Future-proofing your workforce during the countdown to Brexit

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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Following the UK’s decision to leave the European Union (EU) in June 2016, there has been much discussion of the impact of Brexit on UK business. Much of this has been speculative, with the full extent of the fallout yet to be realised as exit negotiations continue. 

But with a ‘hard Brexit’, and thus an end to free movement of labour, looking a certainty, talent management is one area where many businesses are expecting to face a challenge. Here we explore the issues surrounding Brexit’s impact on the talent pool, and explain what companies can do to manage this.

 Hard Brexit – an end to free movement of labour

Prime Minister Theresa May triggered Article 50 in March this year, giving the UK a deadline of March 2019 to agree exit terms. A key talking point has been whether or not the UK will retain free movement of labour, which entitles all EU citizens to seek work and residence in another EU country, along with the rights of entry and residence for family members.

With roughly 2.2m EU citizens currently working in the UK, making up 7% of the working population, the removal of free movement of labour could leave a significant dent in the UK workforce, and organisations have campaigned to prevent this from happening.

However, in July this year Immigration Minister Brandon Lewis confirmed that free movement of labour won’t apply after Brexit, being a core principle of the EU.

Brexit – the challenge to SMEs

This looks likely to intensify an already evident problem for UK small businesses experiencing a diminishing talent pool. The most recent UK SME Confidence Index from Vistage reveals that talent management is expected to be a major challenge for 47% of UK SMEs over the next 12 months.

With 14m employees expected to retire over the next seven years, but only 7m people of working age expected to enter the market, this leaves a huge hole to fill for business owners looking to oversee growth over the coming years. These businesses need to consider how they can continue to attract, retain and nurture talent.

How firms can retain and attract EU talent

If your company employs a number of EU nationals, you may already have noticed the Brexit effect. Uncertainty over their position come March 2019 has led many EU nationals to assess their options and consider opportunities in mainland Europe.

One way that firms can provide security and retain particularly valuable staff is by providing UK visa sponsorship licences. In order to sponsor a worker, they must meet the Government’s definition of a skilled worker, and must have a suitable rate of pay and skill level.

Licence fees apply for each sponsored worker, which can range from £536 (applicable to companies with an annual turnover of £10.2m or less and 50 employees or fewer) to £1,476. In many cases you will also need to pay an ‘immigration skills charge’. Evidently this is an option that isn’t going to be applicable to all workers.

Alternatively, you might want to consider how attractive your organisation is to its overseas workforce and prospective EU national employees. One way to instil confidence within your workforce and to attract more talent is to generate a more inclusive atmosphere and demonstrate the value that your business places on diversity through its events, publications and recruitment material.

How firms can attract and nurture UK talent

It’s not just about keeping hold of staff from overseas. With a talent shortfall that was set to increase regardless of Brexit, your organisation will also need to consider how it can attract the best that the UK has to offer.

With fewer skilled employees imported from overseas, more companies will be vying for home-grown talent. The money on offer will obviously be a determining factor for any prospective employee, and there is a ceiling to how much SMEs can offer in comparison to larger firms.

However, there are other less expensive ways to attract talent that you may consider. Flexible working is one perk that appeals to many employees, whilst an increasing number of organisations offer flexible benefit plans, where employees can select the additional benefits that they desire, such as entertainment incentives or higher pension contributions. Clear opportunities for progression is another factor which will hold sway.

Nurturing talent in-house is an alternative that could yield long-term benefits. With the shortage of skilled candidates entering the UK workforce, this will be a more viable option for many businesses.

It also appears to have the backing of Government, which has introduced the Apprenticeship Levy to help boost the number of home-grown skilled workers in the UK. The levy is paid on annual pay bills of companies that exceed £3m. Those that don’t pay the levy share the cost of training apprenticeships with Government, with the Government paying 90% of the cost up to the funding band maximum.

Your approach to managing skills shortages will depend on numerous factors. However, heeding some of the guidance above can help ensure that your organisation continues to attract and retain staff in the build up to Brexit and beyond.

This ​article is written for general interest only and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.