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Post Brexit: The Emergence of Employee Relocation Complications

Overview: Post Brexit Employment Environment in the UK

The UK exit from the EU (Brexit) is still unfolding, and the exact terms affecting employers and employees stationed in the UK are still unknown.  Nonetheless, foreign companies with offices in the UK are looking ahead for strategies to relocate their employees to other EU member countries in order to retain the business advantages of EU policies.

Such a move would allow a firm to continue to operate within the EU structure, along with the ease of travel and doing business across borders. But complications could arise in relocating employees, or if UK-based employees are unwilling to move they may require some form of compensation.  Both options carry costs and potential legal complications that firms will need to consider when planning their next steps post Brexit.

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Option One: Retaining and Relocating Existing Staff

A company’s first priority when contemplating a move of this type is retaining high-value and well-trained employees, but that may not be so simple in the case of Brexit.  The UK has been a popular and cost-efficient business location for decades, and relocation may not even be viable for some companies.

Challenges

There are several areas of challenge that a company may face in the process of relocation:

Cost

Relocating an employee to another EU location could carry significant added cost for the employer.  For example, social security and benefits payments in the UK is set at 13.8% of salary (employee and employer contributions combined), but countries such as France impose a 50% tariff just for the employer and in Germany it is a combined payment up to 35%.  That is a notable cost increase, especially for banking and financial firms that offer large salaries to senior executives who will expect equal take home pay upon relocation.

Employee Preference

UK-based employees may have personal reasons for wanting to remain in the country such as family connections or cultural preference.  For example, an employee may be unwilling to move to Paris, given the language and cultural differences to face every day, in addition to the disruption to their families in relocating.

Legal Implications

UK laws require that if a company moves then an employee must be offered the chance to relocate abroad, on similar or better terms as in the UK.  In the event that an employee resists relocation regardless of the terms, then companies could face lawsuits based on unfair dismissal.  In that case, redundancy may be a cheaper and more efficient option than multiple employee lawsuits (although legal compensation is limited to 79,000 pounds in the UK for unfair dismissal).

Option Two: Redundancy of UK Employees and Hiring New Staff

The other choice for a firm leaving the UK post-Brexit is that of offering redundancy pay to employees.  This is a statutory option that allows the firm to terminate an employee because their position is no longer needed and is redundant for the business, but it does require payment to the employee.

Challenges

The challenges of redundancy may be just as great as employee relocation, but differ for the employer:

Cost

While redundancy packages may be a less costly option for workers that want to remain in the UK, other costs will arise with the need to hire new EU employees.  Setting up new office locations, incorporating and setting up local payroll will all incur expense, as well as the need to fully train new employees in the country.

Legal Implications

A foreign company entering a new EU country to hire employees will be required to comply with local employment and labor laws.  In addition to the wide differences in statutory payments already mentioned, there are additional laws that govern leave, termination and severance.  In France, workers are entitled to 50 days of holiday leave a year, and most do not work during the month of August.

Access to New Talent Pools

If a company chooses adopt the redundancy route for UK based staff, post-Brexit, they still face the challenge of hiring new employees as replacements.  This could be difficult if the destination country does not have the same talent pool as the UK.  For example, London has been a long-time financial and banking center with a large talent pool, but a city such as Paris may not offer the same access to high-level employees.

This challenge could be further complicated by the fact that multiple firms could be relocating to a new EU member, increasing the demand for skilled workers from an already limited talent pool.  This could add to the cost equation as well as potential employees will be in a position to negotiate higher compensation packages.

Post Brexit Solution: A GEO Employer of Record

For companies facing the prospect of either relocating employees out of the UK, or hiring staff in a new country post-Brexit, a GEO employer of record offers a solution to some of the inherent challenges.

A Relocation Solution

In the case of relocating multiple employees, the GEO can provide a local employer of record in the new country, saving the client the need to set up a branch office right away.  Since corporate registration can take time, the GEO solution allows for rapid deployment of relocated staff, including obtaining work permits and setting up a locally compliant payroll.

A Local Employment Solution

The GEO can function in a similar way for companies that plan to hire new local employees to replace their UK counterparts.   The same employer of record can easily employ locals and will be in a position to comply with all required withholding, tax and statutory payments.

The use of a GEO can be temporary (while a company sets up their own local corporation) or can be a permanent solution to accommodate a company’s changing global mobility strategies.  This can be a real advantage when setting up an office post-Brexit in a new EU member state with its own unique employment laws and requirements.  The GEO is the local expert and resource for all aspects of compliance in the new location, allowing the client to focus on employee training and establishing their business in the host country.

Get in touch to find out more about how an Employer of Record Solution can help your company

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