Brexit: What it Means for HR

With Brexit being the ‘hot topic’ of 2016 and undoubtedly one of the most widely debated topics of the upcoming months, here is a two minute HR Blast for you to begin to consider some of the HR implications of a Brexit.

Brexit: Are we in or are we out?

In case you hadn’t heard, the UK is due to have an in-out referendum in June this year. If we stay in the EU, then HR can take a holiday. If we vote to come out – well, let’s just say you might regret not taking a holiday earlier in the year!

There is, of course, no reason why, if we come out of the EU, much of our current employment and associated legislation cannot remain exactly as it is.

The reality though is that many businesses feel that the EU has brought us significantly more employee rights and red tape than we might otherwise have had (at a cost to businesses) and are aggrieved particularly in relation to working time and TUPE plus entitlements around maternity, discrimination protection, holiday entitlements and agency workers rights. Some businesses will, therefore, argue for deregulation.

For different reasons, there are many individuals who are likely to argue for legislative change: change in respect of the Human Rights Act, especially around our ability to deport people and our treatment of offenders generally, health and safety legislation, especially where that appears to inhibit freedoms and diminish personal responsibility, and immigration, especially in respect to who is permitted to work in the UK and receive benefits. (For more on the Human Rights Act, see below)

For business, what has caused the most stir?

In case you needed anything else to help persuade you one way or another, we thought we would remind you of some of the extra headaches and complexity businesses have had to tackle as a result of implementing EU law:

The Lock V British Gas case; the ECJ ruled that commission payments do fall within the meaning of normal pay and should be taken into consideration when calculating holiday pay.

The ANGED V FASGA case and Pereda V Madrid Movilidad SA; the ECJ confirmed that workers who fall sick during annual leave must be allowed to reschedule the leave affected by illness.

Stringer and others v HM Revenue and Customs; confirmed that holiday does accrue during sickness absence and must be allowed to carry over holiday if necessary.

Kaltoft v Municipality of Billund; the ECJ held that an overweight individual could be deemed to have a disability if their weight hinders full participation in working life.

Deregulation

There is an argument that we would make the UK more competitive by changing and reducing some of the employment regulations. According to Open Europe, a think-tank, we could save ourselves up to 14.8 billion if there was complete deregulation from EU regulations.

However, leaving Europe could impact both our ability to trade and our financial hubs which generate around 22% of current GDP. Leaving would also cause a lot of confusion for employers and employees and the process of deregulation in itself would be costly and time-consuming.

Why has being in the EU cost so much?

Being in the EU has meant that we are subject to EU Directives, which we then have to implement and adopt into our own legislation. Some of the Directives have been particularly burdensome. These include the Agency Workers Directive, the Information and Consultation of Employees Directive and the Working Time Directive all of which have created huge administrative and compliance costs, particularly for smaller businesses.

With some legislation e.g. TUPE which implemented the EU Acquired Rights Directive, we ‘gold plated’ the EU Directive when we adopted it, causing a lot of frustration from businesses.

The lack of specificity with many Directives and consequent lack of specificity in our own legislation has meant that we needed to clarify some aspects of EU legislation. This process involves asking questions to the Court of Justice of the EU (CJEU) which results in significant delays in legal decisions and extra administrative burdens and costs.

The Practicalities of Change

If we don’t stay in the EU, there will undoubtedly be pressure on the Government to consider reversing some of the legislation that has come directly from the EU. However the practicalities of changing laws and regulations that are now entrenched and form contractual entitlements (e.g. holiday, working hours, maternity) for many employees, could be difficult and painful and in many cases would mean terminating contracts and re-hiring staff on revised terms. This would inevitably involve a degree of legal risk, as with any termination or change of contracts.

If we seek to downgrade certain employee ‘benefits’ or ‘entitlements’ that have resulted from EU legislation there might also be a backlash from employees around the UK and a consequent resurgence of union membership, which some might wish to avoid.

Coming out of the EU might, therefore, be a way to reduce exposure to future EU legislation, rather than deregulate what we already have.

And even if we leave the EU, we would still be signed up to the European Court of Human Rights as this is a separate entity and not part of the EU. Therefore, we would have no freedom to address issues around The Human Rights Act unless we then went through a process to leave the ECHR. Obligations around equality and discrimination would therefore continue. The UK is committed to the ECHR as a consequence of having signed the European Convention

The UK is committed to the ECHR as a consequence of having signed the European Convention of Human Rights and some say it is inconceivable we would seek to withdraw.

In practice, the upheaval and time deregulating would take, would naturally mean that change would be brought in, in a piecemeal fashion. This means that we would be unlikely to see any significant changes to employment legislation for some time.

Other Options

As an alternative to staying in the EU, the UK might have the option to choose to remain in the European Economic Area (EEA) and the European Free Trade Area (EFTA), as Norway did, but that would leave us obliged to accept the majority of EU legislation without having any input or rights.

Timescales

Changing legislation does not happen overnight. With consultation, three readings in each house and then royal assent, we might estimate that it will take up to 2 years to bring in legislation that is not fast tracked. And that is after the long period it is likely to take to actually disengage the UK from UK – which some have estimated as several years.

Likely impact on labour?
Whilst there has already been a flurry of activity around this with reports of more EU citizens seeking to work here prior to the June referendum and reports from those worried they will be instantly deported back to whichever European country they first came from, the reality is that nothing is likely to happen fast. Organisations and individuals need to stop panicking as much of this are very much ‘wait and see’.

In reality, of course, we had immigration laws before our current immigration legislation and if we come out of Europe, we will again have immigration laws. The UK will at no point operate in an isolated zone where no foreign workers are allowed.

Currently, Australia operates a points system where immigrants are graded on their potential use to the economy before being granted visas. This could be the route that a UK outside the EU would choose to take. But whatever route we might take it would take a number of years to bring into force.

In conclusion

So, for most organisations, it’s very much a wait and see situation at present and no need for anyone in HR to panic just yet. In Jaluch’s view, the current areas for HR focus ought to be on:

  • Taking time to properly understand the commercial/business continuity and profitability impact of a Brexit on your own organisation
  • Considering any likely impact on succession planning or workforce planning should immigration laws change substantially in the longer term
  • Consideration of managing staff morale, employee engagement and motivation amongst those current employees who might be impacted long term by a Brexit and, therefore, feeling unsettled
  • Clarity in any employment contracts issued for workers who will be working internationally and communication/reassurance with workers currently working internationally
  • Ensuring good levels of regular communication within the organisation to all staff letting them know the business leaders current thoughts about impact and the management of that. Going silent on staff during times of change is seldom helpful when people are worrying.
  • Planning for a communication exercise immediately following the vote in June.
  • Working with your staff representative forum to ensure staff are being listened to and their ideas and views being regularly fed back to the business leaders.
  • Set clear standards for staff in respect of what ‘campaigning’ is or is not permitted between now and June by individual members of staff at work.

Whilst this is very much a specialist topic, Jaluch is able to support you with:

  • Training of staff representatives
  • Staff engagement surveys
  • Contract and employee documentation reviews
  • Training for managers on managing change.
  • Refresher training for managers on essential employment law, data protection, working time legislation and immigration/work permit requirements

Please contact us if you are interested in any of our services.

The information contained within this article is for general guidance only and represents our understanding of employment and associated law and employee relations issues as at the date of publication. Jaluch Limited, or any of its directors or employees, cannot be held responsible for any action or inaction taken in reliance upon the contents. Specific advice should be sought on all individual matters.

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