR4UK.com expressed concern about the proposals for ‘employee owner’ contracts unveiled by George Osborne MP earlier this month.
The new contracts will see employees given between £2,000 and £50,000 of shares that are exempt from capital gains tax, in exchange for foregoing their UK rights on unfair dismissal, redundancy and the right to request flexible working and time off for training.
Peter said: “There is not a huge amount of information available about this new kind of employment contract yet. However, when you look at what facts are available, it is clear that in order to gain shares in the business, employees would have to compromise some of their fundamental rights and businesses will not be completely safe from being taken to Tribunal.
“Under the current plans, employees must give up their rights to unfair dismissal. However, it appears that discrimination claims are not included in this and therefore, the staff member would only have to change their type of claim from unfair dismissal to a claim of discrimination before filing at Employment Tribunal.
“Employees commencing employment since April 2012 have to have two years’ service before being able to claim for unfair dismissal or any redundancy payments so this will make no change during this period, but for existing employees it could raise an issue.
“There are many questions, such as will the shares on offer persuade an employee to accept less salary? How are the shares to be valued and what is there to stop an employer dismissing an employee unfairly as soon as the employee has given up their rights?
“I would urge employees to be cautious about accepting this type of contract until it is clear what terms the shares will be given. I also believe it will take many claims to Tribunal to establish case law before the full significance of this type of contract becomes clear.
“Whatever happens, I cannot see it making any substantial difference to the labour market or the UK employer employee relationship.”
HR4UK.com introduced an online Employment Handbook earlier this year, which transfers all staff contracts online and updates legal information as and when required in order to help employers remain compliant with ever-changing employment law and can save businesses up to 80% in administration and paperwork.
Legislation to bring in the contracts will come later this year, with the aim of companies using the new system from April 2013.