How HR Can Prepare for Brexit's Impact
The United Kingdom's recent vote to leave the European Union (EU) could have implications for global organizations and their HR teams and could potentially affect recruiting, hiring and employer branding for those organizations.
In a historic referendum in June, the British public voted to withdraw from the 28-member bloc; supporters for withdrawal saw it as the only way to maintain U.K. sovereignty over EU regulations and to reduce high levels of immigration that resulted because of the EU's principle of free movement of labor, The Wall Street Journal reported. The U.K. will have two years to officially negotiate its departure.
Consequences 'Very Speculative at the Moment'
Jennifer Baillie Stewart, practice leader for global compensation and immigration at Crown World Mobility in Danbury, Conn., stressed that the consequences of Brexit are "very speculative at the moment."
She noted it could be the end of this year or early 2017 before Article 50 of the Treaty on European Union, the formal mechanism for leaving the EU, is triggered. Once that happens, the U.K. has two years to complete its separation from the EU, which will involve considerations such as trade negotiations and issues regarding immigration/free movement, Baillie Stewart pointed out.
Ben Wilkins, partner at PricewaterhouseCoopers, expects the vote to have "significant implications" for businesses and their workforces that will range from immigration to global mobility to pay, pensions and social security.
"In the immediate afternmath of the result, employers will need to concentrate on keeping abreast of the changes, reviewing the implications for their workforce and then communicating with their employees," he said in a news release.
"Employers are used to EU employees currently having the right to live and work across the EU without restrictions and applying EU regulations on social security coverage and benefits to EU mobile workers," he pointed out.
He noted that employers need to be aware that these rules may not be in place after the U.K. leaves the EU, be ready to address specific employee queries throughout the exit negotiations and to assess the cost implications for the business.
Recruiting, Hiring Hurdles
Mike Butler, a member of the Society for Human Resource Management's (SHRM's) global special expertise panel who work for Radius (Global Growth experts) in Boston, thinks employers in the U.K. will likely face administrative hurdles in recruiting job candidates from outside the U.K. because those people will need work visas, he said.
This would be especially cumbersome if an organization needed to recruit a large number of employees.
"If you wanted to bring in 50 workers from Romania it would be less easy to do ... because each of those individuals would have to go through the visa process," he said. "It affects your employment brand. You're not able to offer quite the overseas opportunities" when movement is restricted between countries.
"HR will have to be more creative in finding their sources of talent; the assumption [that] you could just pop into [the rest of] Europe to find it won't be there," Butler said. "It may be that HR departments in the U.K. won't be able to rely on an overseas talent pool; you may have to look to your own workforce" and develop the talent that is needed instead.
As for job seekers looking for organizations that can provide them with a career path made up of international moves, Crown World Mobility's Baillie Stewart thinks the impact on employer branding could be short-term.
"But it really depends on the trade negotiations" regarding free movement within some countries and the need for a work permit, she said.
Butler suggested that the U.K.'s exit from the EU could affect where organizations choose to locate their global base.
"The big question is, will there be a change in the preferred hub of some U.S. companies?" Butler said. "Where are you going to position your employment entity now that you don't have this freedom of labor from the EU to the U.K.?"
The U.K. often is a preferred location for U.S. organizations because of the common language and similar laws, he said. What once was "a quick setup in the U.K." for organizations looking to establish a local hub may become more complicated, leading organizations to look elsewhere. Butler said he doesn't expect most U.S. companies that are already in the U.K. to change their hub but that he thinks organizations first looking to establish a global base may see Ireland or the Netherlands as more palatable.
That has implications for HR.
"HR needs to understand where you can set up employment entities" in other countries, he said. And this potentially adds "another level of investigation for HR" as it looks into the beneficial tax regimes of other countries.
There are steps that Baillie Stewart said HR and their organizations can take to be prepared once Article 50 is triggered and the U.K. begins its separation from the EU:
- Conduct an audit of your workforce to assess which employees, if any, could be subject to the new laws. If any employees have lived in the U.K. for at least six years, they are eligible for British citizenship, which can have tax implications for the individual and the employer.
"This audit is important. Businesses may have always relied on the same source of talent" from other countries, she said. While it's unknown yet what Brexit's impact will be on recruitment, "we know there will be changes to the immigration of work."
There are options available, she added, that could include modifying the various tiers of the current immigration framework or relaxing the immigration framework.
- Drill down to see what options are available and what guidance employers can provide to their employees.
- Communicate with employees, even if there is no new news. An absence of communication can lead to rumors, lowered morale and disengagement.
"Be connected; it's very important" to let employees know the organization is committed to them and supportive of them and that the organization is keeping up-to-date with the latest announcements from the government, Baillie Stewart said.
- Plan for a longer lead time to get new employees on board if your organization wants to recruit large blocs of employees.
- Create a task force to help bring together skill sets for the organization's industry, with HR as a key member of the task force. The task force can act in an advisory capacity to the organization's leaders and help with communication.
"Immigration is not simple," Baillie Stewart emphasized, "and it will take time for solutions to be developed and implemented. The U.K. still wants to be open for business and thrive as an economy, and it's going to be in a transition period over the next two years."