Only One In Five SMEs Have Heard Of The New Contracts

A flagship government initiative allowing organisations to offer shares in return for removing certain employment rights is likely to fail because an overwhelming proportion of firms think it will be damaging to their business, according to a survey of over 500 UK companies by national law firm, Irwin Mitchell.

The government introduced the so-called ‘shares for rights’ contracts at the start of September 2013 with the aim of helping to kick-start economic growth and encouraging businesses to recruit more easily.

The proposals, which were brought in as part of the Growth and Infrastructure Bill, allow businesses to award shares worth between £2,000 and £50,000 to their staff. In return, employees give up certain rights, including unfair dismissal, redundancy, training rights and the right to ask for flexible working.

The contracts are optional for existing employees, but businesses will be able to make this type of contract part of the package for new recruits.

According to new research by Irwin Mitchell, 80 per cent of businesses have not heard about the new contracts, whilst only 10 per cent of all the businesses surveyed thought it was a good idea.

Out of the 20 per cent who said that they were aware, only 1% said they were considering introducing them. Virtually none (0.1 per cent) of all businesses questioned said they were planning to introduce shares for rights contracts.

Interestingly, nearly three quarters (72 per cent) said that they thought the initiative would make it more difficult to recruit.

Over half (55 per cent) said the contracts would have a negative impact on employee retention whilst nearly a quarter (22.9 per cent) said that they thought this type of conduct would be a hindrance to good employee relations.

Pointing again to the low awareness of the new contracts, out of those businesses surveyed that claimed to have heard of them, only 40 per cent knew which rights were included.

Less than half (44.8 per cent) of those aware of the concept said that they knew it was the responsibility of the employer to pay the reasonable legal costs of the employee in taking advice on whether to accept the terms.