Brexit – Deal or No Deal Action Plan for SMEs – Employment

Written by Simon Marsh on 11 March 2019

The status and rights of EU workers in the UK following Brexit will be a key element of SME’s Deal or No Deal planning – and not just for those employing EU workers.

Those businesses which rely heavily on EU workers or have EU workers in key positions need to know the status and rights of their workers now and in the future.

However all SME’s need to be aware of the potential impact of Brexit on skill shortages and wage costs and the effect this will have on their business and that of their client and suppliers.

And for those businesses with UK employees travelling on business in the EU there are immediate plans needed for No Deal Brexit

Status and rights of existing EU workers

All SME’s with EU workers need to know the status and rights of their workers not just the 21 per cent of small employers which currently have EU workers. And the Brexit changes also affect EEA workers including those from Norway, Switzerland, Iceland and Liechtenstein.

Those EU citizens who have been living in the UK for at least five years, or will have done so by the deadline date of 30 June 2021 (brought forward to 31 December 2020 in the event of a No Deal exit), can now apply “settled status”.

The EU Settlement Scheme (“EUSS”) will open fully by 30 March 2019 however EU passport holders and their family members with a right to reside in the EU can submit an application now under the test phase of the Scheme.

Workers from Norway, Switzerland, Iceland and Liechtenstein can also apply for settled status when the Scheme is fully open.

Those who do not yet meet the five year settled status requirements, referred to as having “pre-settled status”, will have to wait until they qualify before applying.

Application must be made by the deadline date by EU citizens and their families who wish to continue living in the UK after that date.

More details on the EUSS are available at https://www.gov.uk/settled-status-eu-citizens-families

Those SMEs with a plan in place to assist employees in obtaining settled status will help secure a settled workforce and key workers.

Rights of future EU workers

Deal or No Deal there is a transition period after 29 March for EU citizens to move to the UK to work. Under the current deal proposed by Theresa May the transitional period will end on 30 June 2021 and under a No Deal exit the end date is 31 December 2020.

Under the proposed deal, EU citizens arriving in the UK during the transition period will have pre-settled status and will be eligible to apply under the EUSS before the end of the transition period if they wish to remain beyond that date.

Under a No Deal, EU citizens (and family members) may come to the UK during the transition period to live or work but will not be able to apply under the EUSS. They will also need to register within 3 months of entry to the UK and will be granted 3 years’ temporary leave to remain. By the end of the temporary leave to remain period either an application must be made under the Immigration Rules or they must leave the UK.

EU nationals arriving in the UK after the end of the transition period will be subject to a new immigration system which will not differentiate between EU and non-EU migrants.

EU workers will need to qualify for the following employment routes under the new immigration system with the most applying under the following:

  • the new skilled migration route requiring sponsorship by an employer;
  • the Youth Mobility Scheme for those aged between 18-30; and
  • the new short-term and low-skilled migration route with limited to leave of up to 12 months.

Skills and wage costs

Over half of EU workers employed by small businesses are skilled staff including mechanics, IT engineers, doctors and nurses and construction workers and many of these are either planning or considering leaving the UK post Brexit.

SMEs in the engineering, IT, care work or construction industries may expect an immediate impact on the availability of skilled staff.

Those businesses using unskilled labour, such as in the retail, restaurant and agricultural sectors, will also be affected as over one third of unskilled EU workers are actively considering moving away from the UK.

These gaps and expected shortages across labour markets will combine with the lowest rates of unemployment in the UK in over a decade to increase wage inflation across all sectors of the economy –SMEs provide 60% of all private sector employment and will be the hardest hit.

For SMEs there are a number of key action points:

  • find alternative sources of staff
  • consider alternative working methods
  • focus on improving productivity

SMEs operating in sectors which are heavily reliant on skilled EU workers should consider alternative staff sources. This may include providing support for non-EU workers to obtain a right to reside and work in the UK or investing in the skills of current staff.

Alternative ways of working may also help meet key skills requirements. Outsourcing IT support is a common way for SMEs to fill a skills gap from outside their direct workforce. It may be possible to extend this outsource model to other areas of the business process from back office functions such as accounting to direct functions such as sales.

And productivity in the UK lags behind our key international competitors and this is particularly acute for SMEs. This is not caused by Brexit but Brexit makes improving productivity even more vital.

Improving productivity may be as simple as cutting out meetings, shortening calls or emails or removing distractions in the workplace or more complex involving new processes, outsourcing low value tasks or moving services online. Brexit may not be the cause but there is no better time to focus on getting more value from yourself and all your employees than now.

EU travel and work for UK employees

No Deal Brexit will have a significant and immediate effect on travel to and from the EU and rights to work in the EU for all UK citizens from 29 March:

  • Visas may be required for stays of over 90 days in any 180 day period in the Schengen area
  • The visa free period of up to 90 days does not entitle you to work
  • Passports will need at least 6 months left before expiry on the date of arrival in the EU Schengen area
  • Travel outside the Schengen area (Bulgaria, Croatia, Cyprus and Romania) may need a visa or work permit and reference should be made to the country specific advice at https://www.gov.uk/foreign-travel-advice
  • An International Driving Permit (“IDP”) may be needed for drivers in the EU and EEA in addition to the UK driving licence. IDPs are valid for twelve months and cost £5.50 each from the Post Office. Details of which of the three types of IDP is required for which countries is available at https://www.gov.uk/driving-abroad/international-driving-permit
  • Rights to continue to live in the EU following a No Deal Brexit have not been guaranteed however the European Commission has called on Members States to take a generous approach. More details of the EC No Deal contingency action plan are available at https://ec.europa.eu/info/sites/info/files/com-2018-890-final.pdf
  • No stipulation has been made as to working visa requirements for UK citizens in the EU following a No Deal Brexit however those working either as employed or self-employed persons may need to register for social security and are advised to check with that EU country’s authority
  • UK professionals seeking recognition to work in regulated professions in the EEA or Switzerland are advised to check with the host state’s policies on the recognition of UK qualifications

In the event a Deal is agreed before the Brexit date the expectation is there will be no immediate change for British citizens travelling to or working in the EU for the transition period.

Call us for more information or for help for you or your business with any of the issues highlighted in our Brexit blogs series on:  0203 595 4462 or by email: enquiries@wsm.co.uk

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