George Osborne announces plans for a new Contract of Employment

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The Chancellor, George Osborne announced yesterday at the Conservative Party Conference in Birmingham his plans for a new type of employment contract. This new contract would be known as an “owner–employee” contract of employment.

Under this new contract an employee would waive their employment rights on unfair dismissal, redundancy, the right to request flexible working and time off for training. The new contract would also restrict maternity rights, requiring employees to provide 16 weeks (rather than the current 8 weeks) notice of a firm date of return to work.

In return for the surrender of these rights the company will grant the employee between £2,000 and £50,000 of shares which will be exempt from capital gains tax.

This new “owner-employee” contract is principally aimed at small companies and those anticipating fast growth but will be available to all companies no matter the size. Companies will have the option to offer this new contract to all new starters but the “owner-employee” contract will be optional for existing employees.

The Government intends for legislation to be in place later this year and that companies will be able to adopt these new contracts into their businesses by April 2013.

This radical move on employment contracts has raised a plethora of questions of how it will work in actual practice. It is also worthwhile to point out that the new contract would not prevent an employee from making any other employment law claims and in particular they would remain protected under discrimination legislation.

There are plans by the Government to consult further on this later in the month and as with all these things the devil will be in the detail.

Written by
Edward Aston
9th October 2012