UK – Brexit: what do UK businesses need to know?

Written on 4 Oct 2016

Currently, EU nationals benefit from freedom of movement between EU Member States and this is a fundamental principle of EU law. Workers can move between Member States without restriction. This means that UK passport holders can work in other Member States without needing a visa or residence permit, and vice versa. For UK-based businesses, it is the position of EU nationals in the UK that is likely to be of most concern, although similar issues are likely to arise for EU businesses employing UK nationals.

Following the referendum result, total free movement is politically difficult to achieve, so some form of restriction is to be expected.

Until the UK formally leaves the EU, there will be no changes to the status of EU nationals living in the UK.  The decision about when to trigger
Article 50 and start the formal process of leaving the EU will be for the UK’s new Prime Minister, although we do not anticipate that Article 50 will be triggered until the beginning of 2017 at the earliest. The UK remains a member of the EU until Article 50 negotiations have concluded, which could take two years or more.

When we do leave the EU, we fully expect that the legal status of EU nationals living in the UK, and that of UK nationals in EU member states, will be properly protected and mirror each other.  Whilst the UK government has stated its intention to value the contribution of EU nationals, until the
negotiations are completed their ultimate status can only be speculated.  Accordingly, as a first step UK businesses should look to secure residency rights for their EU workers under domestic law.

Ensuring residency rights for qualifying employees under UK law

As the UK’s work permit rules currently stand, the retail sector will be particularly impacted by any restriction on free movement.  This is because work permits are not available for roles that do not require at least a university degree.  Whilst unlikely to be a problem for management level roles, some planning is likely to be needed for lower level roles.

Businesses should identify its EU employees that can/will be qualified to stay permanently by the time of the UK’s formal exit from the EU.  The aim is
to secure a permanent status to live/work in the UK under English law, as opposed to EU law.  For most EU nationals, this is a two stage process – the second of which may not always be advisable.

It is important to secure Indefinite Leave to Remain status – also known as Permanent Leave to Remain.  This means that there are no immigration restrictions on a person’s ability to live/work in the UK.  It should be borne in mind however; that this does not change nationality and this status can be lost by leaving the UK for a two year period. To secure permanent status that cannot be lost, applicants can apply for Naturalisation (the formal process for securing a UK passport). This does however need careful consideration as acquiring UK nationality may in some circumstances have an impact on tax liability.

EU nationals who have lived continuously and lawfully in the UK for at least five years will usually qualify for a permanent right to reside – also known as Indefinite Leave to Remain. The key phrase is to show “exercise of Treaty Rights” – most easily proven by employment.  Previously, there was no requirement to evidence this status, however post-Brexit this evidence will be helpful.  Furthermore, since November 2015, the UK government has insisted on EU nationals having a Permanent Residence Permit before being able to apply for Naturalisation.

Obtaining a Sponsor Licence and securing work permits for employees

Next, if a company believes that it will still have need to recruit non-UK resident workers after Brexit, securing the Sponsor Licence ahead of time will minimise disruption of planned recruitment.  It is to be expected that part of requirements of the work permit process will be the justification for
employing the EU national over a UK national. Fortunately, much of the legal and policy infrastructure for requiring EU nationals to have permission to work in the UK is already in place due to the Points Based System that was rolled out in 2008.  Although at the time, the 2008 process was aimed at skilled non-EU nationals, it was drafted with a specific category of work permit to cater for semi-skilled roles. That category (Tier 3) was not released at the time as the Government believed such roles would/could be filled by EU workers.

International companies and/or or those that already employ non-EU nationals will have some familiarity with the processes involved.  For those that have
had no reason to use the existing work permit arrangements, this may seem a daunting prospect, but with planning and a clear strategy, it should be business as normal.

Whilst there is no need to panic, it is worth making applications sooner rather than later. The reason being is that under current processing times, applications can take 6 months.  As the Brexit date draws nearer and more applications are submitted, those times will only increase and passports need to be submitted as part of the Permanent Residence application process. In addition, we have had companies approach us when they have submitted a Sponsor Licence application and it has refused with a prohibition on reapplying for 6 months.