Brexit – what do staffing and recruitment companies need to do now about contract wording, immigration and data protection?

Written on 15 Jan 2019

As the currently scheduled Brexit date gets closer, and uncertainty continues about exactly what deal if any will be implemented by the UK and the EU, many businesses feel they have little option but to press forward with planning for a no deal Brexit. As such we are being asked what staffing and recruitment businesses can do to mitigate any adverse impact.

As previously covered in our briefings, there are relatively few direct immediate impacts specifically on recruitment and staffing companies. The EU has never delivered a single market in terms of recruitment regulation – UK staffing companies already need separate licences to operate in certain EU countries and Brexit will not affect this. And the UK government has confirmed that worker rights under EU laws will be largely, if not completely, preserved for the time being – meaning that it is unlikely there will be any early repeal in the UK of measures like the Agency Workers Regulations.

So, what are staffing and recruitment companies doing, other than obviously carefully tracking hiring sentiment to be ready for downturns in some areas and/or upturns in others?

New operations overseas

Clearly, many companies are re-doubling efforts to establish operations, and infrastructure, in other countries. We are helping with a lot of that, especially in the US, Germany, the Netherlands and Belgium. It appears companies are mainly doing this as a hedge against the risk of a severe job market downturn in some sectors in the UK. Some companies which already supply into continental Europe from the UK, with no presence or only a “virtual” presence in local countries, are also setting up real local offices across the EU because they are (in some cases) concerned that it may get harder to set up in the future.

One interesting feature of this trend is the extent to which some staffing companies are, to circumvent cumbersome local licensing and other rules affecting staffing companies, setting up on a deliverables/SOW basis when they operate in continental EU countries.

Immigration issues

However, for many companies, the key immediate issue will be the movement and recruitment of internal staff and contract workers from across the EU. In particular, the two main questions we are receiving are: what can we do to protect our current staff and contractor workforce; and what can we do to fulfil future recruitment and staffing needs?

There are a number of things that businesses can be doing to prepare. For example, if you are placing UK contractors into roles across Europe and vice versa you need to start looking at ways in which they can be sponsored for immigration purposes – they may cease to have the right to work if they are not employed and you may need to consider setting up outsourcing and consultancy models. This may add to the growing trend of staffing companies moving closer (for various reasons including tax efficiency) towards an outsourcing/consultancy model in which an element of responsibility is taken for the output of the workers.

In light of this, we have designed a Brexit-readiness session to run through the options available (including contract models that may make it easier to sponsor certain types of contract workers from across the EU if and when they need work permits), highlight the important considerations, and help companies prepare for whatever the outcome. Whilst there is a large amount of, often contradictory, information out there we can help companies cut through the rhetoric and politics to provide practical and useful advice and solutions companies can implement now to be as prepared as possible.

What Brexit-related changes do we need to think about for contracts?

These are some key issues for recruiters to deal with in their contracts:

  • Given that there may be labour shortages in some areas, consider including in any contract where you are obliged to supply staff at a particular fixed rate a mechanism allowing you to put up prices. There is no one obvious index to refer to here but in any contract where labour is a key cost, using the Index of Labour Costs per Hour (ILCH) may provide better protection in the event of a labour shortage and an increase in labour costs than using something like the RPI.
  • Review any volume delivery commitments particularly in sectors where there’s likely to be a labour or talent shortage as a result of Brexit.
  • If you are entering into a long-term agreement in which you will not recoup initial costs for some time, make sure the force majeure clause does not give the client the right to pull out and stop paying you because of Brexit. Brexit should be carved out of force majeure in such cases.
  • Watch out for exchange rate fluctuations where you are paying workers in a different currency to that which you are paid in. This has always been a risk area, but the risk of fluctuations is increasing.
    There is more detail about contract changes that recruitment and staffing companies may need to make in this briefing.

Brexit and data protection

One area where uncertainty remains is data protection, particularly when it comes to cross-border transfers of data in a no deal Brexit scenario. Our immediate takeaways for businesses in relation to data protection are as follows:

  • Continue with GDPR projects through to completion, as an organisation which is compliant pre-Brexit is likely to be compliant post-Brexit (irrespective of the shape that Brexit takes).
  • Review your data transfers between the EU and UK.
  • Continue to monitor the position concerning EEA-UK data transfers post-Brexit and review and decide whether to update agreements to include standard contractual clauses to legitimise data transfers (as a matter of regulatory law) until such time that the UK is granted adequacy (whether that is before or after the end of the transition period under any deal).
  • Document your business’s decision on how to approach and legitimise its data transfers.
  • Businesses that currently benefit from the Lead Supervisory Authority regime under GDPR will need to carefully consider how the removal of the UK/ICO from this regime will impact them, and whether steps can be taken to mitigate that impact.

Further information

There is a wealth of material on our website about Brexit, the GDPR and other broader issues, and the specific impact on various sectors which staffing and recruitment companies deal with. If you would like to discuss how Brexit may affect your business, please get in touch with one of the experts listed below, or register/amend your preferences if you would like to sign up to our regular Brexit briefings.