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Employer briefing on Article 50: the things you need to know
March 29th 2017. A date that will leave an indelible mark on the history of the UK. At approximately 12.20pm that day, the European Council's president, Donald Tusk, was handed a letter that will be significant for generations.
It was official confirmation from the UK that the Prime Minister is triggering Article 50, thus starting the formal process of withdrawal from the European Union.
More than nine months after voting to leave the EU, the formal process of handing over the letter confirms what we knew and now the lengthy negotiations can start - well, once the small matter of a general election is concluded.
But this gives employers time to think and breathe before discussions begin in earnest. How should employers prepare?
Why will Article 50 affect business?
Put simply, the triggering of Article 50 is a hugely significant moment because it begins the two-year countdown to the split between the UK and the EU.
In that time, trade agreements will have to be renegotiated and while two years may seem a long time, it really is not. It’s been almost two months since Donald Tusk received official confirmation from the Prime Minister. Can you think of any progress made since then?
Embracing the freelance economy will help the UK to survive and even thrive in post-Article 50 Britain.
The water has been muddied even further with the calling of a general election. This takes away valuable negotiating time and provides a state of flux which should be avoided as much as possible until 29th March 2019.
That is the date by which all agreements have to be in place. Any changes in trade, movement of workers, freedom of capital / services, all have to be agreed. Yes there’s scope for extension as part of the Lisbon Treaty, but there’s also a chance that the date will come and go without agreements in place, and the UK will then leave the EU with all agreements null and void.
The dreaded ‘no deal’.
An article in Business Matters suggested in March that things will change quickly in the two-year timescale. “It could well be that an operating assumption that holds true for the next 18 months might need substantially changing in the last six months of the window, rendering a lot of what went before irrelevant.”
If the UK have trading partners in the EU, it stands to reason that companies will have similar business arrangements. All of these will be subject to change.
What are the biggest changes that could affect employers?
We’ve covered this previously so won’t labour the point too much, but clearly, the triggering of Article 50 brings about real changes that employers should be aware of.
Earlier this year, Theresa May confirmed that the UK will seek what amounts to a hard Brexit, which will include exiting the single market - backed up in the Conservative manifesto.
“Instead, we seek the greatest possible access to it (the market) through a new, comprehensive, bold and ambitious Free Trade Agreement.”
Managers need to be aware that international employees already working at a company will be concerned about the Brexit process and how it might impact their personal and professional future.
To be allowed access to the single market, the UK have to accept four EU freedoms: movement of goods, capital, services and people.
We have made it clear that movement of people is one of the things that will change, therefore access to the single market would be impossible anyway.
For employers, it leaves trade agreements in a precarious state. For businesses in partnership with EU-based counterparts, changes to legislation and agreements - whenever they are made - will make the process of trading longer, more costly and more than likely increase red tape.
This could have a knock-on effect in other areas of a business.
Freedom of movement
Undoubtedly the most contentious issue surrounding the job market in the UK is freedom of movement.
Mrs May has made this a key part of the negotiations and with her confirmed target to reduce net migration to under 100,000 people, this is a significant issue for employers arising from Brexit, as Samantha Hurley, Director of Operations at APSCo, explains.
“That (migration target), together with the fact that the House of Commons voted to reject the House of Lords amendment which sought to guarantee the rights of EU nationals in the UK before Brexit negotiations begin, means that Brexit has become significant for the labour market and there is a need to access highly skilled specialists post-Article 50.”
Professional development and a clear career progression also ensure staff feel happy at work, which reduces churn and helps combat any skills shortages a company might face in a post-Brexit Britain.
The risk to the supply of workers was also highlighted by Jonathan Portes, who is a senior fellow at the thinktank UK in a Changing Europe.
He believes that potentially making immigration part of freedom of movement negotiations could seriously hinder the access to skilled workers.
He said: “Theresa May has made it clear she wants to end free movement, so a key question is whether immigration will be part of the negotiations at all.
“The government knows the economic value of EU migration to the UK and ending free movement without other arrangements in place risks the UK losing not just low skilled migrants, but nurses, care workers, bankers and researchers.”
How are employers reacting to Article 50?
Surprisingly, there’s evidence to suggest that companies are relaxed despite the general election getting in the way of precious negotiating time.
In the month that Article 50 was triggered, research from Anaplan suggested that although many are concerned about Brexit, almost half had not made plans for it.
Perhaps this has been helped by some of the subsequent reactions within business. In the immediate aftermath of the official Article 50 letter being delivered, the CBI described the tone of the letter as “positive.”
They explained: “The language of the Article 50 letter that expressed the UK’s desire to ‘remain committed partners and allies to our friends across the continent’, and that the decision on June 23rd ‘was no rejection of the values we share as fellow Europeans’ will therefore be appreciated.”
This confidence shows in research from BusinessTransformation.com - part of In Touch Networks, which is a group of professional networks for senior executives and freelance professionals.
Their research survey showed that 57% of UK businesses are making growth a priority, despite the general election and Article 50 decisions and subsequent fluctuations.
Two thirds of businesses don’t think they’ll feel the impact of leaving Europe, and just a third of companies don’t have a strategic plan in place to deal with Brexit.
It is something that surprised Matt Roberts, CEO of In Touch Networks, who said: “Of the organisations we surveyed, we were surprised to hear that so few had a strategy in place for how they will deal with Brexit, with many feeling they won’t be impacted at all.
“This is an issue that transcends sector and scale of business as we see policymaking shift back to the UK. As with any uncertainty, it brings opportunity for ambitious companies with robust leadership. Many of our expert members are being recruited for their expertise to help companies navigate the months and years ahead.”
Optimism is fine, and it’s something that would benefit all businesses, but the things like exchange rates, employment regulations will all change and fluctuate throughout these negotiations so plans will be needed.
Others are choosing to remain vigilant, and will make changes if and when concrete policies are formed as a result of negotiations that could in turn affect freedom of movement.
Xanthe Vaughan Williams is Director at international PR agency, Fourth Day PR. The triggering of Article 50 was significant for the organisation because of the business links they have in the UK and overseas.
With uncertainties around hiring foreign nationals in the future, companies need to look inwards to combat the skills gap.
However, because it is still unclear what leaving the EU will mean, Xanthe is choosing to stay watchful of unfolding events.
“For us, the flexibility for employees to work across international borders is extremely important so we’ll be watching carefully to decide how to respond to any changes to the free movement of labour within the region as negotiations begin.”
What should employers do?
Despite the optimism, it pays to stay ahead of the game and make changes. We realise we have thrown a number of statistics your way but there’s more from the Brexit Business Barometer, compiled by NGA HR.
Like the research that has gone before, businesses are confident about what the future holds. This particular survey is aimed at large businesses, 59% of whom are hopeful about their prospects in the post-Brexit Britain.
However, NGA HR have warned companies that, with inevitable changes in regulations and policies, companies need to ensure they are aware and prepare accordingly.
Deal with the skills shortage
Health, education, construction. These are just a few sectors that are suffering from skills shortages and a look at the government’s Tier 2 Shortage Occupation list shows there are a whole host of jobs that employers struggle to find enough suitable candidates for.
For those not seeing the benefit of a revenue stream coming from thriving currency, many businesses will have continued to review their structure and processes to identify efficiencies or cost savings to plan for the worst-case scenarios.
Almost half of large industries say they are expecting to hire more people, but with unemployment low, the skills gap and the prospect of less opportunities to hire from abroad, NGA HR’s President of UK & Ireland, Jonathan Legdon, urged “companies to look inwards.”
He said: “With uncertainties around hiring foreign nationals in the future, companies need to look inwards to combat the skills gap. Firms should put in place regular training sessions for their current employees to develop their skill sets in line with business needs.
“Professional development and a clear career progression also ensure staff feel happy at work, which reduces churn and helps combat any skills shortages a company might face in a post-Brexit Britain.”
Because of the long term consequences that further shortage of skilled individuals could bring, APSCo is encouraging employers to “support lobbying efforts by organisations such as ours which recognise the absolute need for large numbers of highly skilled migrants to fulfil niche, specialist and hard to find skills in this country.”
In particular, Samantha Hurley said that APSCo will “advocate expedited visa processes” for key skills, as well as call for a relax on rules for migrants who are qualified to fill jobs that are on the Tier 2 Shortage Occupation list.
She wants this for vacancies in sectors that are suffering from a severe skills shortage “so that recruiters could sponsor work visas for professionals to deliver contract services on client sites.”
One of the arguments used for leaving the EU throughout the referendum campaign was the ability to be in charge of the UK’s laws, rather than rights being subject to those laws in Brussels.
Undoubtedly, the changes will affect rights that focus on employees. In NGA HR’s study, 59% of large businesses said they’d like more regulations around working hours, with more than half saying they’d like flexibility in hiring agency workers.
However, the opportunity to recruit outside of the EU should also be taken according to NGA HR, who believe it is vital that companies therefore work on creating a company culture that crosses different social and cultural backgrounds, and embraces diversity.
Working Time and Agency Worker Regulations are both subject to EU standards as things stand and although the government have said that the rights of workers will be protected, it hardly requires a huge leap to expect changes away from the current standards.
Jonathan Legdon stressed the importance that organisations and their HR representatives make sure any changes are logged so that plans can be put in place around these alterations.
“HR teams need to make sure they keep up to date on potential legislative changes to advise business leaders how best to respond and take advantage of the new legislation as it presents itself.”
Remember the devaluing pound
Since the referendum, as our graph shows, the value of British currency has dipped noticeably in relation to the Euro. Depending on sector, businesses will be affected in different ways to this. But in times of uncertainty, it is something tangible that companies can plan for.
Take Custom Planet as an example. Company co-founder, John Armstrong, is focusing the business on a programme of increased exports “as effectively we are now around 10% cheaper to the European market than we were prior to Brexit.”
This means that despite a rise in base product costs, the falling pound has enabled a level of competitiveness.
For companies that suffer from the reduction in strength of the pound, planning is key according to Liam Murray, Client Services Director at BPS World.
He said: “For those not seeing the benefit of a revenue stream coming from thriving currency, many businesses will have continued to review their structure and processes to identify efficiencies or cost savings to plan for the worst-case scenarios.”
International recruitment / expansion
As we know, much of the campaign was focused on the issue of immigration. We’re not going to get political here but there is a great need for overseas workers to not only plug skills gaps but also provide solutions in times of high employment.
Access to these workers will be severely tested given the government’s previous stance on ending freedom of movement of workers between the EU and UK.
However, the opportunity to recruit outside of the EU should also be taken according to NGA HR, who believe it is vital that companies therefore work on creating “a company culture that crosses different social and cultural backgrounds, and embraces diversity.”
Whilst any changes are still a long way off, this is a great opportunity for UK business to now review and improve their employee value proposition including pay and benefits, training etc.
Figures from July 2016 showed that the UK’s population contains 2.9 million EU nationals - equivalent to 5% of the total.
In these times of uncertainty, it’s understandable that these workers will be feeling vulnerable. As a result, Jonathan Legdon says it’s important to make sure these employees are kept up to date with all developments, to make this period as easy as possible.
“Managers need to be aware that international employees already working at a company will be concerned about the Brexit process and how it might impact their personal and professional future.
“If they haven’t already done so, HR departments should deploy open communications with their non-UK EU workers and ensure open and honest conversations about their employment status.”
One of the companies we spoke to is certain that Brexit will provide a business challenge, but their approach has been to look at expanding operations and offices in the Euro zone - which will also circumvent the hiring of EU citizens and associated problems.
Rune Sovndahl, co-founder of Fantastic Services, explained what his organisation is doing and what others should consider.
He said: “Businesses should have looked at what legal foothold they have in Europe in order to maintain their interests across all territories. We have set up subsidiaries in a couple of EU countries to allow us to trade as a group across Europe.
“We have established an office in Berlin, which will allow us to keep hiring EU citizens whatever happens post-Brexit.”
Make sure your business is a desirable place to work
The issues of workers from the EU and skills shortages dovetail because clearly, one will affect the other; if we have less access to skilled workers abroad, it will compound the shortages.
The flexible workforce will be key in ensuring the UK’s economy doesn’t suffer.
Given that immigration is going to impact companies the most, Liam Murray at BPS World suggests organisations should evaluate and improve their employment packages.
“Whilst any changes are still a long way off, this is a great opportunity for UK business to now review and improve their employee value proposition including pay and benefits, training etc, as we could see a further limit on the number of skilled workers coming into the UK employment market.
“If this is to be the case, it’s vital employers are an attractive proposition to prospective employees and have the appropriate presence in the market.”
Make the most of the freelance economy
With potential restrictions on EU workers likely in the future, now is a good time to explore the freelance economy, in order to tap into and utilise the skills of workers in your chosen sector.
Julia Kermode, who is Chief Executive of the Freelancer & Contractor Services Association (FCSA), believes the huge opportunity for freelancers in post-Brexit Britain should be maximised by employers who can benefit from their flexibility in times of uncertainty - especially for businesses who rely on EU labour.
She said: “The flexible workforce will be key in ensuring the UK’s economy doesn’t suffer as those businesses which are wary of hiring full-time employees can take advantage of the flexibility that the self-employed workforce brings.
“It will also be necessary to turn to freelancers if any restrictions on immigration are enforced, as businesses which rely on migrant labour might need to find short term replacements to fill gaps. Brexit could have an enormous impact on permanent workers but freelancers are less susceptible to the unknown.
“Embracing the freelance economy will help the UK to survive and even thrive in post-Article 50 Britain.”
Conclusion - be proactive
Clearly there is still a long way to go before negotiations are concluded, and much can happen in that time. The purpose of the article was to see if organisations have changed their plans since Article 50 was triggered and what - if any - alterations they have made.
Changes have been far from wholesale but obviously, with the two-year negotiation period ticking, now is the time to be proactive.
Liam Murray at BPS World believes businesses should not panic about the March announcement but similarly, should not sit idly by.
“Whilst it is understandable not to make hasty decisions, it is not understandable why businesses are not planning to tackle the skills shortage, which is already upon us and is likely to get worse.”
For employers who rely on EU labour, who may worry about shortages, and how trade and legislation will change, preparing for future challenges would be the wise move.
Written by John Train