23 Aug 2016

Post-Brexit, it is possible that immigration controls that currently only affect workers from outside the EU and the EEA (which includes all EU member states) could be extended to workers from within the EU and EEA, depending on the outcome of negotiations with the EU. Indeed depending on negotiations, workers from the EU and the EEA could be subject to differing immigration controls but this is probably unlikely. This article discusses the potential impact on UK retailers.

Free movement

EU and EEA citizens and their families currently have the right freely to travel, live and work across the EU. That right did not change following the June referendum vote to leave the EU but it has certainly led to a lot of speculation and uncertainty about what may happen when the UK leaves the EU. The only point everyone is agreed on is that nobody knows exactly what will happen or when but one thing is for certain, it is likely to have wide ranging implications if UK citizens and EU citizens of other member states no longer enjoy this automatic right of free movement.

Effect on retailers

UK research shows that up until March 2016 there were approximately 3.4 million migrant workers, with 2.5 million of these being workers from the EU. Retailers in the UK currently employ workers from across the EU and source a lot of goods from overseas. A restriction on movement could have a significant impact on retailers in respect of future labour, trade markets in the EU and global trade outside of the EU.

Following Brexit, it is not yet clear how workers from the EU and EEA will be affected. However, one possibility would be for the current immigration regime that applies to workers from outside the EU and EEA to be extended to include those from inside the EU and EEA. If this occurs then there could be a big reduction in the number of EU nationals employed in the retail sector. This is because the majority of jobs in the sector (ie general assistant roles) are unlikely to meet the minimum skills or salary thresholds that apply to workers seeking to work in the UK from outside the EU and EEA.

Further, if the same immigration controls were applied to all overseas workers, under the current rules workers would need to be earning a minimum salary in order to settle permanently in the UK. This minimum salary is currently £20,800 but will rise to £35,000 from next April. As wages in the retail sector tend to be quite low, particularly in distribution and warehousing, a minimum salary criterion could make it difficult for UK retailers to recruit in future as EU and EEA nationals may have questions over whether they would be able to stay in the UK permanently.

In addition, the retail sector tends to employ a large number of students and there are restrictions on the number of hours students can work during term time if they are in the UK under a Tier 4 visa, which would be usual for most students from outside the EEA. If these same restrictions were also applied to EEA students then there would be an increase in administration to comply with the restrictions (ie to ensure that the term dates for each student were on file and also to administer) and this source of flexible workers could be reduced.

What retailers should be doing now

It is expected to take a minimum of two years for the UK to negotiate agreements and arrangements for its exit from the EU. For now though, to a large extent it is business as usual and employers can still employ citizens from EU and EEA countries subject, of course, to having carried out right to work checks before they start work. Employers should not be tempted to try and reduce or restrict employment opportunities for EU and EEA citizens or they could find themselves on the receiving end of discrimination claims.

Notwithstanding the uncertainty there are things employers should start thinking about now, such as reviewing staff records, identifying who works outside the UK and within the EU and EEA and reviewing contracts of employment and engagement documents to ensure they contain right to work clauses.

EU and EEA nationals who have lived in the UK for five years while working may wish to consider applying for a permanent residence card and in respect of key personnel this may be actively encouraged by some employers. There is however no guarantee that those who have obtained a permanent residence card (but not British citizenship) will have preferential status at the date the UK actually leaves the EU.

Conclusion

If a post-Brexit decision is made for EU and EEA workers to also be subject to the same requirements as workers from outside the EU and EEA, this could result in a significant reduction in the workforce in the retail sector. It will also increase the pressure on retailers to invest in training and provide opportunities to upskill existing workers and new recruits from the UK. If a retail employer is looking to recruit any workers from the EU or EEA for permanent positions or long term projects, then it would be worth considering how any additional costs that could potentially be imposed (ie similar to those that apply to workers from outside the EU, such as any wage increases or additional administration) could be absorbed.

At Bond Dickinson, our corporate immigration specialists work within our leading employment team. We have experience in advising on Tier 2 Sponsorship Licence applications and assisting employers with their prevention of illegal working duties in order to maintain their sponsor status.

For more information please see: Immigration Act 2016 and The potential impact of the EU referendum on immigration.