In less than a month, on June 23, the UK public goes to the polls to consider one of the most important questions of our democratic history: Should the UK remain a member of the European Union (EU) or leave it? ‘Brexit’ is the term coined by the media for the possible British exit from the EU.
Many British citizens are unhappy with membership of the EU, which has transformed almost out of recognition since the UK joined in 1973. With total GDP of more than $18 trillion and a combined population of more than 500 million, the 28 countries of the EU amount to the biggest economy in the world. Brexit supporters say leaving would rid the UK of unwelcome regulation, and free it to determine its own laws, trade agreements and decide how to spend the money it pays into the EU budget more productively. However, some worry that exit from the EU would weaken both Britain and the EU. The precise effect of the UK voting to leave the EU is unknown, but many economists and business leaders, even President Obama, have waded into the arguments on both sides with their views.
The Effect on the Contingent Workforce
Two of the many arguments made by the Vote Leave campaign relate to the issues of immigration and autonomy over the making, and interpretation, of laws. Both of these issues affect employers of contingent workers with business interests in the EU and the UK. So what might the effect of the UK leaving the EU be on the contingent workforce and those who rely on it?
Despite five years of government policy to reduce net migration, in 2015 the figures showed that net migration was at its highest level on record. There are concerns that without the ability to control EU migrants moving to the UK from poorer countries, the strain on public resources such as health, welfare and education will cause real hardship and unrest. However, in the three months prior to February 2016, the employment rate was 74.1%, the highest since comparable records began in 1971.
If the UK left the EU it is possible that the UK would enter into an association agreement, similar to those enjoyed by Norway and Switzerland that includes free movement. If this were the case, the impact of Brexit on EU migration to the UK would be relatively limited.
On the other hand, EU withdrawal could mean the end of free movement and the introduction of visa requirements for EU citizens who want to live and work in the UK and vice versa. In the quarterly migration statistics published in August 2015, an estimated 66% of EU citizens moving to the UK for 12 months or more said that work was their main reason for migration, with the majority moving to take up a specific job. A further 19% reported study as their main motivation, and 10% reported family.
Under current immigration rules, non-EU citizen workers must usually be sponsored by an employer for a skilled job. This could affect the availability of individuals willing to work on a contingent or temporary basis. Many industries rely on low-wage workers who would be least likely to qualify to migrate to the UK if free movement were eliminated. In 2015, 13% of people in the lowest skilled jobs, those known as ‘elementary occupations’, were born in EEA countries, up from 6% in 2006.
A reduction in the availability of workers in these jobs would force employers to automate processes or increase wages to attract indigenous workers, both of which would increase costs.
The Vote Leave movement has argued for a “fairer” points-based system for all economic migrants similar to that introduced by Australia. Visas would be issued for skilled workers in “shortage occupations” or those deemed to be of value to the economy, such as investors and entrepreneurs. However, critics have pointed out that the Australian-style system was devised to encourage immigration not to control it, and that would entail greater administration of the system to be effective.
Of course leaving the EU would also mean that UK citizens would be restricted in their ability to move and work freely around the EU, and those already living abroad may lose certain benefits, such as free healthcare provision.
Employment Related Laws
For employers, the dissatisfaction with the EU has centered on the amount of rules, restrictions and employee rights that have been introduced as a result of European legislation. Since the labor government reversed the UK’s opt out of the Social Chapter in 1997, EU legislation has influenced laws on working time; rights for fixed-term, part-time and agency workers; family leave; paid holiday; transfers of undertakings; collective redundancies; information and consultation with employees; and data protection.
So the inevitable question is: What effect a vote to leave will have on such laws? It is highly unlikely that anything will happen in the short term to reverse any of these laws, but it would also give the UK government the opportunity to amend and repeal any elements of those laws which are deemed to be contrary to the interests of the UK. For example, the calculation of holiday pay and restrictions on working hours could be altered.
Specifically in relation to contingent workers, the Agency Workers Regulations could be repealed or amended to exempt more workers, or restrict the rights of agency temps. There would inevitably be opposition from unions to any proposals that undermine workers’ rights, but the government could use its red tape challenge to alleviate some of the administrative burdens attached to an unloved piece of legislation.
The ability of the government to avoid more stringent rules on data protection, being ushered in by the General Data Protection Regulation in 2018, may also be fettered where the issue of cross-border transfers of personal data is concerned. As with the US, if the laws of the UK are not considered robust enough to protect the data of EU citizens, then the ability of businesses to transfer data will be severely restricted.
Of course, a reversal of workers’ rights and protections may mean the UK is viewed less favorably by its would-be trading partners within the EU, and outside. This could make it difficult to attract investment and trade deals. Or the converse might be the case, if it means doing business from the UK is a more attractive proposition than in other European countries.
In the end there is no certainty what the end-result of the voting outcome will be, but the reverberations will sound in the UK and across the EU for some time to come.