Mark Florman, head of the British Private Equity and Venture Capital Association, embraced the “owner-employee” plan saying it would encourage small businesses to increase hiring.
Under the plan employees can receive between £2,000 (€2,500; $3,200) and £50,000 worth of shares exempt from capital gains tax. In return employees will waive their rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training.
UK union leaders have denounced the measures as a business-friendly package that doesn't compensate workers enough for their waived protections. Companies and start-ups can offer new hires only an owner-employee contract, leading to concerns of diminished worker protections. Employers will however have the option to include more generous employment conditions to this contract if they wish.
“It’s an option that could exist within portfolio companies,” Florman told PE Manager. He noted that tax breaks would encourage ownership beyond a firm's senior management, who are usually more able to take on the risk of an equity stake being undervalued.
A consultation period detailing the scheme's restrictions on forfeiture provisions is expected ahead of legislation later this year. HM Treasury said it intends to ensure that if an owner-employee leaves or is dismissed, the company is not able simply to take the shares back but is able to buy them back at a reasonable price.
“A new generation of owner-employees will enter the labour market as shareholders, giving everyone a chance to work and share in the proceeds of enterprise,” said Florman in a response statement to the scheme.