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Impact of Brexit on Employment & HR in 2021

On 31st January 2020, the United Kingdom formally left the European Union. The UK has now entered into a new trading partnership with the EU under the EU-UK Trade and Cooperation Agreement. New rules now apply on exports, tariffs, data and employing people from within the EU.

Although this meant that No Deal was averted, most observers on both sides of the political debate would recognise that it was a hard Brexit, with the UK leaving both the Single Market and the Customs Union.  

For those who voted for Brexit, the main appeal appeared to be around the notion of capturing a sovereignty which had existed in the past, but had been lost to a foreign power. It is important to understand though that any loss of sovereignty had in fact been “loaned” freely by successive, sovereign UK Parliaments to the European Union.  

The emotional forces which unleashed Brexit will remain in play in 2021 and beyond, and will undoubtedly have an influence on the path Brexit takes, but their direction is unpredictable.  

Some international observers maintain that the UK will be embarking on a post-Brexit journey in 2021 and beyond, without even the vaguest of route maps. Others will of course argue that there is no need for such a map and that a sovereign people and sovereign Parliaments will have the freedom to decide upon and alter course as they chose. 

It is often heard from pro and anti- Brexit supporters alike, that the post-Brexit plan is the creation of a Singapore-on-Thames. Depending upon perspective, this could equate to a recipe for a much more entrepreneurial society with few safety nets or, for a much more unequal society with much lower labour and environmental standards. Nearly 5 years after the referendum debate, there is no detail on the overall direction the UK is heading in. 

Brexit and employment in 2021 – what do we know?

Given this uncertainty, what can be said about 2021 and beyond in a post-Brexit UK?  

The UK will no longer enjoy frictionless trade with the EU. Another is that the trade agreement which is in place largely covers goods and that if there is to be any agreement on services, this will have to be negotiated going forward. These two knowns are likely to have impacts in terms of business restructuring. 

The UK will no longer need to abide by EU labour standards. Although, it must be recognised that at the end of the Brexit transition period on 31st December 2020, existing EU law was converted into domestic law.  

It also needs to be recognised that if the UK seeks to diverge too far from the prevailing EU standards, it is likely to gain what the EU would consider an unfair advantage in terms of the Single Market, and the EU has reserved the right to take retaliatory action, which could include applying tariffs. This could then act as a break on UK aspirations in terms of changes to labour standards.  

Top Brexit workforce-related changes: 

  • Freedom of Movement has ceased 
  • About 4.9 million EU citizens in the UK have applied for Settled Status 
  • The UK has introduced a new points-based immigration system, which treats EU and non-EU citizens equally 
  • EU citizens have been added to the UK Voluntary Repatriation Scheme (which offers EU citizens financial incentives to leave the UK) as of the 1st January 2021 
  • A large number of EU nationals have decided to leave the UK post-Brexit, a trend which has been accelerated by the pandemic.  

These will undoubtedly have considerable impact on employers in relation to access to talent and skills, and their ability to retain talent and skills.  

Even for those EU nationals in the UK labour market, there will be added complexities for employers.

Business restructuring

It is clear that trade with the EU will not be frictionless and that services are largely excluded from the current trade agreement. This is likely to cause businesses to relocate some activities to the EU, in order to avoid disruption and minimise extra costs of doing trade with the EU from the UK.  

Although it is early days, it is speculated that whole logistics and supply chains might have to be re-engineered to recognise the reality of life outside of the EU. This is going to result in the need for many businesses to restructure their operations, which could include setting up new company structures in the EU and making redundancies in the UK. Companies will need to be very careful about how they do this.  

Employment law

The Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, confirmed recently that the Government would examine “what it wants to keep” in terms of EU-derived employment lawHowever, last week, he confirmed that this review has now been dropped.  

It is highly likely that the Government will want to change some of the employment legislation if they have the bandwidth to do so in 2021. The Government will be conscious of the EU reaction to any reduction in labour protection and standards though. They will also be concerned about sensitivities in the ‘red wall’ seats, where newfound conservative voters might be adversely impacted by any such legal changes.  

If future legal changes result in a reduction in the current statutory minimum employment conditions, employers will need to consider the interaction between their current contractual clauses and the changes in the law.  

Statutory amendments may not automatically result in change for individual employers if current contractual clauses do not refer to statute or if they offer contractual rights which go over and above the statutory protections. In addition, employers should carefully consider the impact of any changes they are permitted to make in terms of employee relations and their talent attraction and retention needs. 

Talent and skills

Perhaps the most pressing issue for employers will be around talent/skills attraction and retention needs. These may not be so pressing in the immediate aftermath of the pandemic, as consumer demand will likely remain depressed, and with a 5% unemployment rate there will be a supply of labour.  

The issue though will be key skills. Social care for example has relied very heavily on EU nationals, as has construction, crop picking, ICT, hospitality and the NHSEmployers who look abroad for solutions will need to be able to navigate their way around the work visa categories, including the new skilled worker visa, the points-based system, and new and existing sponsorship licence applications.  

Even for those EU nationals in the UK labour market, there will be added complexities for employers. Employers will need to ensure that EU nationals have the right to work and they will need to distinguish between newly arrived EU Nationals, who do not have any such right and those who are established under the EU Settled Status Scheme. Of course, employers cannot decide to stop hiring EU nationals on a blanket ban’ basis to avoid any problems, as that would be discriminatory. 

Another thing for employers to consider is how their EU National workers are feeling about the post-Brexit Britain experience. There is already evidence of an exodus of EU nationals from the UK. The rapid inclusion of EU Nationals on the Government’s voluntary repatriation list appears a far cry from the “EU nationals … are part of our community and we want you to stay” messaging that was heard towards the end of last year.  

This inclusion on a list of people the UK would like to assist to leave the country will no doubt have a very unnerving effect on EU nationals, many of whom will already feel unwelcome in the UK. Employers should be proactive, understand how their EU Nationals are feeling about the situation and support their EU nationals with securing Settled Status, where appropriate. 

What should employers be thinking about?

Life is likely to be more complicated for employers after Brexit and certainly, employers will not be able to carry on as before. Adjustments will need to be made. Employers should not just tackle issues as they arise on a piecemeal basis. 

 Instead, they should be thinking strategically about this in the round now and preparing for the changes. The following sorts of questions need to be considered: What type of business are we? How will Brexit impact us in terms of restructuring our operations? What are the likely consequences in terms of our employee relations?  

What do we need to change within our policies, procedures and contracts of employment? What are our talent and skills requirements, and how will these be met? Do we have the knowledge and expertise to handle all of this? 

With respect to the last pointClarkslegal have a wealth of expertise spanning across employment law, business restructuring, immigration and strategic HR planning. Should you need assistance in relation to any of these areas, please do not hesitate to contact us via the email address contact@clarkslegal.com  

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