Osborne told delegates at his party’s annual gathering in Birmingham that he would make it possible for employees to waive some employment rights in exchange for shares in the company they work for.
As well as a worker waiving their rights to claim for unfair dismissal, they would also give up redundancy rights, the right to request flexible working hours and time off for training in return for shares. They would also be required to provide 16 weeks' notice of a firm date of return from maternity leave, rather than the usual eight weeks.
Employees who sign up to the new contract would receive between £2,000 and £50,000 in shares, and profits would be exempt from capital gains tax.
The government hopes to legislate by the end of 2012, with a view to bringing in the new contracts from April 2013.
“Owner-employee status will be optional for existing employees. But both established companies and new start-ups can choose to offer only this new type of contract for new hires,” the Treasury said after Osborne's speech.
“Companies recruiting owner-employees will continue to have the option of inserting more generous employment conditions into the employment contract if they want to.”
But John Cridland, director general of the Confederation of British Industry said it was not likely to appeal to large manufacturers.
Not relevant to all business
“In some of Britain's cutting-edge entrepreneurial companies, the option of share ownership may be attractive to workers, rather than some of their employment rights. But I think this is a niche idea and not relevant to all businesses,” he added.
Meanwhile, at the grocery think-tank IGD's annual convention, King said: “Trading employment rights for shares is not what we should be doing.”
“We heard earlier [during the convention] how much the population at large don’t trust business," he said. "What do you think the population will think of businesses that want to trade employment rights for money?
“This should not be our agenda. Our agenda, if the government want to help us, should be making employment easier and less costly. That’s why I’ve been completely consistent when asked what’s the one thing that government could do for UK tax payers to reduce the cost of employing people - reduce National Insurance on employment.
Doesn't have trust
King asked: “Why is it that our relationship with government is one that doesn't have trust at its core?”
He cited examples of areas in which retailers had come into conflict with the government, such as ‘bad taxes’, proposed ‘health levies’, minimum alcohol pricing in Scotland and the Groceries Code adjudicator.
“These are all examples where politicians have demonstrated no trust at all,” said King. “But we will do the right things for our customers. So we have to challenge politicians along the journey.
“We have to be clear that we’ve earned the right to make that challenge by serving our customers well. We are, after all, their agents one way or another. And we should be assertive in our relationship with politicians.”