As Theresa May sets out her vision for the UK’s departure from the EU, businesses must prepare for potential employment regulation headaches, writes Alison Weatherhead

With Britain's negotiations on leaving the EU set to start in earnest in March, both EU nationals working in the UK and their employers face major uncertainties over issues affecting their lives and business models.

For European workers, the prospect of losing their automatic right to live and work in the UK is a major source of worry, especially for those who have established their lives and families on these shores. They will be hoping that, one way or another, they will be allowed to stay.

But the negotiations are likely to bring about problems for businesses too, as they may no longer be able to easily tap into a useful workforce pool, which is accessible because of the UK’s membership of the EU and the single market. The extent to which a company is affected will depend on the agreement that is eventually reached, and also on the sector it operates in.

For example, firms that rely heavily on recruiting seasonal workers from abroad may find they need to develop new recruitment strategies altogether. More than 60,000 seasonal workers are recruited from EU countries each year to assist with harvests and, according to the Financial Times, 96 per cent of EU workers currently employed on farms would fail a 'UK visa test'. 

At present, the UK government has given no guarantee about the status of the EU nationals who are already living in the UK. It seems likely that many will be able to stay, but we don't know if there will be controls placed on them, such as a minimum residency requirement or an earning stipulation above a minimum threshold. Any new controls around earnings could hit businesses such as fruit farms, warehouses, freight companies, and hospitality, catering and retail firms, many of which rely significantly on EU nationals.

Burdens and costs

Such controls will place additional compliance burdens on employers, and this usually also means costs. Employers may want to encourage EU nationals to apply now for residency certificates or permanent residency if they are eligible.

Looking to the future, businesses that usually rely on a non-UK workforce will need to engage with the new system the government introduces to control migration. We don't know yet what that will look like, but it is likely to be a version of the current points-based system. This requires employers to be licensed before they can sponsor migrants. Any sponsorship also comes with enhanced monitoring and tracking obligations, which are onerous and time-consuming.

Many organisations will also therefore want to consider increasing their ability to recruit locally – perhaps with a focus on staff training becoming more important. Budgeting for the future should reflect the fact that, as the EU labour pool is removed or severely curtailed, increased competition for staff may lead to increased wages and other employment-related costs such as training. Further demands from the government for firms to cooperate with its clampdown on immigration are also set to add administration costs in some sectors.

The scale of the challenge facing businesses that rely on EU workers will be revealed in the coming months. For now, employers should take steps to ensure their current workers are not subjected to discrimination based on their race and nationality. The anti-migrant and anti-EU rhetoric that has become so prevalent in the media has no place in the modern workplace, and Equality Act claims are costly and very damaging to an organisation’s reputation.

Alison Weatherhead is a director in the employment, pensions and immigration practice at Maclay Murray & Spens