7th December 2020
This post originally appeared on the 6CATS International website.
As Covid-19 has dominated the minds of recruitment businesses (and indeed everyone) this year, the end of the Brexit transition period has rather quickly crept up on many of us. It’s certainly been all too easy to forget that the UK’s official exit from the Bloc will be happening at the end of 2020. But with only a few more weeks to go, staffing companies that provide services across Europe are being encouraged to turn their attention back to Brexit and ‘prepare’ for next year.
Most of you will probably have seen or heard the adverts from the Government warning company owners that they need to change how they work with the EU from 1st January 2021 – but how? With so much yet to be agreed and clarified, how can businesses ensure they have prepared for what is still unknown in many instances? And how can recruiters tackle compliance post-Brexit when a deal hasn’t yet been struck?
With the likelihood that guidelines surrounding the Brexit agreement will be finalised before the end of the year increasingly slim, we have created a Brexit taskforce to ensure our partners, recruiters and contractors have access to the latest updates. This team will be responsible for researching what impact the UK’s departure from the EU will have on the services we provide and ensure our connections have access to this information.
It is a confusing time for everyone and our conversations with our trusted partners in the European countries we operate in suggest that they also have no finalised guidelines or information on the impact Brexit will have on cross border services.
While it is our view that there will be very little change to the way cross-border service are managed as there is simply not enough time to implement any changes, there are a number of queries that our partners, contractors and recruitment clients are concerned about. Although in many instances there is not a definite answer, in our latest blog post we wanted to give everyone an outline of what we the latest updates that will impact recruitment businesses.
One of the biggest concerns from our recruitment businesses is how cross-border VAT will be handled one the UK is no longer part of the EU reverse charge mechanism. While this is yet to be agreed, what we do know is that other non-EU countries are able to provide cross-border services in the EU without business restrictions.
Recruitment businesses based in the US, Australia, India, the Middle East and APAC, for example, regularly supply contact staff to European end users without issues such as withholding tax or VAT being applied. It is our view that similar rules will be applied for UK recruitment businesses and companies providing services into the EU.
The impact on immigration
We have, of course, known from day one that immigration will be affected once the UK exits the Bloc. It has been clarified that EU nationals wishing to work in the UK will require a work permit, the same as non-EU nationals. And UK nationals will require a work permit to work in EU countries.
This is likely to restrict the placement on UK contract workers on EU assignments due the fact that work permits aren’t easily obtainable. Processing times are often lengthy, which does not fit with the urgency of contract recruitment.
To obtain a work permit the individual in question must have an offer of employment and be sponsored by the employer in the host country. This means a local entity will need to employ the worker and take on all employment responsibility. It is often difficult to find partners or companies willing to offer this service as employment laws in Europe are onerous and weighted heavily in favour of the employee.
And the cost of employment is high, with employer social security rates reaching up to 34% in some EU countries. This will certainly have a significant impact on contractor recruitment from the UK to the EU as it makes the costs of a UK national contractor much higher than an EU national. The contract rate for a UK national will have to be uplifted to cover employer’s social security and employment benefits, whereas in most countries an EU national will be able to operate as self-employed, so no employment costs need to be covered.
Contractor compliance post-Brexit
For any UK nationals already working in an EU country, an application for the right to remain and a residence card needs to be made before 31st December 2020 if the individual is to remain in the EU destination from 1st January 2021. It is crucial that those who haven’t already taken this step do so soon to prevent unnecessary interruption to their contract.
It is also important to note that any UK national contractors non-registered or operating non-compliantly in country, such as UK nationals using a UK Limited Company that is not registered in the country of work, should immediately address this issue to avoid inevitable complications or potentially having to return to the UK post 31st December 2020.
Covid-19 is, of course, exacerbating the situation and making the required immigration and right to work application process more difficult as many government offices across the EU are closed or are not offering appointments due to lockdown restrictions.
When the UK leaves the EU different GDPR rules must also be adopted and applied for any data that is being shared between the UK and the EU. Guidelines confirm that UK companies will require an EEA representative in the EU. This may be a subsidiary operation, but the representative has to be able to deal with queries, such as SAR’s and deal with the ICO (or their EU equivalents).
It is our view that Binding Corporate Rules and Standard Contractual Clauses may be the preferred choice for many, but the situation is fluid and may well change in the next few weeks.
Recruiters – post-Brexit compliance is complex, but don’t ignore it
Despite repeated calls from the Government for businesses to ‘prepare’, the lack of finalised country guidelines for those firms providing services to EU locations from the UK makes disruption inevitable. We can’t see that agreeing and passing legislation in each of the countries is now feasible in the short timeframe remaining so, while there are some steps that staffing companies and contractors can take ahead of the New Year, there may well be an interruption for most if not all businesses.
We will continue to monitor the situation through our Brexit taskforce and will share any updates when we can.
Follow 6CATSPRO on LinkedIn to stay ahead of the latest Brexit developments.