The historic vote in the United Kingdom on Thursday evening, to leave the European Union (EU), has sent ripples throughout the world. We are, as they say, in unprecedented territory. This unknownness, this uncertainty, about the future is certainly a cause for concern. However, our advice in times like these is No Panicking. Dare we say ‘Keep Calm and Carry On’?….
Keep Calm and Carry On
The historic vote in the United Kingdom on Thursday evening, to leave the European Union (EU), has sent ripples not only through the world’s financial markets but also across the region as politicians in some other EU countries are also calling for national referendum votes on their individual EU membership. We are, as they say, in unprecedented territory. This unknownness, this uncertainty, about the future is certainly a cause for concern. However, our advice – Rule #1 – in times like these is No Panicking.
Dare we say ‘Keep Calm and Carry On’?
In fact, it looks as if nothing will be changing overnight as British Prime Minister David Cameron, who has announced his resignation, has indicated that he will not be triggering Article 50 of the Lisbon Treaty (which is the legal mechanism to start the withdrawal from the EU) and will instead leave this act, this decision, up to his successor. Who the successor will be, when they will take office, and when they will invoke Article 50 is still (at time of writing) yet to be decided.
This last bit of uncertainty provides an opportunity, a space, for employers to review their current workforce positions and policies before the un-winding process begins. In particular, we believe that employers, on both sides of the English Channel and Irish Sea, should be studying the following areas which may be impacted by future policy changes:
The most obvious impact will of course be in relation to business immigration as the automatic right for UK citizens to travel and work within the EU, and vice versa for EU nationals to travel and work within the UK, could be abolished. Here employers should perhaps start to become more familiar, once again, with the protocols required for foreign work permits and business visas.
From a more strategic perspective there could also be an impact on trade competitiveness (for both the UK and the EU) as well as a question in terms of the availability of labour. We expect that these matters should be among the crucial points taken into consideration when the negotiations for the future relationship between the UK and the EU take place, but again nothing may happen on this front until Article 50 is invoked.
Secondments & Social Security
The future will certainly raise questions for seconded employees from and to the UK, and not just in terms of working visas as there will also need to be clarification on how seconded employees will be taxed in addition to how social security contributions will be treated in these circumstances.
Today EU law allows for employers to continue to pay the social security contributions of their employees seconded outside of their ‘home’ country for up to 24 months. Once outside of the EU, British employers will not be allowed to have contributions for their employees sent to Europe paid at ‘home’ (and of course vice versa for EU nationals sent to the UK). This is unless specific arrangements are made or a bilateral treaty is executed on this specific matter, maintaining the current system.
Data protection laws in the European Union have already become muddled in confusion after Max Schrems challenged the EU privacy laws which led to the invalidation of the ‘Safe Harbor’ agreement on September 23rd, 2015. A new European Regulation (2016/679) was passed on April 14th, 2016 and came into force on May 24th, 2016. However, the new Data Protection Directive 2016/679 will not come into effect until May 25th, 2018.
Multinationals which compile and record the data relating to their personnel operating within the EU may need to re-think how and where this data is processed in the future. We would like to think that future UK policy on privacy will complement EU legislation, however if it does not then individual data protection authorities may have the right to suspend data transfers between third parties. If this were to happen it could cause quite a headache in terms of cross border personnel management for the unprepared.
European Works Councils
The future for active European Works Councils in the United Kingdom does not look good. On the country’s formal exit it is likely that these organizations would cease to function with immediate effect. The UK could possibly introduce its own version of a Works Council.
Multinationals in the future may have to conduct negotiations with a European Works Council and then a separate negotiation with the UK version.
Questions may also arise in terms of profit sharing for EU employees of UK organsiations where profit-sharing is based on the tax-consolidated results of the UK parent company. The main uncertainty here is likely to be the tax liabilities for such as a scheme due to the current currency fluctuations between sterling and the euro.
Would UK citizens working in the EU still be treated under their local national health schemes or would their EU based employers be required to take out a special insurance indemnity? It is likely that in the future this could become an additional expense that employers will need to consider when transferring employees either way across the Channel.
TUPE, Agency Workers and Working Time Rules
As reported by ELLINT’s UK member Doyle Clayton Solicitors in a recent article, there is a chance that the EU employment regulations on the transfer of undertakings (TUPE), Agency Workers and in relation to working times may be changed in the United Kingdom as they are considered as burdensome and are particularly unpopular with British employers.
Moves to the Mainland
In the coming days and months we expect that many multinationals will be considering whether or not to move their European operations, currently based in the UK, to the continent to continue to take advantage of what the EU has to offer. It will be not only a business migration, it will certainly also be a substantial people migration which will truly call into play the expertise of human resource managers and professionals.
The road ahead for both the UK and the EU is still to be forged. What we do know is that there will be life for the UK outside of the European Union, but the form of it may take a while to materialize as there will be a need for both sides to enter into new various bilateral agreements such as Switzerland has done. To what extent the EU will allow cherry picking remains to be seen.
So in the meantime – Keep Calm and Carry On.
True nobility is exempt from fear
– Marcus Tullius Cicero
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