June 29, 2016

BREXIT: What HR and Payroll professionals need to do now

The decision to vote Brexit in the referendum may have far-reaching consequences for employers and their employees up-and-down the country.

For employees it is an uncertain time as they ponder the impact the result will have on their jobs, and the terms and conditions of their contracts.

For employers, there will be long-term uncertainty about regulations and case law originating within the EU, such as the Working Time Directive, and regulations protecting employment during acquisitions and service provision changes, commonly known as TUPE.

Business leaders are looking to HR for guidance, so below we set out the agenda for what happens next, when, and what the potential outcomes are for the country.

Timeline for Brexit negotiations

The next Government will have two years to negotiate a new relationship with the EU from the point Article 50 is triggered – work is required to establish the legal and regulatory framework for employees and employers alike before starting the clock.

Assuming new leadership is in place by October 1 (following leadership elections in both the Conservative and Labour parties and a potential General Election) we can expect the negotiating period to run at the earliest from mid-October 2016 to mid-November 2018.

It is possible that as a result of legal challenges negotiations may be subject to extensions beyond this date.

Possible UK-EU relationships following Brexit negotiations

The negotiating position the Government opts to take will depend on what kind of future relationship they want to secure for the UK with the EU.

There are four possible scenarios, ranging from tight-knit consensus to loose association:

  1. A Norway-style ‘everything but membership‘ arrangement
  2. A Swiss ‘patchwork of two-way treaties‘ situation
  3. A Canadian ‘tariff-light‘ trade deal
  4. The World trade Organisation’s ‘basic vanilla package

The Workforce – who can work here, and under what conditions

Leaving the EU will have an immediate impact on the lightening-rod issue of the referendum debate – immigration.

With options 1 or 2, free movement of citizens with EU member states would likely continue, with limited impact on employers’ capacity to recruit from the continent.

Options 3 and 4 will almost certainly see an end to the automatic right to live and work in the free movement of labour, with a points-based system (like the one that already applies to non-EU migrants) the most talked-about replacement.

One possibility allows EU nationals to work in the UK for a specified period of time, after which they would need to obtain a visa or residence on the same basis as people from outside the EU. The major uncertainty of a Brexit vote is for migrant employees who’ve been here fewer than four years and are ineligible for permanent residency.

It’s expected that EU migrants already working here would be free to stay, and UK job searches from EU nationals have spiked in the days leading upto and following the Brexit vote.

The law – what could change, and what’s unlikely to be touched

On the face of it Brexit gives the UK power to repeal or reshape employment legislation that many UK businesses dislike.

The Government may try to repeal certain aspects of EU law, such as the Working Time Regulations (WTR), Agency Workers Regulations and CRD IV
(intended to cap bankers’ bonuses).

However, a wholesale abolition of all EU-based workplace law is very unlikely, not least because:

  • Repealing some workplace law would be politically difficult domestically
  • International political pressure will also inhibit the repeal
    of some rules
  • The way UK judges interpret what was previously the dominion of EU Court rulings will change the law over time, but slowly

Laws that could change

Working Time Regulations – there is an appetite to reduce the administrative burden on employers, which could include the scrapping of the 48-hour average working week
Agency Workers Regulations – seen by many UK employers as a problem piece of legislation, the Government could remove the requirement for agency workers to be paid the same rate for a job as permanent staff after 12 weeks
HRA, Unions and TUPE – a possible relaxing of the rules for changing employee Ts&Cs following a transfer
Financial Services – Bonus Payments – CRD IV, the ‘Bonus Cap Rule’, has been in operation since 2015 and cold be relaxed or removed altogether
Data Protection – modest changes could be introduced to reduce the burden on employers, and the Government would probably seek to reduce public or consumer protection elements too

Laws that could prove too difficult to change

Discrimination – Although leaving the EU gives more scope for the Govt to look again at this area of the law, it wouldn’t be popular and there is little political desire
Family Friendly policies – Changes in the working patterns of UK employees, and the demands of customers, means a more flexible workplace is unlikely to be reversed any time soon. Smaller businesses could see exemptions or adjustments around rights to maternity leave, but again political or popular desire is lacking

What to do next

HR and Payroll professionals should take the time to read all the literature they can, understand the potential roadmap(s) for the next two years to minimise disruption for the workforce, and be prepared for every potential outcome.

One high priority will be to drill down on the skills needs of the business, and look at medium and long term recruitment, talent management and succession planning issues.

And they should revisit the legal landscape affecting their business and make contingency plans for changes that will present challenges – and significant opportunities – if managed well.

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About the author

Lisa Gillespie

Over 20 years Lisa has acted as a consultant and adviser on many HR issues and employment tribunals across public, private and third sector organisations. She has worked in most UK local authority areas on projects ranging from social care and health to training and conciliation arrangements. Lisa studied psychology before moving into employment law and HR after further study at Manchester Metropolitan University and the University of Salford, and she is also qualified in project management and counselling.