The Talent Ramifications of the Brexit Deal (or No Deal)

The Talent Ramifications of the Brexit Deal (or No Deal)

The UK’s planned exit from the European Union is fast approaching, and a new deal over the terms of that exit faces an uncertain future in the UK parliament. Whatever happens, there will be talent implications for employers and HR leaders in the UK and Europe. Below is our broad look at the background of the process and terms of the latest proposed deal, and what the potential consequences could be — viewing several key issues through the lens of HR, including immigration, employment law, and the risks of a no-deal Brexit.

Fast Facts

  • The UK will formally exit the European Union on March 29, 2019, marking the deadline for UK and EU negotiators to reach a deal on an orderly Brexit transition. UK Prime Minister Theresa May has reached a draft agreement with the EU that would provide for a 21-month transition period, after which the UK would be able to control immigration from the EU, while backstop measures would allow the UK to remain in the EU customs union and enable a soft border between Northern Ireland and the Republic of Ireland if a final trade deal is not reached by December 2020. The transition period could be extended once, into 2022, if the UK and EU agree to do so.
  • A scheduled Parliament vote on the deal with the EU was delayed on December 10 after the May government realized the agreement would most likely be rejected. May then survived a confidence vote two days later, and plans to continue lobbying for the deal, which will not be scheduled for another vote in Parliament until sometime in January.
  • May’s deal, as drafted, would preserve the free movement of labor between the UK and other EU countries for the duration of the transition period, while any EU citizens living in the UK before the end of that period would have a right to stay, but would have to apply for residency documentation. Afterward, EU citizens would no longer have special privileges in immigrating to the UK. May has proposed a skills-based system for admitting immigrants after Brexit, but some business leaders and the National Health Service fear this system will leave them short-staffed in roles that would not qualify as high-skill under May’s scheme but for which native talent is in short supply.
  • The UK government has pledged to uphold employment laws based on EU regulations after Brexit, but some of these laws may be partly amended to be more flexible for employers or to reduce their liabilities. Unions, however, fear that these protections may be weakened substantially.
  • If there is no deal by the March 29 deadline, the UK will face a “messy” exit from the EU—likely causing severe economic disruptions. In the event of a no-deal Brexit, the UK would revert to trading with Europe under World Trade Organization guidelines, reintroducing customs and border controls. A no-deal Brexit can be expected to hurt the pound and cause instability in the British financial sector, which could spread to continental Europe and the rest of the world.
  • In a no-deal scenario, the government has promised that EU citizens’ immigration status would not change before 2021, but it remains unclear what employers will have to do to ensure that their European employees are able to continue living and working in the UK. Many businesses have put contingency plans into action to protect against the consequences of a no-deal Brexit, but most HR managers in the UK are underprepared for this scenario. In any case, Brexit is expected to result in a labor supply shock and make it more challenging for UK employers to fill job vacancies.

Background

On June 23, 2016, citizens of the UK narrowly voted to withdraw their country from the European Union. The “Brexit” referendum sent a shockwave through the British, European, and global economies, and prompted concern and uncertainty at many organizations in the UK and abroad.

Conservative Prime Minister Theresa May, who came to power shortly after the referendum in 2016, has worked to cut a deal with Brussels that preserves the UK’s strong trade ties with the EU, but has also stressed that no deal is better than a bad deal as far as her government is concerned. UK and EU negotiators deadlocked over several key points where London and Brussels are at cross-purposes, and uncertainty over whether and how these obstacles will be overcome has been a major source of anxiety for UK businesses over the past two years.

Chief among these issues are immigration and the free movement of people between the UK and the rest of the EU. May has stressed the need for the UK to “take back control” of its borders, even if it meant losing access to the EU’s single market. Free movement of people is one of the “four freedoms” underpinning that single market; the UK wants to preserve free movement of goods, services, and capital, while regaining the right to restrict immigration from the EU. For its part, Brussels has resisted creating new forms of special treatment for the UK that would make Brexit easier, partly to discourage other EU countries from pursuing exits of their own. Another, related area of disagreement is the border between the Republic of Ireland and Northern Ireland, which forms the UK’s only land border with another EU country. Many businesses on the island of Ireland have supply chains that cross that border every day and employees living on both sides of it; creating a hard border with customs and immigration controls would be costly and complicated for these organizations.

The deadline for reaching an agreement is March 29, 2019. If no agreement is reached, the UK will “crash out” of the EU and trade with the bloc under World Trade Organization guidelines. May announced on November 25 that her Brexit negotiators and their counterparts in Brussels had reached a draft agreement that would solve some of these challenges.

A vote on the deal in the UK Parliament had been scheduled for December 11, but May called it off one day before when it was clear that the deal was going to be rejected. Many MPs opposed the agreement, claiming the proposed Brexit is too hard or not hard enough, or because they believe the country should hold another referendum on the question before proceeding.

Prime Minister May said on December 10 that she would ask the EU for new “reassurances” on the deal, and in particular the backstop plan for the Northern Ireland border, which many MPs said they opposed. The EU has maintained they will not renegotiate the agreement, however. May’s government offered no specific timeline as to when there would be another scheduled vote in Parliament on this or any revised deal — but has said it will not happen until January. There is also a January 21 deadline to present the deal to Parliament. May survived a confidence v

Here is a broad outline of what might happen next and the key issues HR leaders need to understand:

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Global Talent Monitor: Discretionary Effort Continues to Fall in US as Employee Confidence Dips

Global Talent Monitor: Discretionary Effort Continues to Fall in US as Employee Confidence Dips

In the past three years, the number of US employees willing to go above and beyond their employers’ expectations at work has fallen by 10 percent, from 27 percent in the second quarter of 2015 to 17.8 percent in Q2 of 2018, the latest data from Gartner’s Global Talent Monitor shows. Globally, employees’ confidence in business conditions has fallen for the first time since Q1 of 2016.

One possible driver of employees’ declining levels of discretionary effort is a lack of satisfaction with opportunities to grow and develop in their careers. Nearly 40 percent of employees in the US and globally ranked a lack of future career opportunities as their main source of dissatisfaction in a previous job, displacing compensation as the number-one driver of attrition both in the US and around the world. Over the past few years, we have seen development opportunity grow to be an increasingly critical element of the employee value proposition, both as a driver of attraction for new employees and, in its absence, as a reason for quitting.

“With recent U.S. reports showing little growth year over year in real earnings, workers hope to achieve more satisfaction in their jobs through better titles and opportunities to advance and grow in their current careers,” Brian Kropp, group vice president of Gartner’s HR practice, said in a statement. “To prevent further reduction in workplace effort and to retain top talent, employers should pay closer attention to employee dissatisfaction about the lack of career opportunities, particularly if wage growth remains stagnant.”

“Leading organizations are able to use their employment brand to illustrate why their career opportunities are better than their competitors,” he added. “A company’s EVP directly correlates to employee engagement levels, as workers are more likely to work harder and stay in their current positions if they are highly satisfied with their company’s EVP offerings. Gartner data shows that organizations with high levels of employee engagement report financial outcomes three times higher than firms with lower engagement levels.”

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How Can HR Use Cultural Brokerage to Strengthen Diverse Teams?

How Can HR Use Cultural Brokerage to Strengthen Diverse Teams?

In a recent Harvard Business Review article, Sujin Jang presented the concept of “cultural brokerage” as a way of facilitating interactions across employees from different cultural backgrounds to supporting team creativity. Her research shows that “cultural brokers” (team members with multicultural experience) can act as a link between team members whose experience is mainly limited to only one culture. This research has significant implications for an increasingly global workforce and for HR leaders working to support diversity and inclusion goals.

One key message for HR leaders is that while having diverse teams can foster innovative thinking, all of the members of those teams must also feel included in order to achieve maximum benefit to innovation and productivity. Our research at Gartner on D&I leadership also finds that an inclusive culture can have a major impact on team performance, particularly for diverse teams. (Gartner Diversity & Inclusion Leadership Council clients can read our Creating Inclusive Leaders study here to learn more.)

But facilitating an inclusive environment where employees from different cultural backgrounds feel equally valued and included is not an easy task; even with cultural brokers on their team, leaders must be proactive about inclusion and should not depend on these brokers to foster constructive collaboration alone. We recommend four approaches to building inclusive team environments:

  • Ensure leader behaviors match inclusive values: Our research shows that interpersonal integrity and productive conflict management are two leadership behaviors that effectively drive inclusive environments for employees.

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What the World Cup Means for the World of Work

What the World Cup Means for the World of Work

The 2018 FIFA World Cup in Russia has been consuming the attention of football/soccer fans around the world over the past two weeks and will continue to do so until the final match on July 15. The world’s most-watched sporting event, the World Cup has viewers tuning into matches from every country and at all hours of the day—including during work hours. Just as the Super Bowl and the National College Athletic Association’s Division I basketball tournaments have been demonstrated to cause a dip in productivity in the US, this quadrennial international event is bound to have an economic impact in many countries.

New research attempts to calculate just how big that impact is likely to be. Maude Lavanchy, a research associate at IMD Business School, and Willem Smit, an assistant professor of marketing at the Asia School of Business and an international faculty fellow at MIT’s Sloan School of Management, built a model to predict the productivity cost of the 2018 World Cup in a number of major countries based on how many matches were scheduled to take place during work hours in that time zone and how the expected outcome of each match (based on betting odds from UK bookmakers) would affect workers’ happiness—positively if their team wins, and negatively if they lose. The researchers outlined their findings in an article at Bloomberg earlier this month:

In all, we found that half of the 48 group-stage games could have economic consequences. Although such calculations are inherently speculative, they can nonetheless tell a useful economic story. And in this case, it doesn’t look good.

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Despite Tech Boom, Canada’s STEM Grads Still Look South

Despite Tech Boom, Canada’s STEM Grads Still Look South

Even as Canada is working to make itself a hub for cutting-edge technologies and attract investment from global tech companies, much of its own homegrown tech talent is looking for work abroad, a new study finds. Led by the University of Toronto’s Zachary Spicer, the study found that one in four recent Canadian STEM graduates from the country’s top universities were working in other countries, mostly the US, the Globe and Mail reported earlier this month. Figures like these, Spicer warns, are enough to raise concerns about brain drain:

The numbers were higher for graduates of computer engineering and computer science (30 per cent), engineering science (27 per cent) and software engineering, where two out three graduates were working outside Canada, mostly in the United States. Nearly 44 per cent of those working abroad were employed as software engineers, with Microsoft, Google, Facebook and Amazon listed as top employers. …

“I think policy makers should look at this as a bit of a wake-up call,” said Mr. Spicer, who said the study was the first scholarly effort to map out Canada’s tech brain drain. “When we see certain fields where upward of 65 per cent of a graduating class are leaving for the U.S., I think there should be concerns there that our homegrown companies aren’t even going to be able to access some of that talent. If we found in the 1960s that 60 per cent of our auto workers were leaving to work in other countries … we probably would have held a royal commission.”

This study’s findings may comes as a surprise, considering that Canada’s tech sector is by all accounts on an upward trend.

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Applicants for US Visas May Soon Have to Provide Social Media Handles

Applicants for US Visas May Soon Have to Provide Social Media Handles

In what looks like the Trump administration’s latest effort to tighten the US border by subjecting entrants to greater scrutiny, the State Department announced in the Federal Register on Friday that it was proposing to require that people seeking both immigrant and non-immigrant visas provide consular officials with additional information, including their social media accounts from the past five years, Ana Campoy reports at Quartz:

“This is an indirect way that the Trump administration is trying to limit immigration to the US that does not require for them to go to Congress,” said Stephen Yale-Loehr, an immigration law professor at Cornell University, of the proposed rules.

The US had already been requesting social-media information from people suspected to represent a national security threat. That policy targeted a sliver of travelers to the US—about 65,000. The new measures would cover nearly 15 million people. Along with the handles, the State Department is also asking for a five-year history of email addresses, telephone numbers, and international trips.

The proposals must be approved by the Office of Management and Budget after a 60-day public comment period, so these new requirements will not come into effect until this summer at the earliest, but if they do, Campoy surmises, it may make some people think twice about traveling to the US. The American Civil Liberties Union issued a statement condemning the proposals as “ineffective and deeply problematic”:

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Starbucks Commits to Gender Pay Equity Worldwide

Starbucks Commits to Gender Pay Equity Worldwide

At its annual shareholder meeting on Wednesday, Starbucks announced that it “has achieved 100 percent pay equity for women and men, and for people of all races, performing similar work in the United States” and expressed a commitment to closing its gender pay gap worldwide as well:

Announced today, Starbucks has committed to achieving and maintaining 100 percent gender pay equity for partners in all company-operated markets globally, setting a new bar for multinational companies. This is an effort supported by equal rights champion Billie Jean King and her Leadership Initiative (BJKLI) and leading national women’s organizations, the National Partnership for Women & Families and the American Association of University Women. …

Starbucks has also formulated Pay Equity Principles that led to the successful closure of the pay gap at Starbucks in the United States. Recognizing the importance of this issue for women all around the world, Starbucks is sharing these principles so other companies can follow suit, and address known systemic barriers to global pay equity.

A number of major US companies with multinational reach, including large financial institutions and tech companies, have recently released pay equity audits demonstrating gender and racial pay gaps of 1 percent or less in the US and committing to closing the small gaps that exist. These audits have come in response to pressure from the activist investor Arjuna Capital, which filed shareholder resolutions at a number of large companies requesting them. Arjuna had submitted such a proposal at Starbucks as well, but withdrew it last year after the coffee chain issued a report showing 99.7 percent pay equity between male and female employees performing similar work.

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