Turning employees into shareholders

October 9th, 2012 at 9:01 am by David Farrar

The Herald reports on a policy just announced by UK Chancellor George Osborne:

The chancellor then sprang a surprise with his plan to swap shares for rights.

Workers could buy up to £50,000 in shares of the company they work for with all profits being tax free. In exchange employees would abandon their rights on unfair dismissal, redundancy and flexible working.

British unions immediately opposed the plan, which is due to come into effect in April 2013.

So long as it is voluntary, I think this is a nice idea. Businesses work better when employees have a stake in it as shareholders. However not sure one does it by way of tax breaks.

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7 Responses to “Turning employees into shareholders”

  1. CJPhoto (182 comments) says:

    A bit shore on details in the Hearld. I assume you are buying the shares at a discount, otherwise why would you give up employment rights?

    Not sure it is a good deal for employees either. When the economy tanks again, you will be first to be laid off as you have forgone your rights which is at exactly the same time as the share price has just tanked.

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  2. Mark (1,301 comments) says:

    So when referring to profits is the Chancellor talking about Capital profits on the shares, dividends or both. The reality is that they may be better of to buy the shares, pay the tax and keep their rights. Someone will have to do the maths at some point.

    I dont know enough about British labour laws or tax to get a real feel for whether it will work. Cant see that such a scheme would have wide appeal in NZ. We do not have capital gains tax for a start.

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  3. anonymouse (651 comments) says:

    I think the Herald story is wrong, the shares would not be “bought” they would be given by the company to the employee

    here is a guardian story on the topic, and the word “buy” is not mentioned at all

    http://www.guardian.co.uk/money/2012/oct/08/george-osborne-employee-shares-for-rights

    But I think teh scheme it is going to be a bit of a dog, the only companies that will be in a position to give away share will be ones that already have some forms of employee shareholding schemes,

    To introduce it will require a pile of compliance costs for the firm, including valuations etc

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  4. Manolo (12,608 comments) says:

    Horror of horrors. What employee worth his socialist salt would like to become a capitalist and shareholder?
    Do not let this evil idea come to NZ.

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  5. Kleva Kiwi (267 comments) says:

    Typical left wing media reporting. That is, if you can even call it reporting. Change the facts to suit the story…

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  6. peterwn (2,932 comments) says:

    This was sort of done in NZ many years ago. The Government got fed up with Public Works contractors. A would win a contract, and would sub-let it to B. Workers forced to use the employer’s shop at inflated prices, etc. So the Government set up a scheme where workers could band together and tender for works and these were called co-operative contracts. Even in the 1970′s gangs would go ‘on contract’ to erect power pylons – this being popular with the workers as they could earn more. That particular type of work was easy to estimate and measure.

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  7. Rich Prick (1,319 comments) says:

    If the scheme is by way of options, then the tax break is probably the tax on the difference between market value and option price upon exercise. This is one of the problems with our tax law, the tax liability arises upon the excercise of the option, not upon sale, meaning that employees exercising options generally sell share to pay the tax liability. And that kind of defeats the general good that comes from employees holding shares in the employer.

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