The EU hokey-cokey has stopped with Britain deciding it’s out. So what does that mean for your payroll?
It’s worth prefacing this post with an almighty ‘don’t know’ as the UK starts to come to terms with finding a new Prime Minister, possibly a new opposition leader and extricating itself from its European ties. We don’t know what Brexit will ultimately mean for wage costs, or recruitment, or the value of the pound, or anything else that may ultimately influence the payroll of UK businesses. So what do we know?
We have at least 2 years of negotiation
The point at which the clock starts ticking is the point at which Britain invokes Article 50 of the Lisbon Treaty. Only Britain can do that – the EU can’t fire the starting gun for us. At that point, the UK will have 2 years to leave the EU.
The question is, when does Britain make the move? Many EU leaders (and some in the UK) are encouraging a ‘soon as possible’ approach to avoid prolonged uncertainty. Others are advocating a calmer, more protracted approach to invoking Article 50.
Markets never like uncertainty, so the longer the process takes, the greater the likelihood of volatility in global financial markets. For your payroll, that means supplier costs could vary more widely than previously as sterling is buffeted by the political fallout. If the pound remains weakened (and at time of writing there are signs of recovery) it could make suppliers from within the EU more expensive. It will also increase costs for things like fuel and energy.
Our employment law has been formed by UK and European legislation. Frustrated at having to pay the living wage? As that’s a UK law, you’re unlikely to see any change. Want to see changes to the Working Time Directive? That was driven by the EU and may, like any other EU law, be on the table for change in a post-Brexit world. But…
The UK still wants access to the European market, and one of the consequences of Europe agreeing to that is likely to be a requirement to uphold EU employment legislation. We would anticipate little immediate change.
Until we are officially out of the EU, the right to freedom of movement of EU citizens remains in place. What happens after that really is anyone’s guess. The EU is likely to demand the same freedom of movement as a condition of accessing the single market.
The UK Leave campaign promoted an Australian points-based immigration system that would remove the bias towards EU citizens. One possible halfway house is the UK granting EU citizens freedom of movement for labour – but until negotiations start, businesses will have no idea how overseas recruitment processes are likely to pan out.
There are two immediate consequences of this:
- EU citizens already in the country, or considering moving here for work, might decide the uncertainty is enough to make them move elsewhere. This could decrease the talent pool in some areas and, potentially, leave businesses with increased labour costs and/or skills shortages.
- UK companies are already adopting a ‘wait and see’ approach to recruitment, and this is unlikely to change dramatically in the short term. For payroll departments, therefore, the likelihood must be that casual and temporary appointments will increase, as will overtime. Assuming, of course, that business remains buoyant.
Want help setting up your payroll to cope with the consequences of Brexit? Talk to us here.