HRM Guide - How leaving the EU could affect British business' recruitment

Following the Conservative Party's surprise victory in the recent UK general election, Prime Minister David Cameron moved quickly to introduce a raft of reforms outlined in his party's manifesto and pre-election pledges. Amongst these changes, and perhaps most controversial both at home and abroad, is Mr Cameron's ambition to renegotiate the terms of the UK's relationship with the European Union in anticipation of the promised in-out referendum by 2017.

UK's membership in the European Union

The origins of the EU trace back to the mid-1940s when the nations of Europe, shocked by the devastation of World War II, sought to economically bind themselves to one another such that armed conflict within the community could not occur. Although initially in favour of establishing such a union, the UK did not join the European Economic Community (EEC) until 1973. Two years later, and not since repeated, the UK held a referendum on its membership, resulting in a conclusive 67% of the electorate voting to remain.

Today, the EU's single market provides for the free movement of goods, services, capital, and people amongst member states. Within this framework, the nationals of the European Economic Area (EEA) and Switzerland may reside, work, and study without restriction.

This affords British businesses the ability to employ workers from within the EU without requiring immigration permission otherwise required for non-EEA/non-Swiss nationals. Additionally, in many cases, the family members of these nationals may also exercise treaty rights to reside and work in the UK.

Leaving the European Union

Leaving the EU would be detrimental to British business for a number of reasons, not least of which are the immigration hurdles which would need to be surmounted by employers seeking to employ EU migrants.

A "Brexit" (as the potential "British Exit" is now affectionately referred) would negatively impact British businesses by requiring EU nationals and qualifying family members to obtain immigration permission under UK immigration rules. This would place financial and administrative burdens on employers seeking to hire such persons, and would be costly and onerous for prospective employees and their families.

First, were the same rules to apply to both EU and non-EU migrants following an UK exit, a recently introduced Immigration Health Surcharge would likely apply to many of the former. Under the new fee scheme, certain migrant workers must pay £200 per year of immigration permission, with the full balance due prior to entry. For employers, many of whom incur these costs on behalf of their migrant employees, this would be yet another expense associated with necessary hires. Accordingly, this would mean that an EU migrant entering the UK under Tier 2 (General) sponsorship for five years with a spouse and two children (unless falling under one of the limited exemptions) may owe £4000 on top of any immigration filing fees.

Second, while prevention of illegal working legislation currently requires UK employers to verify all employees 'right to work' documents, for EU migrants, this control need only be undertaken one time prior to commencement of employment. By contrast, migrants with limited immigration permission under the Immigration Rules need to be monitored on an ongoing basis, and further checks must be undertaken prior to expiry of their immigration permission. Were the UK to leave the EU, the pool of migrants requiring continuing checks would increase substantially, placing yet another burden on employers.

Finally, the current annual cap on skilled non-EU migrants entering the UK under the Tier 2 (General) sponsorship category has not risen since it was set at 20,700 in 2011. Worryingly, however, the monthly quota was oversubscribed in June 2015 for the first time. At present, it is unclear whether the annual cap would be increased to accommodate those EU migrants entering under this category, should the UK leave the EU.

While the UK's economy continues to improve at a faster pace than many other EU member states, leaving the Union would dramatically affect this recovery. Despite, the growing number of UK nationals willing and able to work, many businesses still depend on sourcing skilled workers for specialist roles that are not easily filled from within the British workforce. This potential inability to quickly and easily access the needed, qualified migrant labour from within the EU would adversely impact industries that suffer from such skills shortages.

Indeed, Deutsche Bank recently signaled that a UK break from the EU might trigger it to relocate its British operations, and both Airbus and Vodafone have gone on record as stating that severing political ties with the Union would cause enormous damage to business and the UK economy.

Moreover, the UK prides itself on being open to business and attracting the best and brightest talent to its shores. With migrants in the UK already facing increased scrutiny in their everyday lives, from housing to banking to driving licences, leaving the EU would not only close those doors, it would send a strong protectionist and anti-immigrant message that would tarnish the UK's international reputation.

Membership to the European Union provides the UK's businesses, citizens, and economy with extraordinary benefits, and an exit would have far-reaching adverse repercussions for all of them. Though the prospects of leaving still seem remote, nothing at this point should be taken for granted.

Natasha Chell, Laura Devine Solicitors

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