Brexit Extension Is No Relief for UK Employers

Brexit Extension Is No Relief for UK Employers

Business leaders in the UK may have breathed a sigh of relief last month when the country’s deadline for leaving the EU, originally scheduled for March 29, was pushed back until October 31. The extension is good news insofar as it gives the UK government more time to finalize an agreeable Brexit plan and avoid crashing out of the union, with potentially devastating economic consequences. Likewise, it gives British organizations more time to shore up their own Brexit plans, if they had not done so already. For these organizations, however, and particularly for their HR functions, the extended Brexit deadline is a decidedly mixed blessing, and it would be a mistake to treat it as a reprieve.

One of the most disruptive effects Brexit has had on the UK for nearly three years now has been to introduce major uncertainty into the business environment. Not knowing whether, or when, or how Brexit would finally happen has made it difficult for organizations to make long-term plans that depend on the outcome of this process. It would be one thing if the UK and the EU had decided that Brexit would definitely take place at the end of October, under a finalized deal and with a specified transition plan. The extension agreed upon in April did none of that; instead, it gave the UK government another six months to try and accomplish what it has been unable to do thus far and rally majority support in Parliament around either the deal Prime Minister Theresa May made with her European counterparts last year, or some alternative arrangement that the EU would also accept.

In other words, the uncertain environment that has prevailed since 2016 remains in place: Organizations still don’t know when Brexit will happen and whether it will be orderly or chaotic. As Steve Hawkes, deputy political editor at the Sun, remarked when the extension was announced, another six months of unpredictability “is possibly the worst outcome for business.”

If the UK ratifies the Brexit deal before October, the UK may leave the EU at the start of the following month. If the country fails to hold elections to the European Parliament at the end of this month, it will crash out with no deal on June 1. If Parliament still can’t pass a deal by the new deadline, the country faces the prospect of a no-deal Brexit in November or an additional extension, assuming the EU is willing to grant one. The delay has even amplified uncertainty around whether it will ultimately happen at all, though the government remains committed to achieving Brexit — and organizations must continue preparing for it.

To that end, businesses in the UK cannot afford to slow down their contingency planning for the various Brexit scenarios that may come in the next six months. This is especially true for HR, as Brexit’s impact on workforce planning, retention, and employee engagement are some of its most significant consequences for organizations. While the overall picture of the future remains cloudy, there are a few things of which HR leaders can be sure, at least in terms of what risks they need to plan against. Here are some things UK businesses should be thinking about as they move ahead with their post-Brexit talent strategies:

The UK Labor Market and Access to Talent

The UK is facing a skills gap, aging workforce, and shortage of labor in key sectors, even without the impact of Brexit. EU candidates have already been scared away from the UK job market and many businesses have already shifted part of their operations to other European countries in anticipation of Brexit, so even if Brexit were to end up not happening at all, some of the damage to the UK as an employment destination is done and won’t be quickly repaired. Brexit-related talent shortages are hitting key sectors like finance, hospitality, construction, health care, and agriculture.

Employers will need to get creative to solve these talent shortages, assuming the unlimited supply of European immigrant labor will no longer be available. That could mean hiring less-qualified candidates and training them rather than holding out for candidates ready to go on day one with all the needed skills. It could also involve diversity and inclusion strategies like expanding pipelines of talent from underrepresented race/class/geographic backgrounds, or re-entry programs for mothers who have left the workforce. Employees and candidates will have greater leverage to demand more flexibility and work-life balance, so employers will have to work harder to attract and retain talent in an even tighter market.

Immigration Policy and Settled Status for EU Nationals

The settlement scheme for EU citizens already living and working in the UK to remain in the country legally after Brexit is ongoing, and immigration specialists recommend that EU nationals employed in the UK still apply for this status or for permanent residency, even as the outlook for Brexit remains uncertain. The deadline for settled status applications is still June 30, 2021; if the UK leaves the EU without a deal, employees will need to have been living in the UK by April 12 of this year to be eligible and will need to apply before December 31, 2020.

The scheme has run into some bureaucratic and technological glitches: The automated eligibility check system has reportedly failed to recognize some applicants’ years of continuous residency, and self-employed workers, stay-at-home parents, and people with gaps in their employment history are particularly at risk for erroneous rejection. As stories of these failures spread, some EU nationals eligible for settled status may become afraid to apply. UK organizations with EU national employees need to be prepared to answer questions, address anxieties, and provide guidance through this process.

Reducing net migration has been a policy priority for this government and was a core rationale for Brexit, so overall availability of immigrant talent, particularly for permanent roles, is declining and likely to remain lower for years to come. Even though the government has talked about opening up the UK to more workers from Commonwealth countries and immigration from Asia has been rising as EU immigration has fallen, these trends are unlikely to fully offset the reduced influx from EU countries as the goal all along has been an overall reduction in immigration and greater focus on hiring native UK talent. The government has proposed a post-Brexit immigration policy that will focus on bringing in highly skilled and credentialed talent through the Tier 2 visa program, so access to international workers will be largely restricted to high-skill, high-compensation roles. The cost of hiring from abroad will also increase, putting foreign talent out of reach for many UK employers.

The government has also proposed short-term guest worker visas for lower-skill workers in blue collar occupations and agriculture, but foreign workers may not be interested in one-year visas that don’t allow them to bring their families with them and give them no reason to integrate or form relationships with their colleagues (which would present a unique inclusion challenge for employers).

Employment law

May has repeatedly promised that Brexit would not lead to any erosion in the rights UK employees currently enjoy, some of which are derived from EU policy and precedent. Unions and other labor advocacy groups have questioned the sincerity of these promises and rejected May’s proposals for protecting workers’ rights. The Employment Lawyers Association has asserted that notwithstanding May’s assurances, Brexit may lead to a historic upheaval in UK employment law if Parliament does not enact legislation ensuring that the UK would continue to be bound by case law from the Court of Justice of the European Union.

Some of the changes these advocates fear in law and regulation concern issues like gender equality, diversity, and discrimination, as well as work-life balance issues like paid time off and flexible scheduling. Many UK employers will continue their diversity and anti-discrimination policies and offer attractive work-life benefits, even if the legal obligations are no longer in place, but will need to be proactive about communicating those intentions to their employees, who won’t necessarily assume that they are shielded from these changes in the law.

Employee Experience

Surveys suggest that UK employees, including both UK natives and EU nationals, feel more negative than positive about the uncertainty surrounding Brexit and the changes it implies for their work lives. That negative experience of Brexit has manifest itself so far in anxiety, lower morale, and disengagement, which could be exacerbated with the impact of the event itself, especially if Brexit hurts the UK economy as much as it is expected to. Declining employee confidence in the strength of the economy has led to a heightened fear of layoffs, a decrease in active job seeking, and an increase in intent to stay: a mixed blessing at best for employers, as it suggests new talent will be harder to attract while current employees might be easier to retain, but are less likely to leave even if they’re disengaged, dissatisfied, and unproductive. Employers will need to retool their retention and engagement strategies in response to these anxieties, particularly with regard to EU citizen employees.

It is imperative that employers communicate their plans for dealing with Brexit to their workforce, but a March survey indicated that only 11 percent of UK employees felt their employer had clearly communicated its Brexit plans to them. Our recent surveys at Gartner have also found that most UK employees have dim perceptions of their employers’ policies to help workers affected by Brexit, which suggests that they are receiving insufficient and uneven communications from HR. (Gartner for HR Leaders clients can read more insights from our Brexit employee sentiment surveys here.)

In terms of diversity and inclusion, Brexit has generated a lot of mistrust among European and other non-native workers in the UK toward their colleagues and neighbors, regarding how welcome they really are in British society and the workplace. Even though UK citizens may not be any more biased against immigrant workers than other Europeans, the discourse around Brexit has unearthed a lot of anti-immigrant sentiment, creating an uncomfortable environment for many foreign workers. Employers need to step up their efforts, if they haven’t already, to ensure that immigrant employees affected by Brexit feel safe, included, and valued in the workplace, and be vigilant against discrimination and harassment.

Also, Brexit implies a major change in the demographic makeup of the UK workforce, with fewer European immigrants in the workplace, more from Commonwealth countries, and more UK natives from demographics that were once overlooked (e.g., ethnic minorities or working-class communities). D&I strategies may need to be updated to reflect a new set of inclusion challenges: Immigrants from Poland and Romania face different forms of discrimination and hostility in the workplace than immigrants from India or Nigeria, BME UK citizens, or lower-class white British people with less prestigious educational backgrounds than their peers.