What impact will a “no deal” Brexit have on your workers

15 January 2019

With the government’s current Brexit plan not being voted for by parliament on the 15 January, a "no deal" Brexit starts to look much more likely. Leaving aside votes of no confidence and other political manoeuvrings, Theresa May and her government have to come up with a plan B Brexit by 21 January but, if they do that, there are still only some 40 parliamentary sitting days between now and 29 March to get a deal agreed and in place with the EU and secure a parliamentary majority for that plan: "no deal" looks most likely at the minute.

What happens to your workforce in a "no deal" Brexit

With "no deal", the transition period to December 2020 evaporates and it’s all real from 30 March. Other than the worry over disruption to air travel this shouldn’t have any effect on business visitors.  The Government’s white paper on a proposed future immigration system published just before Christmas proposed that EU citizens would not be required to apply for visas to travel to the UK. The UK and the EU already permit visa-free travel from many countries and will likely want to do the same for each other even in the event of “no deal”. It also won’t impact those EU citizens already here. The UK government has already confirmed that such people will be allowed to stay. The EU will surely do the same.

The same white paper proposed 12-month temporary work visas for citizens of specified low risk countries (yet to be defined) for a temporary period until at least 2025. Although this is only a proposal it would be likely that this would be the approach that would be followed in a "no deal" scenario after the 29 March for unskilled workers from the EU.

The other proposal in the 19 December white paper was that skilled workers could apply for sponsored work visas along the lines of the existing Tier 2 visa scheme but with the removal of both the annual 20,700 skilled worker limit and the need to conduct a Resident Labour Market Test. There would also be special routes for Innovators, Investors and Exceptional Talent. Post 29 March it is likely that this skilled-worker route would soon be adopted. The key headline was that skilled workers from EU and non-EU countries would be treated the same after Brexit.

Finally, on 29 March with a "no deal" and no transition all the EU social security rules which seek to ensure mobile workers from all EU countries don’t pay social security on the same earnings in more than one country, will cease to have effect for UK workers. Currently UK workers posted to another EU country have the right to contribute to the UK national insurance system for at least a 2-year period rather than to local (usually more expensive than the UK) social security. Workers posted to the UK from the EU have the same possibility of being able to contribute to the cheaper UK social security system rather than to their home country system. This won’t be the case after a "no deal" EU exit and from then workers will have to rely on the bilateral social security agreements made by the UK with member states before joining the EU. These agreements were struck in a time when workers were less mobile and so were less flexible and typically cover shorter periods. Postings to such countries where the agreements conceived of shorter postings may give rise to higher social security costs. Postings to the 10 EU countries with which the UK does not have agreements in place (countries like the newer entrant EU countries such as Poland, Hungary and the Czech Republic and Greece) will give rise to higher social security charges particularly in the first year of posting where the worker will be subject to both UK National Insurance and the host country’s social security on the same earnings.

What HR teams need to do now for Brexit

HR teams will have to identify those workers who could be affected, which countries the UK had bilateral social security agreements with prior to their membership of the EU, prepare to fit postings into the shorter secondments expected by these agreements and budget for the increased social security costs.

Having said all that, we don’t have a crystal ball. Companies have about 50 working days between now and 29 March. There may still be an “orderly” exit from the EU, but companies have to plan for a no-deal exit on the “plan for the worst, hope for the best” basis. Firms can’t wait until it’s clear that it will or won’t be a no deal exit to start planning for it.  If you haven’t started planning for it, you need to do so now or very soon.

Contact us 

If you would like to discuss the above subject further, please contact Chris Blundell or David Wignall in our Human Capital Advisory team. Alternatively, send us an online enquiry.

If you found this article interesting and want information on how Brexit affects your trade with the EU countries, Please read Indirect Tax Partner, Alison Horner’s Insights article here