With over three months still to go, the debate over the effect of Brexit on HR and the jobs market is being strongly contested by each side. In this article, we look at some of the principal issues and arguments and explore how HR can prepare for the potential impact of Brexit.
The skills shortage
CV Library found that over 40% of UK recruiters are concerned about restricted access to qualified candidates as a direct result of Brexit. It is a view reiterated in a survey released just yesterday by recruitment agency Manpower which highlights that over 200,000 jobs created in the UK last year were filled by workers from the EU. Official figures were provided by the Office of National Statistics (ONS). Those skills, it is implied, could be lost if the ‘out’ campaign is successful.
An alternative view exists, however. A CIPD report suggested ‘there is little evidence of a skills shortage’ due to current record levels of net migration which have significantly boosted the supply of labour for employers. The level of excess labour is also seen as responsible in part for the current downward pressure on UK average wages (predicted to remain within the 1-2% bracket during 2016 and beyond).
Brexit would mean a wider choice of vacancies for job seekers but the potential for business growth may be limited due to a reduced skills supply if EU workers are no longer permitted to move freely to work in the UK. A smaller labour pool may also lead to higher pay levels. Average weekly earnings at present remain 9% below 2008 in real terms. This may be regarded as a benefit for employees but an additional cost at a time of uncertainty for employers.
The most vulnerable industry sectors
Industries which rely on access to a broad talent pool of low skilled workers, such as construction, retail and agriculture, may feel the impact more strongly but not exclusively.
Professor Adrian Favell, writing for the London School of Economics makes a clear distinction between ‘freedom of movement’ and immigration. The former, he suggests, would mean the ‘brightest and best’ talent would not come to the UK, resulting in a shrinking talent pool. Professor Favell views freedom of movement as a ‘set of rights’ permitting both short-term and long-term movement across the EU. London has been a main beneficiary of this freedom of movement implying that employers based in the capital would experience the biggest talent shortage.
Much would also depend on whether investment in a post-Brexit UK rises or falls. Increased investment would lead to more jobs being created but a fall may dramatically impact the stock market.
In theory, the UK would be free to amend all employment laws following Brexit but doubt exists over whether it would do so in practice. The CIPD comments that employment law would be unaffected by Brexit as it believes that the UK government would be unlikely to remove safeguards and protection against such issues as discrimination and equal pay.
As EU membership affords greater protection to public sector employees by giving them the right to enforce EU directives on issues such as discrimination and redundancy, this is a further issue to be considered.
The requirement to refer cases to the European Court would no longer exist which would be a cost benefit for UK businesses.
Agency Workers’ Rights (AWR)
Introduced in October 2011, the Agency Workers’ Rights charter (AWR) granted temporary workers equal rights with permanent employees, including holiday and sick pay, after 12 weeks of continuous employment. Some parties have voiced concern that leaving the EU would lead to the repeal or amendments of AWR and the European Working Time Directive.
Alternatively, it is considered that a renegotiation of trading terms with the EU may be conditional upon EU employment directives remaining in place.
Big business versus small business?
Following the announcement of the referendum, nearly 200 business leaders signed a letter to the Times in support of remaining in the EU, citing their need for ‘unrestricted access to the European market of 500 million people’ to ensure ongoing investment in job creation.
On the opposing side of the argument, a similar number of small business owners stated their support for Brexit, identifying ‘unnecessary regulations’ as problematic for their bottom line. This group claimed that the UK economy was sufficiently robust to create more jobs ‘without being held back by the EU’.
It isn’t a straightforward matter of big business versus small business. Three of the UK’s leading supermarkets – Sainsbury’s, Tesco and Morrisons – refused to sign the letter supporting the ‘remain’ campaign, stating that this is a matter for the British people to decide. Arguably, a shrinking labour pool would impact them the most.
How can HR prepare for a potential vote to leave the EU?
It is impossible to predict the outcome of the EU referendum, much less the impact it will have on jobs, access to skilled labour or employment laws. Separating facts from the increasingly heated debates of the opposing campaigns will be a huge challenge for employers.
One thing is certain. Nothing will happen overnight. The UK will have two years within which to negotiate the terms of its withdrawal, which could be extended by a further year if required. Changes are likely to be gradually phased in to allow HR to transition. The type of relationship the UK negotiates with the EU in the event of an exit will also affect what happens during this time.
Three options exist which are summarised below:-
- The UK becomes a member of the EEA (European Economic Area). Norway currently operates on this basis.
- The UK adopts Switzerland’s model as a member of the European Free Trade Association (EFTA).
- The UK negotiates its own agreements with the EU and other countries as a member of the World Trade Organisation (WTO).
In the meantime, HR will still be required to deliver solutions to meet workforce demands. Its focus must be on the issues it can impact, whatever the result.
These include the imminent implementation of the National Living Wage on 1st April, boosting productivity, the creation of effective talent acquisition and retention strategies and key areas identified in this year’s Human Capital Trends Survey, such as, organisational design, leadership, culture and engagement.
In the event of Brexit, additional issues to be borne in mind include:-
The possibility of work sponsorship : Managing Director of Migrate UK, Jonathan Beech, speaking to Recruitment Grapevine believes that Brexit may lead to the introduction of work sponsorship, mirroring the system in place for non-EEA workers with ‘transitional’ arrangements for EEA workers already living in the UK. There is an argument that this could lead to more equality in the talent pool as restrictions on non-EU workers have recently become more complex.
The importance of background checks : At present, failure to confirm an employee’s right to work in the UK risks a fine of up to £20,000 per person. Brexit may lead to confusion around this issue so the onus is on HR to ensure compliance in all areas. Recruiting software with inbuilt links to major checking agencies minimises the risks of HR operating illegally.
Investment in technology : Whether or not the UK votes to leave the EU, HR cannot continue to rely on manual recruitment systems. In the event of Brexit the emphasis on HR’s ability to move quickly, streamline its systems and become more creative will be heightened, making it increasingly difficult for businesses without recruitment software or HR analytics to compete effectively.
In or out, the uncertainty and changes brought about by the referendum debate are likely to intensify the competition for talent in many sectors. It is critical to use technology that can help your business hire better people faster and source the best HR services. That’s why Advorto is your starting point.
Our recruiting software manages your entire talent recruitment lifecycle. Contact us today to find out more and begin your 30 day free trial.
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