Sainsbury's boss Justin King has attacked a George Osborne's scheme that could see staff "trade" employment rights for shares in the company they work for, saying it would undermine already low levels of trust in business.

"I would not wish to trade good employment practice for greater share ownership," said King of the initiative announced by the chancellor at the Conservative conference on Monday.

The employee-ownership scheme would see companies offer workers shares worth between £2,000 and £50,000 in exchange for sacrificing their rights over unfair dismissal, redundancy and requests for flexible working. Critics fear it will encourage small firms to circumvent labour market laws in return for giving the employee an initial £2,000 bonus.

"This is not something for our business," said King, who was speaking at the IGD grocery industry conference. "The population at large don't trust business. What do you think the population at large will think of businesses that want to trade employment rights for money?"

His comments came as fresh market share data showed Sainsbury's setting the pace for the big four supermarkets. Buoyed by its sponsorship of the Paralympics, Sainsbury's sales grew 5.6% in the 12 weeks to September, increasing its share to 16.5% from 16.2% a year ago. Demonstrating the trend for Britons to shop around to save money there were also bumper showings for Aldi and Lidl, which grew at 25.4% and 10.8% respectively. There was also a strong showing from Waitrose, which after growing at more than twice the market rate during the period is sitting on a record share of 4.7%.

"Among the big four supermarkets, the stand out performance is from Sainsbury's," said Kantar analyst Edward Garner. "Its sponsorship of the Paralympic games has clearly borne fruit."

The results contrast sharply with those of Tesco and Morrisons which both lost market share during the period. Sales at the UK's biggest retailer increased 3.3% in a market that grew at 3.9% while Morrisons sales growth was flat.

Analysts said that based on leaked Kantar figures for September alone, Morrisons and Tesco looked even worse. On that basis sales at Morrisons fell nearly 2% versus increases of nearly 8% at Sainsbury's and Waitrose.

Tesco, which last week reported its first drop in profits in nearly 20 years, also lagged the market in September with growth of 2.2%. The poor showing suggests chief executive Philip Clarke's £1bn turnaround plan is not paying off yet.

Analysts said Morrisons, where boss Dalton Philips has also been refurbishing stores, was being hit by the transfer of grocery sales online and the increasing popularity of convenience store shopping.

Morrisons is behind the curve in new business channels such as the internet because its former boss and founder, Sir Ken Morrison, shunned anything other than its traditional 38,000 sq ft supermarkets and dismissed home delivery as something he had done "on a bike as a young man". It opened its first convenience store last year and plans to have 70 by the end of the next year. It is also said to be finalising plans to belatedly start selling food online.