As it stands, the UK looks set to declare Article 50 and leave the European Union within the next couple of years.
And while the effects are unlikely to happen overnight, issues surrounding data protection, labour regulation and immigration – as well as the wider effects on the economy and workers’ rights – are likely to be called into question, with a potentially massive impact on employers and their payroll departments in the UK.
The post-Brexit UK economy
As predicted, in the immediate period following the referendum result, the UK economy took a hit, the pound depreciated by 10%, to its lowest value since 1985 and $2 trillion of stock was wiped off of the global market.
Whether the UK heads towards a period of recession or slow growth is still uncertain, but it looks likely that – due to the crash of the pound having an effect on imports and trade – the cost of living will rise. And, for your payroll department, this may see an increase in the number requests for pay rises as people seek to counteract the rising cost of goods and services.
Potential issues for employers and payroll staff:
Data Protection and Privacy
If the UK invokes Article 50 and leaves the EU, there’s still a lot of uncertainty and debate surrounding the future of data management. At present, data protection and privacy are handled under both the UK’s ISO 27001 and the much stricter European Union Data Protection directive. If we leave the EU, it will require a careful untangling of the two legislations – especially as the EU looks to implement the General Data Protection Regulation.
This issue will become particularly tricky if UK companies, or companies with UK headquarters, are storing data of E.U citizens. This unique situation could pose a problem for UK companies, as Eduardo Ustaran of Hogan Lovells told The Wall Street Journal: ‘The new U.K. government is going to find itself in a difficult position. The more the U.K. tries to distance itself from the EU, the harder [it will be] for U.K. companies to prove that they are safe recipients of data.’
If Article 50 is invoked, it would be prudent for employers and payroll staff to pay special attention to any proposed legislation concerning data.
At present, a large number of the UK’s employment laws are derived or directly linked with EU legislation.
The biggest bone of contention for employers seems to be the EU Working Directive, which prevents EU employees from working more than 48 hours per week. As we progress towards independence from the EU, it’s highly likely that UK businesses and employers will push for a repeal of this directive and a less heavy regulation on the UK labour market.
However, many laws and employment rights – such as maternity and paternity, redundancy and discrimination – are all enshrined in British legislation and will not be particularly affected by leaving the EU.
Migration, workers from EEA and UK employees working abroad
One of the main arguments from the Leave campaign was that it would control immigration across the UK.
Although it is unlikely that the UK will negotiate a deal that doesn’t include free movement of people, it is a possibility that must be considered. UK businesses should be prepared to adapt and scale their payroll systems, HR departments and compliance approaches in accordance to any changes introduced as a result of Brexit.
As it stands, British employers are free to hire anybody from any country in the European Economic Area without going through immigration and getting visas. If we leave the EU without a deal that includes free movement of people, then this will be subject to change.
Without free movement of people, EU citizens working in the UK will have to obtain a visa to continue doing so. This would involve more background checks for the employees, and an increased demand on HR departments. There are 2 million EU workers in the country – providing the information for every background check and visa application is a lot of HR work.
On top of that, if the UK introduces controls or restrictions on EU workers, then it is likely that similar restrictions will be placed on UK workers that work and operate in the EU. As a result, companies that operate internationally or have offices in other countries will – presumably – have to deal with visa applications for all of the international staff.
Having international offices and staff will also affect payroll – payroll departments will need to consider and take into account the territorial, legislative and compliance differences between the UK and the EU.
Looking towards the future – business as usual?
Just two weeks after the decision to leave Europe, it’s almost impossible to predict how things are going to change for UK businesses.
If Article 50 is declared, we could see diminished work forces, EU citizens returning home, HR departments under pressure to fill out visa forms or fill vacancies from a smaller talent pool, a recession and new workplace legislature. However, at the moment, nothing is for certain.
Because of this, The Chartered Institute for Payroll (CIPP) professionals has warned payroll professionals to carry on with ‘business as usual’ until Brexit negotiations are concluded.
Helen Hargreaves, Associate Director of Policy and Research at CIPP, has recently stated: ‘It is not a foregone conclusion that everything will change following our exit from the EU, and the CIPP will continue to monitor all legislation and regulation changes arising in the future, regardless of whether these are a result of European or UK legislation, and ensure that payroll practitioners are always aware of their responsibilities and obligations and how these should be met.’
‘The payroll profession is continually subjected to changing legislation and this will continue to be the case over the coming years and months, irrespective of our status within Europe.’
She was also keen to point out that, although some worker’s rights are derived from EU laws, they’re enshrined in UK law and unaffected by the Brexit vote:
‘An often quoted example is that the EU was responsible for the introduction of the right to paid holiday leave, which is of course correct. However, EU legislation grants workers 20 days’ paid holiday. The fact that UK workers have a higher entitlement of 28 days is as a result of UK regulations.’