Growth and Infrastructure Bill

Lord Lea of Crondall Excerpts

Monday 22nd April 2013 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

My Lords, I am grateful for the full and wide-ranging debate that has taken place during our consideration of the Growth and Infrastructure Bill. Last week the other place disagreed with the amendment to remove the employee shareholder clause from this Bill. In today’s debate I will explain why the Government support the position of the other place to retain it in the Bill.

I intend to focus my initial remarks on the announcement made by my right honourable friend the Minister for Business and Enterprise who gave an important assurance about jobseeker’s allowance claims. I will also explain to the House why I believe it is important to support greater choice for companies and individuals with the creation of a new employment status.

Last week, my right honourable friend the Minister for Business and Enterprise announced in the other place that jobseeker’s allowance claimants will not be mandated to apply for employee shareholder jobs. This means that individuals receiving jobseeker’s allowance do not need to worry about their benefits being affected if they do not wish to apply for, or accept, an employee shareholder job. This is an important point. The Government will not compel jobseekers to apply for these jobs even if the job fits within their job search specification and we will leave it up to jobseekers themselves to choose whether to apply or not.

During the Third Reading debate on the Bill we discussed the guidance that will be made available for jobcentre staff to help them understand the new employment status. We have now updated the draft guidance for DWP jobcentre advisers. It now states explicitly that a jobseeker cannot be mandated to apply for an employee shareholder job. A copy of the draft guidance was placed in the Libraries of both Houses on 16 April.

We are debating a wholly voluntary new employment status. As I have said throughout the debates, we do not want people to be coerced into accepting these new contracts and it is worth us considering other protections that this clause provides. On Report in the other place the Government amended the clause to give strong protections for existing employees, enabling them to turn down an offer of an employee shareholder contract by their employer. First, we created a new unfair dismissal right that applies from day one of an employee’s contract. This means that if an employee turns down an offer to change their contract to an employee shareholder one and they are dismissed because they said no, this would be considered an unfair dismissal. Secondly, we created a new right not to be subjected to a detriment from day one of an employee’s contract. This means that if an employee turns down an offer to move to an employee shareholder contract and they then suffer a detriment, such as being passed over for promotion or for a pay rise for no good reason, they may be able to make a successful claim at an employment tribunal. These two protections allow employees to turn down an offer of an employee shareholder contract if it does not suit them and they can do this with the knowledge that the law protects their decision.

The clause has further protections. The shares, which must be worth at least £2,000 when given to the employee shareholder, must be fully paid up by the employer. This is an important point because if the company became insolvent and the shares were not fully paid up, the employee shareholder would otherwise be liable to pay any outstanding amount against the value of the share. It is important that we consider the context in which the new employment status fits. Employment law offers a choice of different employment contracts.

[Lord Lea of Crondall]

I am most grateful to the Minister for giving way at this stage. However, he has rattled through the circumstances in which someone could apply for a job: he says there is no compulsion and that there are options. I want to put a question absolutely clearly and directly. It arises from the guidance, which post-dates where we were last time in this House; in fact, it post-dates where the Commons were a week ago. The guidance refers to the circumstances where the vacancy is an “employee shareholder job vacancy”. Where, therefore, is the option for the jobseeker who does not want to be an employee shareholder? There is none. Is it not disingenuous to suggest that there is an option?

[Viscount Younger of Leckie]

I thank the noble Lord for his intervention. This currently remains an entirely voluntary procedure and jobseekers will not face a detriment if they are due to apply for a position.

[Lord Lea of Crondall]

I am sorry; it is very unusual to intervene twice. However, where is the option? The Minister has said that there is no coercion. Of course there is none in the sense of having a whip, but where is the option to get a job if it is solely an “employee shareholder job vacancy”?

[Viscount Younger of Leckie]

I am not sure I entirely understand where the noble Lord is coming from. If a jobseeker is seeking a job there are various options for him or her to look at in terms of roles, and the employee shareholder role will be treated equally alongside any other option. The only difference is that there will be absolutely no detriment to that individual if they apply for an employee shareholder role, and if they decide to turn it down. On the matter of guidance, I clarify that it remains in draft form. If this is an issue concerning the way that the guidance is written up, I am more than happy to listen to the noble Lord if he has any comments to make.

--- Later in debate ---

[Viscount Younger of Leckie]

I know of many employee contracts—not those for an employee shareholder—where serious advice is required. However, the status of being an employee shareholder is wholly new. The individual concerned may well require advice but noble Lords are talking about the circumstances of entering the employment phase and the proposal we are discussing would set a new precedent. As we know, often very difficult discussions take place towards the end of the employment contract. That is where it has become the custom and practice for companies to pay fees. That is the difference. I hope that I may be allowed to move on.

The recruitment of skilled personnel is normally taken very seriously. It takes time and commitment and involves searching for suitable candidates, sifting applications and interviewing. This will be no different with the new employment status. In fact, companies will need to take time to consider whether this type of contract is right for them. The owner of a company offering the status should think about the impact of giving up equity in the company. This is a decision that is not easily reversed, as once you have given away your shares it may not be easy to get them back. We must remember that the owner is giving away a stake in the company. Companies will need to be sure that the person to whom they offer the contract is right for the company. An employee shareholder may be able to influence the decision-making of the company and take a share of the profits. This is not something a company would do without being sure that it was the right move for them.

The new status will not be applicable or suitable for all companies or all individuals but it might be right for some. This new employment status represents more choice for individuals and companies. I have been clear throughout our debates that the status is voluntary. Indeed, it may well be used only by a minority of companies, but what is important is that we allow them to choose what is right for their own personal and commercial circumstances.

[Lord Lea of Crondall]

My Lords—

[Viscount Younger of Leckie]

I hope that I may be allowed to finish. I urge the House to keep this innovative proposal as part of the Bill. We should not deprive individuals or companies of choice that may lead to more jobs and better company performance. Above all, it is good for growth in the UK. I beg to move.

Motion B1