The polls have closed, and the voters have spoken. After four months of what has felt like endless campaigning by Vote Leave and Britain Stronger in Europe, the leave campaign won out with 52% of the vote. In short, the UK will leave the European Union (EU).
A landmark decision, that is for sure. It comes after an estimated spend of £142.4 million, according to figures from BBC Reality Check, in a written statement to Parliament by the Cabinet Office. After such a long and arduous campaign, it feels like the end. Actually, it’s only the beginning.
What can we expect to happen now we have voted to leave the EU and how can businesses and recruiters react?
The exit process
In truth, the changes resulting from leaving the EU won’t be felt by businesses for a couple of years at least. The process – the first occasion since the 1970s that has seen a member state leave the EU – will start with activating Article 50 of the Lisbon Treaty.
Article 50 states that a member state can withdraw from the EU in accordance with constitutional requirements and the European Council should be notified. After this, Britain and the EU will negotiate arrangements for withdrawal, which takes into account the framework for their future relationship.
All treaties will cease to apply to Britain two years after the notification of withdrawal. Therefore, June 2018 is the key date. Things were muddled slightly by Justice Secretary Michael Gove’s claim that we won’t have exited from the EU by the end of the next parliament – something his spokesperson put down to ‘tangled words’.
This two-year period then, will be used to negotiate the terms of our exit and the end of any treaties. Britain could still end up with access to the single market and have agreements that permit free movement of workers through the EU, but this all depends on the terms.
In the meantime, recruitment agencies, employers and professionals can prepare for any changes.
In an ideal world, businesses will have been preparing for this scenario but with the negotiating periods to come, it gives companies the chance to assess how the decision affects them and make changes.
The upcoming period is likely to lead to uncertainty according to Robert Lloyd at Currencies.co.uk. The company, whose Chief Market Analyst was interviewed on the BBC to discuss the EU referendum, believes that companies will be “left in limbo” at this time, and Robert told Agency Central: “It’s this period of uncertainty that could be damaging to our economy and thus, damaging to the job market.”
With this level of uncertainty, the logical step is for companies to prepare what is in their power. It is a strategy many of those who have spoken to Agency Central have put at the top of their agendas.
Phil Foster is the Managing Director of Love Energy Savings and he talked about the expenditure of businesses right now. Limiting spending will help with the uncertainty.
He said: “With the Brexit, it is essential that SME owners economise wherever they can, so that they can redirect funds into more important aspects of their company and keep business ticking over while there is so much uncertainty in the air.”
With any company, communication is crucial and it is especially the case when preparing for Brexit. It is something that has been stressed by NGA Human Resources (HR), a leader in helping companies with their HR issues.
In their white paper, The Day After Brexit, they emphasise ways in which businesses can minimise disruption to the workforce. It urges good planning and communication, adding: “HR would be well advised to consider the types of skills currently in the workforce, particularly around recruitment, talent management and succession planning issues.”
Following these steps should give employers a head start and the requisite preparation for when the changes following our exit from the EU comes into place.
Let’s look at these changes and the thoughts of various companies and recruiters.
Change of laws
A common theme emanating from those organisations who have spoken to Agency Central focuses on the potential change of laws Brexit will bring and the subsequent impact on workers.
In their informative document, NGA HR highlight the key employment laws that have been passed by the EU and therefore would be vulnerable to change that could be to the detriment of the workforce.
It means the UK will have the power to repeal or reshape some employment laws. The document states: “The most likely legal changes would probably come around Working Time Regulations and the Agency Workers Directive.”
While a number of political and legal reasons would make wholesale abolition of employment laws unlikely, there are some that will be at risk following Brexit.
Working Time Regulations
Governing employee working hours and holiday breaks, this law could be amended once out of the EU. Potential changes to this legislation may be popular with employers who could see administrative burdens eased.
Currently, we have a 48-hour weekly working limit. While staff can opt out of this, in theory the government could scrap this restriction. Indeed, it is something they have fought against previously.
Calculation of holiday pay could also be changed because the UK would have the freedom and power to implement the procedures they deem fit. These rules, according to the white paper, “could specifically exclude fluctuating payments such as commission or overtime.”
Agency Workers Regulations
This law is one that could cause significant problems to employees. As it stands, agency workers are entitled to pay equal to that of permanent staff after 12 weeks. The government could repeal this law, which takes away security of income.
While this, on the face of it, could benefit employers who would see a reduction in business costs, the flip side of the argument means it could deprive them of employees who can no longer afford to stay on at the organisation.
Losing full time pay and other benefits such as holiday leave under amendments to these regulations pose a problem for employers who may then see a shortage of staff. NSK Recruitment’s spokesperson highlighted another way this could hurt businesses.
We may be faced with our skilled migrant workers leaving Britain, resulting in a shortage of workers in the short term.
Some of the employees benefiting from the EU’s Agency Workers Regulations may well be migrants. It means there’s a two-pronged threat for businesses because these staff members would also see their chances of working in the UK dramatically cut due to changes in movement of people to the UK.
Free movement of EU citizens
This has the potential to affect businesses badly with roles that they struggle to recruit for. When we were part of the EU, citizens could freely live and work across any of the member states. Now that this won’t be the case, the free movement of workers between the UK and EU will be restricted.
A caveat to this is it is dependent on the exit negotiation terms the country agrees with. On one hand, our government could negotiate for single market access which could easily come with the stipulation that we can only have access if workers can still move freely around the continent.
However, if this is not satisfactory for either party, the EU would reject these terms and it would mean that access to employees previously enjoyed by employers in the UK will be no more.
It could be argued that allowing EU nationals to remain in the UK for a set amount of time before applying for visas is an option. Again though, this all comes down to the negotiation terms.
What this shows is a level of uncertainty that will affect jobs and the skills shortage that has already been experienced in construction and other industries too.
BPS World is a global resourcing specialist. They highlighted the reliance on skilled workers from the EU in Planet Talent – their guide to global recruitment. It states that a number of UK industries benefit from EU workers to fill a shortage in skills. Engineering, Construction and IT are just three of these industries and the fear is that leaving will “exacerbate the skills crisis in the UK.”
The shortage of skills that employers and recruiters fear from leaving has to be turned into an advantage. NSK Recruitment believe the UK is a leading country in Technology and as such, leaving “would positively affect our recruitment options by demanding the skills of British workers to increase.”
We have seen through our previous Brexit-related article that the Healthcare industry relies heavily on skilled employees from other countries. Spain and Portugal in particular are countries that help to provide our health service with qualified nurses and clinicians.
Greg Wood is the Group Commercial Director of Your World Healthcare – the largest supplier of allied healthcare professionals to the NHS and industry. He told Agency Central that a number of steps need to be put in place now that we have voted to leave. This includes prioritising healthcare staff.
He said: “The next crucial step would be to permanently place nursing and healthcare professionals on the skills shortage list. With a growing population and ageing workforce within the NHS, tackling our shortages will require robust action.”
To make up for the shortfall of staff that could be caused through leaving the EU, many industries have stressed the need for visa quotations to be changed.
This will continue the flow of skilled workers into these roles, fighting against the skills shortage along the way. Your World Healthcare’s Greg Wood has made this a priority.
“As an industry, our contingency plan in the wake of Brexit is to lobby the UK government to increase visa quotations from countries such as Australia. A restriction on healthcare professionals agreement with South Africa – agreed more than a decade ago – would need to be reviewed to see if it can allow for South African healthcare professionals to come to Britain again.”
In our piece that looked at the view from businesses about the referendum, concerns were raised about how employers’ ability to recruit would be affected by trading outside of the EU. When the UK was part of the EU, the process of a transaction had less delays, therefore didn’t hinder cash flow and essentially helped businesses and their finances.
These concerns were raised by Chris Coopey, Partner at Accountancy firm Carpenter Box. He said: “One inescapable statistic is that our main trading partner, by a long chalk is the EU. Leaving means we will be caught by all the legislation governing the goods we export to it.
“It would leave the UK industry and UK service sector at a major disadvantage.”
Having left the EU, companies should be prepared for changes to the VAT they pay for transactions with the member countries too. This extra cost could be vital for SMEs.
Businesses should keep on top of any developments regarding the trade agreements that will be negotiated. The UK could be part of the European Economic Area (EEA), which would allow for free movement of goods and services depending on the terms of the deal made.
Alternatively, businesses could still have access to the single market. Again, it is entirely dependent on the terms of the exit negotiations. A word of warning, however, came from Germany’s Finance Minister. In an interview at the beginning of June, Wolfgang Schauble ruled out the possibility of the UK enjoying single market benefits.
The UK would be free to broker trade deals with non-EU countries. The hope here is that opportunities will arise and that the finance will help to maintain the UK’s healthy job market, while maintaining the popularity of recruitment agencies.
With any decision of this magnitude, there will be uncertainty. We have been told it’s a once in a lifetime vote and now we are set to leave the EU, businesses and employers need to be prepared.
Expect changes to employment law. NSK Recruitment emphasise the need for companies to understand these alterations. “We will have to better understand the laws to ensure no errors are made.”
Companies should explore alternative sources of labour. Like some in Healthcare are already thinking about, lobby for visa controls to be changed, and if your industry is one that suffers from a skills shortage, make recruitment for this a priority with the government.
Changes to trade deals and employment contracts should also be monitored.
Now we have made our decision, the two-year negotiation of exit begins in earnest. Make sure that when this is finalised, your company is ready.