What does Brexit mean for HR?
How will Britain’s decision to leave the EU affect HR? We explore the standout issues for firms
“I don’t think I’ve had a conversation in the past three weeks that hasn’t started with Brexit,” says Udara Ranasinghe, partner in the employment and pensions group at law firm DAC Beachcroft. We are sure that many of you feel the same.
On 23 June, the UK voted to leave the European Union. In a referendum with a turnout of 72%, 52% of voters chose leave. What’s happened since, whatever your view on the outcome, hasn’t been pretty. In the absence of a coherent Brexit plan, the pound sank to a 31-year low against the dollar and financial experts worry that the result could lead to another recession.
The fallout of the result has led to political turmoil, resulting in the resignation of the prime minister, the appointment of a new one, a leadership battle in the Labour party and the resignation of UKIP leader Nigel Farage. Phew.
With Theresa May now installed in Number 10 and a new ‘Brexit’ division set up in the Cabinet, involving prominent leave campaigners David Davis as Brexit minister, Liam Fox as international trade minister and Boris Johnson as foreign secretary, the dust may be beginning to settle. May has been clear that “Brexit means Brexit” (although the jury remains out on just what ‘Brexit’ actually means) and Davis has said Article 50, the legal process to begin two-year exit negotiations, will be triggered early next year, meaning the UK could officially be out by 2019.
So, what does this all mean for HR? In the immediate term, the message has been ‘Don’t panic, nothing will change yet.’ “Lots of communication has been trying to reassure people as quickly as possible that [businesses] are not going to react too quickly or suddenly,” says Penny Tamkin, director, employer research and consultancy, at the Institute for Employment Studies. However, this still presents a “significant issue” for HR. “What can you feasibly say at a time of complete uncertainty?” asks Tamkin. “HR don’t have the answers.”
Indeed, a post-Brexit survey by the CIPD found only 6% of employers had a plan in place for dealing with a leave vote.
In times of uncertainty, HR becomes all the more important. As the country and wider business world get to grips with Brexit, we present some of the areas HR leaders need to be aware of and starting to act on.
Recruitment and skills
According to data from CEB, the number of online job postings in the UK fell from 1.5 million to 820,000 in the week after the Brexit result. However, data from Reed tells a different story, with the number of jobs posted online up 8% from this time last year in the three weeks after the vote. In a poll just after the referendum by the Institute of Directors, 24% of members said they would be freezing recruitment.
Tom Hadley, director of policy and professional services at the Recruitment and Employment Confederation (REC), says there has “definitely been some impact on permanent hiring” in the wake of the result. “The trend will be for permanent hiring to go down but for temporary and contract hiring to increase,” he adds.
There is concern over the availability of skills should the UK’s access to free movement of labour be limited. The CIPD found 57% of employers have concerns that Brexit will weaken or significantly weaken their ability to acquire and retain skilled employees. HR magazine has already heard anecdotal evidence to suggest some businesses are stumbling in recruiting staff.
Ranasinghe tells of one large organisation which tried to hire an EU national as its new CEO, only to be rejected due to Brexit, while Hadley says the REC has seen a few examples of EU nationals turning jobs down.
On the upside, CIPD head of public policy Ben Willmott suggests this could be a “wake-up call” for government to “look at our skills system. Arguably, the availability of migrant workers has camouflaged the weaknesses in our skills system.” He adds: “[Brexit] will expose the problems in the status quo.”
“Even before the vote, one of the biggest challenges had been finding staff, so if free movement is curtailed, how will we deal with it?” asks Hadley. Mike Williams, people director at restaurant chain Byron, says he is “extremely concerned Brexit will impact the hospitality sector”.
“I expect that we will lose existing migrants as a result,” he predicts.
The NHS is one organisation reliant on migrant labour, with about 5% of its workforce coming from the EU. “We are an essential industry and we have a significant number of EU colleagues,” says chief executive of NHS Employers Danny Mortimer. “People need some certainty and they need the guarantee [from government] that EU nationals in key sectors will be given leave to remain.” However, Brexit minister Davis recently said he was unable to guarantee the status of EU nationals living in the UK before negotiations begin. The CIPD found 70% of employers have encountered concerns from staff about job security or right to work in the UK since the vote.
For now, managing director of immigration consultancy Migrate UK Jonathan Beech advises employers to “know who your EU national employees are, and who are your UK citizens working in the EU”. He says employers should tell EU national staff to make sure they keep hard-copy evidence of employment and their life in the UK, such as bank statements and bills, if they want to apply for permanent residency. “EU nationals are going to be used as a bargaining chip for UK nationals overseas,” he says, predicting that immigration law will change in about three years’ time, “most likely to a points-based system”.
Any points-based system will need to be different from one based on earnings, many agree. Beech feels the current model is “draconian. It needs to be ripped up and started again, taking key skill shortages into account.”
Mortimer agrees, adding: “Our concern would be to make sure people who are providing essential public services are recognised by a more sophisticated points-based system. Now the system is too driven by earnings and that penalises us.”
Ranasinghe, meanwhile, warns against choosing not to hire someone from the EU out of concern about immigration issues further down the line. “Nothing has changed, and if companies start making changes based on what they anticipate, it could be discriminatory,” he says.
While HR professionals may be concerned about potential changes to employment law, the good news is experts predict nothing is likely to happen – in the short to medium term, at any rate. “Many of those things people cite as being red tape existed pre our relationship with the EU,” points out Mark Taylor of law firm Jones Day, listing equal pay, unfair dismissal and statutory redundancy pay as examples. “We’ve also gone a lot further with some laws than the EU requires, such as maternity rights and TUPE,” he adds.
Ranasinghe says employment law is “not high on the list of changes that need to be made” and that it’s “unlikely” any central rights will disappear. (David Davis has also indicated as such.) He suggests the government may “tinker around the edges” with areas such as the Working Time Directive. Others areas that he says may be looked at are the Agency Workers Regulations and elements of TUPE, but he agrees with Taylor that wholesale change to current legislation is unlikely.
He does float the idea the government may choose to get rid of the cap on bonuses in the financial sector as a means of keeping financial services companies in the UK, given that some have said they would consider relocating to Europe should the passport arrangement for financial services change.
“We had a Polish lady who has lived without incident in the UK for 11 years racially abused in the street the weekend after the vote. We also had a colleague cancel a holiday as he didn’t think he’d be allowed back in the country.” So says the HR director of a high-street retailer.
The stories demonstrate just how real the risk of intolerance has become, backed up by stats suggesting reports of hate crime increased 57% after the vote. In a joint statement, the CBI and TUC called for “employers, unions and others to do all they can [to make] our workplaces a beacon of inclusion and tolerance”.
“A longer-term headache for HR is ‘cultural hijacking’,” warns IES’s Tamkin. “Most organisations will value a culture of diversity and you don’t want that being hijacked by an issue like this. This has been incredibly divisive and both sides feel very strongly.” She adds that intergenerational tensions may also arise, given the “simplistic view” that it was older people who voted out.
In the NHS, leaders and employees have been using the hashtag #LoveourEUstaff on Twitter to show support to those colleagues from EU countries. “It was about trying to set a tone,” says Mortimer. “It is genuine as we do love them, but also we can’t afford for them to leave.”
So what next?
While nothing is likely to change in the next couple of years regarding immigration or employment law, HR still has plenty to consider. As Tamkin says, “no one was prepared for Brexit” – including, apparently, those politicians who campaigned for it – and uncertainty is likely to continue in at least the short term.
There is concern in the public and third sectors that we could see another wave of austerity, and Tamkin warns that for HR practitioners “all this has the potential to hijack other priorities and energies”. But for now, at least, the message for HR leaders is that most British of clichés: (Try to) keep calm, and carry on.