Mark Florman: Employee-shareholder policy could restore our winning entrepreneurial zeal again.

By Mark Florman

The UK has some of the best entrepreneurs and brightest business minds in the world. But to put the dynamism back into our economy we need to make it as easy as possible to start and grow a business: which is why I am a supporter of the Government’s new Employee-Shareholder policy.

Anyone who has ever started their own company knows it’s a risky business. Budding new enterprises can be tied up in red tape, struggling through the complexity of UK employment law without an HR team, and often wary of the risks they’re taking on.

These costs add up to one thing – a huge barrier to hiring people. One of this Government’s most radical policies is to do something about it.

Last October, the Chancellor announced the creation of a new employment status – the employee-shareholder. For the first time, employees will be allowed to give up some of their gold-plated employment rights in exchange for shares in their company. And, if the company succeeds and the shares increase in value, the Government will waive Capital Gains Tax to reward their aspiration.

The idea is simple. New start-up businesses need more freedom to hire people; and employees don’t have a big enough stake in their companies. This policy solves both problems. And next week, I hope the House of Lords will vote to make it a reality – because this change could make a huge difference to the companies and employees who choose to take it up.

If a company decides to take advantage of the new employee-shareholder status, they no longer have to pay exorbitant defence costs for dismissal tribunals, statutory redundancy pay or flexible working, all of which can cripple a new business.

And if an employee decides to take advantage of it, they keep all of their rights regarding discrimination and the minimum wage, and gain the opportunity to become a partner in their business, with a generous tax break if the company succeeds.

I have seen first-hand the huge difference having a stake in your company can make. When I started my own advisory company in 1992, I included all of the staff in the equity of the business – knowing that this was the way to align everyone to the same short and long term goals . And for every company I have started since then , in media , transportation , fund management and others , I have had the same policy , bringing the same opportunity to everyone . People are better colleagues and employees when they share the profits of success. And as a number of leading businessmen who championed the policy in the Daily Telegraph last year rightly say, employee-stakeholders are more productive, more motivated and have higher job satisfaction.

Some people have argued that this policy isn’t generous enough for employees or doesn’t go far enough to help big international companies. But these people miss the point. Of course, it won’t be right for every person, in every company. But it will make a huge difference to many small, newly established , fast-growing start-ups, who feel the regulatory burden of employing people more acutely than anyone else. And it will make a huge difference to many ambitious people who want to become partners in a thriving new business and help it grow.

Last year, 270,000 small companies were set up in the UK. The Government is right to do everything it possibly can to help them succeed and to encourage even more people to start new businesses in the years to come – these businesses are the new engines of the new Britain that we must build if we are going to compete and trade with the faster growing economies of the world.

This new employment status makes it easier for smaller entrepreneurial companies to innovate and take on people, encourages greater share-ownership which will drive productivity, and sends the clearest possible signal that the UK is open for business.

We need to turn our attentions to small, cutting-edge enterprises that will go on to become the future Amazons, Googles and Apples of the next generation, driving innovation and growth and helping the UK compete with the rest of the world.

Britain needs to find its winning entrepreneurial zeal again. The Government’s employee-shareholder policy may just be radical enough to help deliver it.