Corbyn’s shares for workers scheme
6th December 2019
Posted in Articles, Business Tax, Employee Incentive Arrangements by Forbes Dawson
The issue
Jeremy Corbyn has made much of his proposal to introduce a scheme whereby employees will receive 10% of a company over a period of 10 years. However there seem to be a lot of false rumours flying around about his proposed ‘shares for workers’ scheme. The main point to note is that it only applies to listed companies and therefore:
- Owner managers would not have to give up 10% of their shares.
- Employees of owner managed businesses will not benefit.
There are also points of detail which means that employees do not really gets shares at all.
How will this really work
The idea is for shares in listed companies to be diluted by 10% over a period of 10 years, however it is stretching the truth to say that these shares are going to workers. The following is what is really being proposed:
- There will be an ‘employee pot’ which will take ‘ownership’ of 1% of listed companies over each year of a 10 year period.
- Out of the ‘dividend pot’ for these shares a maximum dividend of £500 per worker can be paid.
- Any remaining funds will be put into a Climate Apprenticeship Fund.
- Hidden away in the detail is that the £500 cap on dividends would be increased to ensure that no more than 25% of the pot goes to the Climate Apprenticeship Fund.
- There does not appear to be any mechanism for employees to benefit from capital value of the shares.
Forbes Dawson comment
This may simply be a big stick to encourage companies to set up employee schemes in the commercial spirit of John Lewis. There is actually an exemption from the 10% mechanism for companies which implement employee ownership schemes of their own. To the extent that this is applied the cost will be borne by those who invest in the stock market because share capital in the effected companies will be diluted by 10%. There is of course a contrary view that the employees will be more motivated and this will be enough to make up for the capital dilution. I would question however whether an across the board £500 pay rise is really going to have much effect here.
