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Brexit - Human Resources and the Immigration issue

 

Brexit - Human Resources and the Immigration issue

Anxieties about the potential security, economic and social impacts of immigration became a significant issue in the recent Brexit referendum. While the impact of the referendum result won’t be felt immediately, changes to immigration policy and potentially employment law will impact on HR practices and on businesses ability to employ foreign nationals. In this post we will explain the current position on immigration and the options post-Brexit. 

 

What is the current position

There are in the order of 3 million EU nationals working in the UK compared with approximately half that number of Britons who live on the continent. Net migration into the UK has been running at over 330,000 a year recently with about equal numbers coming from either inside or outside the EU. The strong performance of the UK economy relative to some other EU member states and the presence of well-established migrant communities already living in the UK are thought to be important drivers of recent migration.

Citizens from other EU countries or to be more precise those countries in the European Economic Area that includes the 28 EU member states, (except citizens of Croatia who need to apply for a registration certificate), Iceland, Liechtenstein and Norway, and Swiss nationals, have the right to live and work in Britain, just as British citizens have the right to settle elsewhere in the EU. Prior to 1 January 2014, Bulgarian and Romanian nationals who wanted to work in the UK had to obtain prior permission. The UK is not a member of the passport-free Schengen zone, so it retains border controls and checks.

After an initial period of three months EU nationals can apply for a registration certificate confirming a right of residence in the UK however this is not a legal requirement. The regulations indicate that an EEA national must not become an unreasonable burden on the social assistance system of the UK and are required to be working, undertaking self-employed activities, be self-sufficient in the UK, or in certain circumstances they may be jobseekers or students. They have full access to the UK labour market and can take any job, whether skilled or unskilled. After five years in the UK, EU nationals may automatically qualify for permanent residence and 12 months later they can apply to naturalise as a British citizen. The number of permanent residence grants from EEA nationals have fluctuated between 15,000 and 23,000 per year since 2011, while citizenship grants have been between 7,000 and 18,000. Both peaked in 2013.

The UK already has full control over migration from non-EU countries. For non-EU migrants a points based system has been in place since 2008. There are different tiers with each tier having an allocation of ‘points’ based on different attributes including language ability, age and capacity to support themselves financially.

There are five tiers:

  • Tier 1 - Highly-skilled individuals, entrepreneurs and high net-worth individuals (not requiring a sponsor)
  • Tier 2 - Skilled workers with a job offer
  • Tier 3 - Low skilled workers for temporary labour shortages (although this Tier has never been used because of the strong labour supply from EEA countries)
  • Tier 4 - Students
  • Tier 5 - Youth mobility and temporary workers.

In an attempt to reduce the amount of non-European migration into the UK, the tier 1 and tier 3 categories were suspended. Sponsorship by an employer is essential for Tier 2. Only employers registered with and licensed by the Home Office are permitted to issue a Certificate of Sponsorship to a named individual, who must then apply for permission to enter the UK.

If the employer is a Tier 2 licensed sponsor they must demonstrate that a UK resident cannot be found for the role, with recruitment conducted so as to satisfy the Resident Labour Market Test or the role is shown to be from categories on the “shortage occupation list”. A skilled job has to pay at least £20,800 per year, which increases as the number of visas issued reaches a predetermined cap. To take up residence after five years there is an additional requirement for the applicant to be earning over £35,000 per year and this may involve a knowledge of Life in the UK test.

Asylum seekers do not normally have the right to work in the UK. In contrast, refugees (ie those who have received a positive decision on their asylum claim) have full employment rights in the UK. The latest statistics indicate that over 25,000 people applied for asylum in the year ending June 2015, with 41% of these being granted. The UK is estimated to be the seventh highest in terms of the number of asylum applications for EU countries. Britain has pledged to accept up to 20,000 refugees from Syria by 2020, this is however well below commitments received from similar sized EU countries.

The policies designed to reduce immigration on non-EU migrants has failed to meet the 'tens of thousands' target promised in the 2010 Conservative manifesto. Social problems with integration of migrants in the UK and provision of sufficient local services to meet the growing populations also need to be addressed. It is fair to conclude that the issue of immigration is much wider than freedom of movement within the EU, and coming out of the EU will not solve all the issues raised by the electorate.

 

What are the potential scenarios Post-Brexit

The impact of leaving the EU will only be fully known once the negotiation on trade and free movement are concluded. The challenge will be working out a new treaty that preserves as much of the meaningful economic ties as possible while reassuring the British people that immigration can be controlled (you can read more about the negotiation options available to the UK in this post).

The potential options include;

·       the UK becoming a member of the European Economic Area, like Norway, retaining the free movement of labour principle. If this happened the impacts of Brexit on UK migration could be relatively limited.

  • adopting the points-based system which currently applies to non-EU migrants. This would require an employer to sponsor EU nationals to work in the UK.
  • an Australian-style points-based system, which allows EU nationals to come to the UK without a job offer provided that they meet skills criteria. This involves more central planning, deciding the relative value of different types of skills and setting limits on the number of people to admit. For example, in 2015-16, the Australian government determined that it would be desirable to admit up to 1,230 electrical engineers.
  • targeted policies could be introduced such as further restricting access to welfare benefits as an economic disincentive or extending the £20,800 salary threshold for non-EU citizens to EU citizens. Estimates indicate that about three quarters of EU citizens working in the UK would not meet that salary threshold. The hospitality, agriculture and construction sectors would however be hit hard by these restrictions.
  • the UK could seek to establish individual bilateral immigration agreements with specific countries, however, the EU are likely to require any immigration issues to be negotiated as a block.
  • the EU are under pressure to define their own immigration policy and there is the potential that this may align more closely with UK requirements in the future. This could for example allow an emergency brake on the free movement of people by setting a cap.

 

The main advantage of an Australian-style points system is that migrants do not require an employer offer to live and work in the country which would cut the amount of bureaucracy for employers. However, the downside of the Australian system is that it would not necessarily prevent skilled migrant workers from entering the country and taking up low skilled jobs or no job at all. Also points systems rely on the government’s perception of which skills are most needed rather than on the views of the employers and they are susceptible to backlogs.

One of the attractions of adapting and expanding the current points-based system to include EU citizens is that it offers continuity, especially for employers that already use the system. The UK could reactivate low skilled Tier 3 visas, with a flexible cap to fill gaps in the labour market. However, the significant downside to the system is the introduction of costly red tape for businesses requiring employers to register as sponsors, demonstrate that they have tried to recruit within the UK and pay various costs that will include a new immigration skills surcharge from April 2017.

It is likely that EU citizens currently working in the UK will retain their right to stay in the country, potentially through a worker registration scheme, but it is unclear how this will work in practice, what would happen if they became unemployed or whether any rights would be extended to those who enter the UK after this point. For those UK citizens working in Europe any attempt to implement restrictions on EU citizen movements into the UK may be met with reciprocal arrangements.

The choices around immigration controls are complex. It will be difficult to negotiate full access to the economic area without more open borders than the redlines of the leave campaign would deem acceptable.

 

The potential impacts

The impacts will only become known once negotiations with the EU on free movement have been concluded and the UK has decided on an immigration policy.

Labour supply. The government’s Migration Advisory Committee has argued that further restrictions to skilled work visas would bring a "significant risk [of] detrimental impacts on UK productivity, innovation and competitiveness”. This could be particularly acute in sectors such as construction where EU workers have been a safety-valve as workloads have increased. It has been estimated that 12% of British construction workers are of non-UK origin and the sector is forecast to grow at a 2.5% annual growth rate over the next 5 years. UK employers will be concerned that there may be insufficient people to undertake the unskilled roles currently fulfilled by EU nationals, especially in the agricultural, hospitality, catering and healthcare sectors. It may also be more difficult to attract skilled workers who may perceive the UK as being a less attractive location for non-nationals and the UK could experience a “brain drain” as European nationals return home.

Recruitment, training and development. In the short term employers may freeze hiring decisions or look to hire temporary workers until the economic uncertainty starts to disperse. There will be a need to invest in training programmes to expand the skillset of the current workforce, implement back to work initiatives and maintain a focus on apprenticeships. It will be important to promote diversity and inclusion seeking candidates from the widest possible talent pool by attracting women and underrepresented sections of the community into areas such as engineering.

Employee engagement and retention. Brexit will heighten tensions of job insecurity among non-nationals and those working for companies with a heavy reliance on exports or access to European markets. It has been reported that some EU workers in the UK perceive a less friendly atmosphere towards non-nationals which could create anxiety and stress.

Reward. The potential labour shortage and higher inflation due to the weakened pound may put pressure on wage increases.

Government policy and employment law. Concerns on being able to retain and attract multinational firms and foreign direct investment may drive policy towards a more business friendly environment that involves a more flexible employment model. This may create concerns where changes are at the expense of worker rights. Other impacts could arise where the government decides to repeal or revise employment laws that are required as part of the UK’s membership of the EU. There is speculation that EU law covering aspects of working time, agency workers or the transfer of employees from one employer to another (TUPE) might be reviewed. The European Court of Justice (ECJ) will no longer be the ultimate law court and arbitrator of decisions affecting the UK.

 

The full potential impact of leaving the EU on Human Resources and immigration will take time to emerge. Brussels opening negotiating stance will be free trade will only come with free movement of labour. The UK government must fashion an immigration policy which satisfies the leave voters without causing too much damage to the economy. Drawbridges will however be drawn to some degree and businesses will need to prepare contingency plans to deal with changes in immigration policy.

 

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