The Brexit Effect on Recruitment

This is a guest contribution by REC business partner Brabners LLP.

The UK has now formally left the European Union (EU) and we are currently in a transition period, with “business as usual” until 31 December 2020. From 1 January 2021 free movement for all EU nationals (apart from nationals of the Republic of Ireland who are subject to different rules) will come to an end. From this date, EU nationals will be subject to the same visa requirements as their non-EU counterparts.

The below is by no means an exhaustive list however, we hope this blog helps to shine a light on some of the key challenges, and answer some of the fundamental questions, facing recruiters in the run up to the transition deadline.

So, without further ado, what do these changes mean for your existing workforce and candidates?

EU nationals who have residency in the UK before 31 December 2020, can continue living and working in the UK so long as they apply for (and successfully obtain) Settled or Pre-Settled Status, under the EU Settlement Scheme (the Scheme). The deadline for applications under the Scheme is 30 June 2021.

When they apply, any individual who can establish 5 years’ continuous residence in the UK will be granted Settled Status. Anyone who cannot meet this requirement, but is nevertheless eligible under the Scheme, will be awarded Pre-Settled Status. (Continuous residence is, broadly speaking, showing no more than 6 months’ absence from the UK in any 12 month period.)

Individuals who obtain Settled Status will establish their rights to continue living and working in the UK indefinitely, so long as they are not absent from the UK for a five year period. On the other hand, Pre-Settled Status gives EU nationals a continued right to live and work in the UK for the 5 year validity period only. This visa status is slightly more precarious, as it lapses after 2 years’ absence from the UK.

Recruitment businesses who employ these individuals in their own businesses would be employing them unlawfully - leaving the business exposed to significant fines and other criminal sanctions. In relation to candidates or temporary workers, recruiters will not be able to place them with end user clients, because these individuals will not have the legal right to work.

What does the future hold for recruitment businesses?

With effect from 1 January 2021, new visa requirements will apply to all EU and non-EU nationals alike. This means that from 1 January 2021, most EU nationals who are not eligible for Settled/Pre-Settled Status will require a work permit in order to be employed in the UK. In order to access the work permit visa route, recruitment businesses will need to obtain a Sponsor Licence.

Perhaps the biggest issue for recruitment businesses is that the current guidance generally only allows employment agencies (which includes employment businesses and umbrella companies) to apply for a Sponsor Licence to sponsor migrant workers who will be directly employed by them in connection with the running of their business (such as their own employed recruitment consultants).

This poses obvious issues for recruitment businesses where they are looking at supplying international candidates or temporary workers to a client/end-hirer. But there are some grey areas in the current guidance. Recruitment businesses should take specific strategic advice on whether this might be possible based on their business model.

Are there any other options?

If the work permit route is not available/viable, recruitment businesses will need to try and find alternative visa routes. If they cannot find one, the individual will not be able to work in the UK.

In terms of alternative options, these are limited. One potential option which might be worth considering is the new Frontier Worker Permit. Broadly speaking, this is designed for EU nationals who live outside of the UK and essentially commute into the UK for work. Once granted, visas are valid for 5 years for workers or 2 years for the self-employed (but individuals need to continue working in such a way as to retain their frontier worker status or risk the visa being revoked).

The new Frontier Worker Permit is likely to be particularly useful for those who are not eligible for Settled/Pre-Settled Status for some reason, such as those who miss the 30 June 2021 application deadline.

It will certainly be worth exploring this visa route for those businesses who are struggling to find an appropriate route for EU nationals under their current business model. However, the requirement for workers to have begun working in the UK prior to 31 December 2020 means that this will not be a viable option for recruitment businesses in the long term.

What happens if you get this wrong?

The sanctions for breaching immigration law are significant. 

In the first instance, if the business is employing individuals who do not have the right to work, they will be doing so illegally.  Illegal working can result in a civil penalty of up to £20,000 per illegal worker, or even criminal liability, which could result in an unlimited fine and up to 5 years in prison.

Where sponsors breach their immigration compliance requirements, whether by employing someone illegally or not meeting their specific sponsor duties, they run the risk of their sponsor licence being revoked or their application to becoming a sponsor being refused.  Without a sponsor licence, businesses will not be able to access the work permit route, which will significantly limit their ability to employ non-UK national recruits.  If an existing licence is revoked, all sponsored employees will have their visas curtailed or cut short; in other words they will be given 60 days to leave the country or find another employer to sponsor them.

In addition, immigration law breaches attract significant adverse publicity; businesses who have employed illegal workers are “named and shamed” by the Government, and it may have a negative impact on your ability to win business going forwards.

What should recruiters and HR professionals do?

Brexit means that recruitment businesses will have to reassess, and potentially adjust, their business models to adapt to these changes. These changes will no doubt present challenges, but there are also opportunities for recruitment businesses who have a full understanding of the issues affecting themselves and their clients.

In the lead up to 31 December 2020, what should recruitment businesses be doing now?

• Audit your employees, temps and candidates to assess who are EU nationals.
• Actively communicate about the Settled Status Scheme to staff, temporary workers and candidates. But, be careful not to give immigration advice (this is a regulated activity and giving advice if you are not qualified is potentially a criminal offence).
• Ideally, we would recommend that applications under the Settled Status Scheme are made in advance of the end of this year, when the Brexit transition period ends.
• If recruitment businesses want to use the work permit route (and are able to do so under the rules), they should make an application to become licensed sponsors as soon as possible.
• Recruiters should pay close attention to developments around the new visa requirements, particularly the Frontier Worker Permit, if this might provide an alternative visa route for their workers/candidates.
• The legal position and the impact on the various different business models operated within the recruitment sector is complicated. Recruiters should evaluate their current business model and take specific advice on the impact of these changes as they apply to them.

The Brabners Business Immigration team has experience in supporting recruitment businesses, their candidates and end user clients in all of these areas. Please get in touch with us if you would like to discuss these issues further.

This bulletin is for general guidance purposes only and should not be used for any other purpose.

Brabners is a Limited Liability Partnership.

This is a guest blog contribution for the REC website. The views expressed by guest writers reflect the individual's personal opinions.