HR: taking the right steps UK leaving the EU
In the face of uncertainty, can HR wait for direction? The impact on people of the referendum decision in June remains uncertain. Clarity is only likely to emerge during the negotiations over the next two to three years. What is clear is that, for now, the UK remains a member of the European Union and is bound by its legal and regulatory obligations until such time as the country definitely exits. So, with such an uncertain future, HR professionals might be forgiven for waiting for clarity to emerge before taking concrete actions. But, is that really an option? Regulatory, tax and legal teams are already working to understand the likely business impacts from the expected loss of passporting for financial services. Some operating model change seems inevitable and HR needs to be engaged in this, providing insight on location strategy, talent drivers and availability. The challenge is to accept the uncertainty while still ensuring that HR is ready, now, to support and deliver the required organizational change. Already resource constrained HR departments will face a number of pressures to support their business Brexit strategy. HR: taking the right steps UK leaving the EU 2
Understanding the key drivers Understanding your people risks; managing your strengths Business location Employee data Talent Firms will need to be able to assess and discuss the relevant strengths and weaknesses of any proposed location or business footprint strategy. To contribute to the strategy, HR will require knowledge of local labor markets, the availability of educated talent and key skills, key compensation and benefit structures, and an understanding of employment tax, immigration and regulatory requirements. Existing HR data is unlikely to include detailed information on EU nationals. To support likely operating model changes, firms will need to understand in considerable depth the immigration status and nationalities of all their employees. Extending current data gathering and analysis on work permit and visa expiry dates to track European or UK workers will be vital to help plan for the future. The impact of the Brexit vote on individual s ability to live and work across Europe is already having an impact on global talent strategies. While any changes to immigration rules may still be years away, we are already seeing firms assess their current reliance on EU and non-eu workers, and whether there are specific areas of critical skills which might be at risk. HR will need to understand and address the potentially limited availability of talent for certain key business functions in the UK, such as quantitative modeling and analytics, long before Brexit outcomes are known. Workforce planning and analytics models will need to be reviewed and updated in light of this data. Firms will also have to consider the impact of Brexit on their operating model and the cost of sourcing and deploying talent. Current approaches to the use of contingent labor and the trend toward near-shoring may need to be reviewed under new labor frameworks. Finally, the transition to a new economy (irrespective of Single Market membership) is likely to generate an increased workload for key functional areas finance, HR, IT, risk and legal. HR teams need to work with the business and their functional counterparts to proactively identify what these skills will be. They then need to have a plan to develop or secure these skills and resources, at a time that all other firms in the market will have similar needs. The availability of educated talent and key skills Employment tax, immigration and regulatory requirements HR required knowledge Local labor markets Key compensation and benefit structures Firms will also have to consider the impacts of Brexit on their operating model and the cost of sourcing and deploying talent. 3 HR: taking the right steps UK leaving the EU HR: taking the right steps UK leaving the EU 4
Impacts on mobility Why EY? Business travel New establishment Cost optimization Firms may have to contend with limited mobility for both short- and long-term assignments due to different regulatory and taxation agreements post Brexit. At the same time, operating model changes may see an increase in shortterm business travel. As arrangements are clarified, mobility will need to be considered more strategically as roles are being designed and talent is being deployed across UK and EU locations. Ascertaining whether employees would qualify for any new visa or work permit restrictions across the EU is essential. Conversely, establishing a presence in another EU27 country is likely to require firms to have an established employee population in that market rather than the brass plate structure sometimes used in other foreign jurisdictions. Understanding the skills required to run these businesses and determining the depth of locally available talent will help HR to start developing both a talent strategy and an employee value proposition for any new markets. Preparing and planning for the cost impact of new regulations and restrictions will be vital, and the continuing impact of foreign exchange volatility will also need to be factored in. Establishing or increasing a presence in the EU27 may require tactical solutions and the flexibility of established policies and processes to deal with this should be considered. With 10,000 dedicated practitioners globally, EY s People Advisory Services can help you understand, secure and improve your People agenda getting the right people, with the right capabilities, in the right place, for the right cost, doing the right things. We are currently helping clients understand the people implications of their Brexit location and business strategy decisions with a connected and collaborative approach to the issues of talent, mobility, immigration, employment taxes and reward. What steps should HR be taking now? HR professionals should be using the current period of uncertainty to address the following issues: Understand the nature and number of roles that will be required to support potential business location strategies and assess the availability of specific talent required to support these Assess current employee data availability and develop plans to address any gaps Review existing talent and workforce planning models to ensure they remain resilient to future changes Assess likely immigration and related work permit requirements for existing mobility programs Understand transition capability and requirements for key functions and develop a resourcing plan to manage the change Understand key compensation and benefit impacts of establishing or increasing presence in EU27. Assess additional regulatory requirements and impacts on incentive design Ensure that mobility and short-term business travel options are adaptable Develop an understanding of the likely employment tax implications of an increase in EU27 footprint Contacts Angela Dawes FS People Advisory Services Leader adawes@uk.ey.com T: +44 20 7951 2760 M: +44 7956 364147 Alison McDowell FS People Advisory Services Director amcdowell@uk.ey.com T: +44 20 7022 9282 M: +44 7342 021719 Andrew Deveney FS People Advisory Services Senior Manager adeveney@uk.ey.com T: +44 20 7197 9313 M: +44 7831 136237 5 HR: taking the right steps UK leaving the EU HR: taking the right steps UK leaving the EU 6
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