What Does Brexit Mean for Payroll?

 Britain is Exiting the EU

The U.K. referendum vote to leave the European Union is a watershed moment in history. What this decision means for the future of the U.K., the EU and the world is unknown and predications are murky at best. Yet, post-referendum topics of data protection, labor regulation and immigration are being examined and could affect global payroll implementation.  

It is important to note that the ‘Brexit’ vote of 52 percent to 48 percent on June 23 is not legally binding. In order to move forward, the prime minister must invoke Article 50 of the Lisbon treaty which says that “any member may decide to withdraw from the Union in accordance with its own constitutional requirements.” The terms of severance, which can be negotiated for up to two years, would have to be ratified by the European Council and Parliament.

The biggest question for payroll professionals will be: Does this decision complicate payroll processes?

Data Protection and Privacy

There still is a lot of uncertainty about what changes will occur if the U.K. invokes Article 50, including the data protection side effects of Brexit. Data management could become more complicated while companies try to reconcile EU legislation with U.K. legislation, especially while the EU attempts to implement its new General Data Protection Regulation.

What we know is that if Article 50 is invoked, payroll professional also will need to pay close attention to proposed labor and migration legislation moving forward.

Employment Law

Many of U.K.’s employment laws can be attributed to EU legislation. For example, the EU Working Time Directive prevents EU employees from working more than 48 hours per week and requires employers to keep certain working time records. Many businesses would be interested to see these requirements repealed to fit with a less regulated British labor market.

However, most of the more recent employment issues in the U.K., such as the new higher minimum wage for people 25 and older, the looming apprenticeship levy and restrictions of skilled migrant workers all have been steered by British legislation and have little to do with EU requirements.  So while the U.K. may see some changes in working time and agency workers, it is unlikely that most key employment aspects like anti-discrimination legislation, maternity and paternity laws, and collective redundancy would see much change.

Migration Issues

Proponents of the U.K. leaving the EU point out that the move would help control immigration.

Currently, British employers have the ability to hire workers from within the European Economic area, which includes all EU countries, plus Norway, Iceland, Switzerland and Lichtenstein, without obtaining immigration permission. If the U.K. votes to opt out of the EU, employees from other member states might experience restrictions on traveling and working in the U.K.

This is just a possibility, of course.

It is probably more likely that the U.K. and the EU would negotiate an agreement that continues the freedom of labor. Even still, there are opportunities for the U.K. to play favorites in allowing employees from certain regions.

And then you have to factor in the complication of existing workers in the U.K. from member states.  Will they be required to return to their home countries? Again, unlikely. But the specifics of a future arrangement are unknown.

For more information on how ‘Brexit’ will affect employers and employees, read the International Payroll Decision Support Network news coverage of the issue.

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Follow Molly Ward on Twitter at @mollyalisonward.