With the Coronavirus pandemic causing the largest economic global shock the world has seen in decades, employers would be forgiven for having lost sight of the other economic and regulatory force for change – Brexit. With the clock ticking down on the UK’s transition period for leaving the EU, it is essential for UK employers to plan for the impact it will have on the UK labour market.
This note considers the potential workforce implications and ways in which employers might respond.
- EU employment law rights enshrined in UK law
- Tribunal fees
- Financial pressures leading to restructurings and job losses
- Growth in ‘off balance sheet’ workers
- Impact of new immigration scheme
- Staff recruitment pressures
- Remote working and greater mobility
- Conclusion – what can employers do to prepare?
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At the time of writing, whether a trade deal can be struck between the UK and EU and what that might look like remains an area of considerable uncertainty. Subject to the provision of any agreement, withdrawal from the EU means that UK employment law rights currently guaranteed by EU law would no longer be sacrosanct. EU derived employment law includes many protections which have played an important role in giving employees legal rights in this country – for example, much of the equality law framework; TUPE; working time; collective consultation; and rules on agency and fixed term workers. Issues around interpretation have been determined by the European Court of Justice.
Subject to any agreement, a post-Brexit government however will no longer be bound by EU jurisprudence, and could therefore seek to amend or remove all or any of these rights. However, the previous and current governments have committed to ensuring that workers’ existing rights are retained. This was reiterated in March 2020 when a note was issued to confirm that workers’ rights would continue as they currently stand, whether or not a deal is achieved. Even though amendments will probably be made to legislation in the longer term, employers (and employees) can take comfort in the knowledge that – particularly in the light of Covid-19 – it is unlikely there will be any immediate significant changes to UK workers’ rights.
When fees were introduced in 2013, the number of tribunal claims plummeted, and this, and in particular, the subsequent arguments around access to justice, eventually led to the scheme being scrapped. At this stage, all we know is that this is an area the Ministry of Justice continues to keep under review. It is possible that, as the government looks to reduce barriers to employers operating more flexibly in terms of their workforces, by introducing fees, it will make it harder for employees to challenge HR decisions.
But equally, it’s doubtful that the access to justice arguments will have been negated since the scrapping of fees, and in any event, such a move would be unpopular and might hurt the very people the government has spent so much time and cost on helping though the pandemic.
The loss to the UK economy from the anticipation of Brexit has been estimated to be close to 3% of GDP, and the Bank of England and the Office for Budget Responsibility have both concluded that there is likely to be a recession if there is a no-deal Brexit. It goes without saying that the pandemic will exacerbate macro-economic challenges caused by Brexit.
Intense Brexit uncertainty has already manifested itself in lower net migration, business investment, productivity growth and industrial output. This is leading to substantial financial pressures on businesses which are, understandably, looking to reduce costs and restructure.
Employers must be communicative about potential jobs cuts or restructurings and if specific positions will be eliminated. Where redundancies are inevitable, businesses should be focussed in their approach and mindful of following the correct redundancy processes. Of course, the Coronavirus Job Retention and Job Support Schemes launched by the Treasury will have ameliorated some of these pressures but as most commentators agree, such financial support cannot (nor is intended to) avoid workforce restructurings altogether.
From staff recruitment to customs documentation and changing contract terms, Brexit could bring additional business costs. Employers should be mindful of these expenses when stress testing their businesses and consider the financial implications of Brexit on their workforce.
In an attempt to alleviate business costs but avoid redundancies, and again reflecting the ‘new normal’ flowing from Covid-19, many employers have increased the use of atypical working arrangements within their workforce, including more use of contractors, casual workers and fixed-term workers. Whilst such working arrangements can be attractive to employers and help them to remain flexible during difficult times, employers must be careful that the use of such arrangements is compliant with employment law and don’t run into employment status and tax concerns. Importantly, employers looking to change current employees’ working arrangements should be mindful that any changes to terms and conditions must be agreed to by the employee.
On 1 January 2021, the UK’s new points-based immigration system will kick in, marking the end of free movement between the EEAU and UK. The new system will treat EU and non-EU citizens equally and anyone coming to the UK to work, excluding Irish citizens (who benefit from long standing alternative arrangements), must meet a specific set of requirements for which they will score points. Visas will then be granted to those who gain sufficient points.
EU, EEA and Swiss Citizens can apply for ‘settled’ or ‘pre-settled’ status under The EU Settlement Scheme. This is mandatory for all EU nationals who wish to continue living in the UK after 31 December 2020. The scheme is open now and the deadline for applying is 30 June 2021. Home Office guidance on the Scheme is available here.
Employers should assess how the Scheme will affect their employees and ensure those employees are applying for settled status now, bearing in mind that there are significant delays in processing applications due to Covid-19. If there are staff or new recruits in the pipeline that are currently based outside of the UK, can they be brought into the UK before 31 December 2020 to make use of the settlement scheme?
Organisations wishing to recruit skilled EU and non-EU workers in the UK from 1 January 2021 will need a sponsorship licence from the Home Office in order to do so. Employers must be up to date with changes which have been implemented to the sponsorship scheme which they can do by seeing here.
EU nationals can represent a sizeable proportion of UK organisations, which rely on the wider European talent pool to fulfil critical roles. Employers are advised to create a ‘talent pool impact assessment’ to identify which areas of their businesses will be most affected by Brexit and review the demographics of their current workforce. Brexit will have an impact on EU recruitment and employers will need to ensure that they continue to have access to the skills their businesses need. As well as offering competitive salaries, non-financial benefits, such as offering flexible working, could be key to attracting staff and preventing recruitment difficulties.
What is striking about the new immigration system is that there is no visa route for lower-skilled workers. EU nationals play a major role in lower-skilled sectors of the economy and it is estimated that 58% of EU-born full time employees in essential occupations in the UK do not meet the proposed requirements for a work visa, meaning Brexit is likely to cause widespread shortages and disruption to industries which rely heavily on EU migrants. For example, most social care positions do not require substantial training and are low paid, making them ineligible for work visas under the proposed immigration system.
Employers of low-wage workers have a couple of options if they are unable to recruit from the existing UK labour force. They could hire new foreign workers via non-work routes, such as those coming to the UK with their family. Alternatively, they might use strictly temporary, short-term visa schemes that do not have any skills or salary requirements. This includes the two-year Tier 5 visa, which is currently open to eight countries and may be extended in the future to EU countries.
With lockdown causing economic activity to plummet, the struggle to control Covid-19 has hit the labour force hard with 695,000 people having left company payrolls between March and September 2020. Although the easing of lockdown measures in the summer boosted the economy, this did not spur a recovery in the jobs market and the number of redundancies in the UK has accelerated at the fastest pace since the 2009 financial crisis.
The introduction of ‘furlough’ provided employers with some much needed breathing space but its conclusion at the end of October (notwithstanding its successor, the Job Support Scheme), will have a further impact on jobs. Following a rise in infection rates and local lockdowns, the chancellor recently announced an expansion of the Job Support Scheme to protect companies over the winter months. Eligible businesses will be able to claim two-thirds of each employee’s salary up to a maximum of £2,100 a month. The scheme will begin on 1 November and be available for 6 months, with a review in January.
With Zoom and Teams becoming household names, the new reality of working from home is likely to result in a permanent shift to hybrid working. The transition raises big questions for organisations on how they structure their workforce and they must be wary of logistical issues concerning data security, client confidentiality and GDPR issues that may arise from working from home.
Hand in hand with remote working comes greater mobility of where to work from and social media has seen a flurry of images of sea and countryside ‘office’ views with people taking advantage of the ability to work anywhere. Barbados has latched onto this idea with the introduction of the ‘Barbados Welcome Stamp’ scheme which provides a special visa that allows employees to relocate and work from Barbados.
In agreeing to such arrangements, employers must be mindful of the legal ramifications, including tax, social security, immigration and employment implications, as well as differing time-zones. They must undertake careful due diligence before agreeing to such requests and are advised to take legal advice. Employers which do ‘location-based’ salary may be tempted to adjust salaries in a bid to save costs if they become aware employees are no longer living in prime locations such as London, or are saving on commuting costs.
Employers cannot afford to ignore Brexit and must be proactive in assessing work structures and the impact Brexit will have on their staff. Action might include the following:
- If reliant on EEA or other foreign workers, getting to grips with the new immigration system, identifying any staff who will be impacted by it and, if necessary, obtaining a sponsor licence.
- Being clear about staff investment decisions and maintaining strong, open communication with staff.
- Where restructuring is needed or redundancies must be made, ensuring compliance with all legal requirements, including taking steps to avoid redundancies before dismissing staff.
- Investing in ‘working from home’ technology and data protection measures to minimise the risks of security breaches.
- Ensuring the health and safety and well-being of staff, including their mental well-being to build a resilient, strong workforce in preparation for what it likely to be a difficult and uncertain time ahead.
- In the event of any legal uncertainty or if Brexit/Covid-19 is likely to cause the need to restructure the workforce, take legal and professional advice.
Please see here for HMRC guidance on helping businesses and individuals get ready for Brexit.
For any advice on how your business can prepare for the post-Brexit employment and immigration landscape, as well as take advantage of new opportunities which will arise, please get in touch with your usual contact at Bevan Brittan.