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 UK plc 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:

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With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

The deadline for the UK to withdraw from the European Union is coming up in just two weeks, on March 29. This week, the UK Parliament voted against a deal negotiated between Prime Minister Theresa May’s government and EU leaders, against a no-deal Brexit, and in favor of delaying the Brexit date in order to buy additional time to figure out a solution. Any delay will require the consent of the 27 remaining EU countries, which is not guaranteed, and even with more time, legislators will still face the same tough choices.

As the clock counts down to the deadline, Brexit has created a lot of uncertainty for UK organizations and their employees, especially workers from other EU countries whose future status is up in the air. This uncertainty has done significant damage to UK employees’ confidence in the business environment, Gartner’s latest Global Talent Monitor report indicates:

Employee confidence in the UK business environment has slumped, according to Gartner, Inc. The latest data in Gartner’s Global Talent Monitor report for 4Q18 shows employee confidence in near-term business conditions and long-term economic prospects reaching an index score of 55.6, a decline of 7.5 per cent from an index score of 60.09 in 3Q18. These results follow a worldwide trend that has seen global business confidence sink to its lowest point since the fourth quarter of 2017.

This lapse in confidence was paired with a sharp decline in employees’ active job seeking behavior, which fell by 7.2 per cent from 3Q18. Amid declining perceptions of the job market, coupled with the highly uncertain Brexit outlook, employees’ intent to stay in their current jobs in 4Q18 increased for the first time in 2018, as did their willingness to go above and beyond in their present roles.

UK employers are staring down the uncertainty of Brexit in the context of a tight talent market in which it has become exceptionally challenging to fill critical skills gaps. The Global Talent Monitor data from the final quarter of last year suggests that talent attraction will be a major challenge for employers this year, regardless of what happens with Brexit, as employees take a more pessimistic view of the job market and become more averse to the risks inherent in changing jobs. (Gartner for HR Leaders clients can see all the latest data from our Global Talent Monitor here.)

Uncertainty is a key factor — perhaps the key factor — driving the Brexit panic, as illustrated by the Decision Maker Panel, a survey of 7,500 UK business executives that researchers from the Bank of England, University of Nottingham, and Stanford University have been running regularly to gauge the impact of Brexit on companies. Writing at the Harvard Business Review, the researchers ascribe declines in investment, employment, and productivity to Brexit-related uncertainty:

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Overtime Rule’s Uncertain Future Still Leaves Employers ‘in Limbo’

Overtime Rule’s Uncertain Future Still Leaves Employers ‘in Limbo’

The new overtime rule proposed by the Obama administration last year, which would have increased the overtime salary threshold from $23,660 to $47,476, currently looks very unlikely to come into effect in its original form. A federal judge in Texas struck the rule down in September, finding that the Labor Department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions. Meanwhile, the department’s new leadership under Labor Secretary Alexander Acosta has signaled that it would rewrite the rule to make it less burdensome to employers, issuing a request for comments in July as it began a process of reviewing the regulation.

Nonetheless, policymakers, including Acosta himself, agree that the overtime threshold is overdue for some kind of increase, and most observers believe the Labor Department is likely to adopt a new rule that raises the threshold less dramatically, either through incremental increases or different salary tests depending on location, company size, or type of role.

Employers who had hoped to rest easy after the Obama-era rule was held up in court still face an uncertain change in regulation in the coming year, including the possibility that Acosta chooses to appeal the ruling against the 2016 rule. Erin Mulvaney discusses that uncertainty at the National Law Journal:

“Employers have been left in limbo,” said Lori Brown, president and chief operating officer of Compliance HR at a webinar this week that highlighted issues about the overtime rule. “It’s an ever-changing compliance dilemma.” …

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UK Employers Wary of Future, Lack Spare Capacity Amid Brexit Uncertainty

UK Employers Wary of Future, Lack Spare Capacity Amid Brexit Uncertainty

A new survey of employers in the UK shows that uncertainty over Brexit and labor market worries continue to shake business leaders’ confidence in the country’s economic future, the BBC reports:

A survey of 601 employers by the Recruitment and Employment Confederation (REC) found 31% expect the economy to worsen, with only 28% expecting it to improve. … The REC’s measure of confidence has turned negative in the space of a month. In July the number of those employers who felt confident about the economy outweighed the pessimists by 6 percentage points. …

The REC’s JobsOutlook survey showed that 40% of employers had no spare capacity and one in five planned to take on more permanent staff to meet additional demand. However, their biggest problem was finding the right candidates, especially in the construction industry, for either temporary or permanent positions.

In the wake of June’s surprise election result, in which Prime Minister Theresa May’s Conservative party lost its majority in Parliament, the UK has faced even greater uncertainty as the government is proceeding with Brexit negotiations with a weakened hand. After the election, both business and labor leaders called on the government to take steps to strengthen the domestic labor market—but there may be limits to what the government can achieve in that regard.

In the meantime, People Management’s Hayley Kirton solicits the opinions of some experts as to what employers can do to face down the capacity challenge illuminated in the REC survey:

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EU Citizens Will Be Allowed to Stay in UK After Brexit, but Cut-off Date Remains Unknown

EU Citizens Will Be Allowed to Stay in UK After Brexit, but Cut-off Date Remains Unknown

Since the UK voted to leave the European Union last year, most observers have predicted that the nearly 3 million citizens of other EU countries already living in the UK, about 2.2 million of whom are in the workforce, would be grandfathered into any potential post-Brexit immigration scheme and allowed to stay in the country. Last Thursday, Prime Minister Theresa May revealed to European leaders at an EU summit that she was willing to grant these EU nationals permanent “settled status”—including rights to healthcare, education, benefits, and pensions—provided the EU reciprocated by granting the same rights to the roughly 1 million British expatriates in other European countries. The details of the plan were published on Monday, and Jo Faragher outlined the key points at Personnel Today:

Under the proposals, EU citizens who arrived and became resident before the specified date but who do not have five years’ continuous residence at the time of the UK’s exit will be able to apply for temporary status so that they can remain in the UK until they have logged five years’ residency, at which point they can apply for “settled status”. Those who are working towards settled status can continue to have the same workers’ rights and claim the same benefits as they do now.

One of the key tenets of the proposals is that all EU citizens and their families, regardless of when they arrived, will eventually need to obtain “immigration status” in UK law. This means they will have to apply to the Home Office for permission to stay, evidenced through a residence document.

Once the UK formally exits the EU, the plan stresses that there will not be a “cliff edge” for EU citizens applying for settled status—instead, they will enjoy a grace period of up to two years during which they will still be able to live legally in the UK and apply for permanent residence if they choose. Those who receive settled status will retain it indefinitely, unless they leave the UK for a continuous period longer than two years, in which case they may lose it.

The one crucial piece of information that remains undetermined is the “specified date” after which European expatriates are no longer eligible for settled status: Originally, the government had proposed to limit eligibility to those living in the UK on the day Article 50 was triggered (March 29, 2017), but May has left open the possibility of changing it to the day Britain leaves the EU in 2019. This could give her a bargaining chip in the negotiations with the European Council over the terms of Brexit, with which to ensure that the rights of British expats in Europe are protected.

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UK Supreme Court Affirms No Brexit Without Parliament Vote

UK Supreme Court Affirms No Brexit Without Parliament Vote

Adding yet another twist to the story of Brexit, the Supreme Court of the United Kingdom on Tuesday upheld a High Court of Justice ruling from November finding that the government could not trigger Article 50 of the Lisbon Treaty, which starts the process of withdrawing from the EU, without letting Parliament vote on it, the BBC reports:

Reading out the judgement, Supreme Court President Lord Neuberger said: “By a majority of eight to three, the Supreme Court today rules that the government cannot trigger Article 50 without an act of Parliament authorising it to do so.” He added: “Withdrawal effects a fundamental change by cutting off the source of EU law, as well as changing legal rights. The UK’s constitutional arrangements require such changes to be clearly authorised by Parliament.”

The court also rejected, unanimously, arguments that the Scottish Parliament, Welsh Assembly and Northern Ireland Assembly should get to vote on Article 50 before it is triggered. Lord Neuberger said: “Relations with the EU are a matter for the UK government.”

This ruling may or may not complicate Prime Minister Theresa May’s efforts to follow through on the choice voters made in last summer’s Brexit referendum swiftly and decisively. Brexit Secretary David Davis said the government would have a bill ready to present to Parliament within days, and the procedural hurdle of going to the legislature is not expected to push back the government’s self-imposed deadline of March 31 to invoke Article 50.

In the estimation of the Guardian’s Brexit policy editor Dan Roberts, the ruling gives Parliament the opportunity to interfere with Brexit, but only if it is willing and able to do so:

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May Stresses Commitment to Hard and Fast Brexit, Immigration Control

May Stresses Commitment to Hard and Fast Brexit, Immigration Control

UK Prime Minister Theresa May on Tuesday laid out an uncompromising vision of her government’s path forward on Brexit, the Guardian reports, expressing a commitment to making a clean break from the EU, whether by securing an acceptable divorce agreement with the remaining EU countries or by going it alone. The UK will pursue such an agreement, and parliament will get to vote on it, but May stressed that neither Europe nor the legislature could prevent Brexit from happening:

She said her government’s 12 priorities for crunch negotiations with the EU 27 meant Britain would:

  • Not be seeking membership of the single market after it leaves the EU.
  • Take back control of its borders, which she said had been impossible with free movement from within Europe.
  • No longer be under the jurisdiction of the European court of justice, arguing: “We will not have truly left the European Union if we are not in control of our own laws.”
  • Not stay in the customs union in its current form, but would try to strike a separate deal that would make trading across borders as “frictionless as possible”.

Her promise of a vote for MPs and peers follows demands from Labour and the Lib Dems, as well as parliament’s committee on Brexit, but Downing street sources made clear that parliament would not be able to stop Britain leaving the EU. That suggests that failure to pass a vote will result in Britain falling back on to the higher tariffs of World Trade Organisation rules.

This is not the first time May’s government has promised a “hard Brexit,” but details had until now been scarce. Tuesday’s speech was very revealing of May’s priorities, the Economist’s Bagehot columnist observes:

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