The Impact of Brexit on HR, Recruitment and Resourcing
In this short thought piece, I explore how people and resourcing issues are at the top of many organisations' Brexit agenda and, what HR and recruitment professionals can do now to start preparing for the impact of Brexit.
Let me start with my interest in the subject matter.
As a portfolio non-executive director and board adviser to a number of businesses, Brexit as a concept and in practice is something of great interest to me and the organisations with whom I work. One of the key areas of concern for businesses planning their response to the impact of Brexit is their workforce. This for me extends to both the people themselves and more generally, resourcing issues. Since I am the Chairman of MBN Solutions, a full-service People Solutions business, I thought it would be an area worth exploring in more detail.
The Impact of Brexit on HR, Recruitment and Business
Like many UK businesses, the decision to leave the EU in June 2016 has certainly led to a period of immediate uncertainty for MBN Solutions. Clearly, we all want to know the detail of how we will go about what is emerging as a relatively messy divorce. As a result of the uncertainty we have spent time building both research and thought leadership into the issues which for us create both opportunity and risk. What I discuss here are those that relate to issues around the people and the workforce.
The single question we are most frequently asked at MBN is how is Brexit going to affect recruitment and retention of employees in the future? Whatever the impact, once Article 50 is finally implemented in March, there’s no doubt that Brexit is going to take time and a lot of energy to work out, and this is where the first key point needs to be highlighted and that has rapidly become our core mantra… Don’t let Brexit stand in the way of business as usual!
The Role of HR and Recruitment
If we go for a hard Brexit, as has been indicated, it will clearly impact on recruitment from current EU member states. Much of our work at MBN focuses on finding the very best talent in insight and analytics, data science and econometrics, and as such, we currently see many high-quality candidates coming to the UK from the EU where many countries have invested heavily in this important sector. These workers bring exceptional skills and competencies and can potentially add tremendous value to the UK economy. This, of course, will not be unique to workers coming from the data skills sectors. The role of client Hiring Manager and HR functions here is to find ways of securing such talented individuals without compromise and this requires planning. Our response? We consider ourselves the most appropriate business partner to facilitate this which represents an opportunity to deepen our client relationships by assisting the HR functions within client organisations.
We have spoken with such functions and there are many issues relating to Brexit that are particular to HR. There is already a high degree of uncertainty amongst members of staff about what the future holds and communicating with employees is therefore going to be vital. Anticipated changes may mean assessing the immigration status of employees and providing targeted support for EU nationals and perhaps even their families.
Calm and compassionate leadership is going to be needed and strong planning implemented to help ameliorate potential challenges not only in recruitment but for retaining key staff. There may be changes in regulations and the need to move some parts of the business to the EU for more direct access. There is certainly going to be a requirement to maximise efficiencies in line with cost pressures that could ultimately impact on recruitment. We have already found that the cathartic approach of talking to clients is helping them to understand these issues and helping them to remain calm regarding people issues whilst allowing MBN to be positioned as their ‘go to source of intelligence’ regarding how candidates are responding and where alternative domestic sources of resource may be available.
Business Shouldn’t Panic
The process for Brexit is going to take some time and even when Article 50 is triggered there are two years of negotiation before we really have a clear idea of the actual trade and labour market landscape. There will be some economic turmoil as with any change and navigating this is key at MBN as we source candidates in the EU and provide recruitment services to many EU based businesses.
While we don’t yet have a clear path, we have to prepare as best we can. That means creating a plan (there, that’s the third time I have said it) and looking at current processes and procedures and examining alternative scenarios. Our plan in this narrow area of impact has involved us understanding more about different sources for key staff. That doesn’t just mean looking for talent beyond EU borders! It also means implementing measures to retrain existing staff to fill possible skills gap or look at other parts of the UK labour market to explore the prospects of bridging gaps with domestic staff. Our feeling here is that planning now should see sufficient time to start to explore the detail behind these alternatives and identify future sources for the talent the business needs.
Will Brexit Be Bad for Us?
For us, we have a global business, but our commercial activities in the EU are a sizeable proportion of our overall work. So, if like us, you have strong ties to Europe and rely on them disproportionately compared to other markets, there is going to be a lengthy period of anxiety as you try to navigate that path. We have accepted that there are certainly challenges ahead and trading agreements that need to be reached but there are also plenty of opportunities as with any major change. In the long term, there will be rules and agreements put in place which like us, you will need to comply with. The doom and gloom relating to missing out on the single market is very real but the good news is that most of the world’s economies and businesses are not part of the EU and they manage to thrive and grow. Key for us will be to explore scenarios and understand what future trade direction the business has open to it to substitute any short-term losses as a result of exiting the EU – this is why we have made clear to our team that ‘business as usual’ is the order of the day!
The Impact on Recruitment Businesses
Along with a hard Brexit, there are going to be recruitment issues that most agencies will need to face. We, like many agencies, have banks of contract staff, particularly in technical disciplines. Such contract staff from the EU may become vulnerable under a hard Brexit and in such circumstances, we need to understand and set out alternative scenarios for meeting client demands for contract staff by exploring future skills sources (a pattern should by now be emerging, we explore scenarios, we plan and we prepare).
One such scenario could mean ensuring staff recruited from EU countries comply with regulations and have the right immigration status and paperwork. That will probably add to the cost of employing key staff from this region. This is not new to us as we have non-UK contract staff and already deal with non-EU international recruitment. If this applies to you then you will find nothing different in this. However, there is a finessed approach here that can be adopted by recruitment businesses that will help with maintaining the quality of their candidate pool and much of this approach will also work for in-house recruiters – Focus on the talent!
So, what about the talent?
Given that much of the drive behind Brexit and the leave campaign revolved around immigration controls, we can almost certainly bank on changes to Immigration law. As it stands, it is highly unlikely the UK will be a participant in the EU free movement principles and so thousands of employees, like EU nationals or even UK expatriates and their families, who work in various industries across Europe are likely to be affected. At present indications are that they are likely to be allowed to stay but who really knows? And that is the real issue for us, our clients and other agencies – the uncertainty. Perhaps the worst-case scenario is that these changes could actually be implemented in a way that may result in many of these staff having to leave the country in which they are currently based (UK nationals returning from Europe and EU nationals leaving the UK), thereby creating an employment nightmare. Surely here, common sense will prevail… Right?
Unlikely to be immediate in the sense that there is likely to be some lead time for this, the potential impact means that, we need contingency plans for the likelihood of some major changes to our workforce and our clients’ recruitment strategies as soon as possible. I stress that if nothing else is done, this point alone will at least, like it has for us, help you to identify the key risks and their likely impact and to understand scenarios for dealing with it if it happens.
A key component in this plan is our ongoing need to determine where we will have to look to find people with the skills and competencies required (a recurring theme). We then need to determine the extent to which they will qualify to work in the UK and if not automatically, what conditions will need to be fulfilled in order to secure the appropriate visas and permits to work. We see our role here as a facilitator to help the in-house client teams with both strategy and making it happen.
What about pay and rations?
If EU workers are forced to leave the UK as a result of Brexit, this could bring about a shift in the balance of power in the labour market towards employees, with a new war for talent between businesses seeking out the best talent intensifying. The result will almost certainly be an increase in pay packages, particularly for those people with skills that are in high demand in the industries that have traditionally depended on migrant workers (technology, education, hospitality, healthcare, construction and manufacturing).
By way of example, if the influx of lower cost resource from Eastern Europe is stopped, the lower end of the job market could also see a pay boost. This is not such good news for British businesses that may have to pay more to fill positions and retain staff. Such an effect will likely harm the competitiveness of UK businesses. Further, if businesses struggle to find the people that they need, they may need to increase outsourced recruitment, particularly for more basic roles. This, of course, may result in a further increase in costs. This represents an opportunity for MBN since we are already exploring disruptive propositions whereby lower cost, semi-skilled recruitment is bundled or packaged by us in a quasi self-service model. This will allow our clients to have access to a lower cost recruitment model whilst we focus on finding and securing the higher yielding, more strategically important candidates for our clients. Perhaps this is the start of the next generation of recruitment partners?
Providing information to candidates
Candidates’ will also realise that Brexit leads to uncertainty. Concerns may arise as a result of fear of the uncertainty and perceived vulnerabilities in companies’ abilities to deal with Brexit. Concerns with British businesses and changes to employment contracts as a result of withdrawal from the EU is only the start. Others may find that the UK based business they join could decide to relocate some or, in extreme cases, all of their workforce to elsewhere within the EU. Other concerns relate to the potential for financial impact on their salaries or the prospects of failure to negotiate trade terms leading to reduced work and the prospects of layoffs and redundancies. We have focused on providing regular and clear communication within our own workforce and with potential recruitment candidates for clients. But here, it is also incumbent upon any decent recruiter to help facilitate this and identify what is important to the potential candidate or core of your workforce.
By keeping up to date with the impact that Brexit will have on employment and contract law, plus having a clear idea of our client’s approach to the economic situation (even if that’s simply, they are planning no immediate changes) we will be in a better position to reassure candidates of any concerns.
Brexit is a fast-moving situation. News is emerging on an almost daily basis. As it’s revealed what ‘vote leave’ will really mean for us, other employers and their employees, we will need to be ready to digest legislative changes quickly and discuss them with our clients or internal stakeholders and candidates. Once again, the opportunity for us and other recruiters here is to cosy up to people who can rapidly interpret the legal changes and set these out in plain English to be distributed to our client base for action.
We have become the calming influence
It’s inevitable now – there’s no getting away from Brexit and the incumbent changes it will bring about. And for those who stand to be directly impacted, feeling concerned is an understandable and natural response. The reality is that we are already experts in helping people navigate a difficult and stressful time of their life – changing careers and finding talent. For business, its time to engage those often kept at arm’s length. If the new war for talent is a real prospect, its only a matter of time before such recruiter/client alliances start to dilute sensible partnership opportunities and if you don’t act sooner, you’ll no doubt have reduced options later. For us, we can use our experience to play a very reassuring role in candidates’ lives and work with them to allay fears and explain options. Further, we work with businesses in a truly collaborative way to help them understand the dynamic of the next generation labour market that will be born of Brexit.
At this stage, there is of course a limit to how much you can do to immediately answer candidates’ concerns and debate options with client organisations. Until further government and EU legislation is announced, it will be a case of trying to stay on top of our plan – a sensible plan with a set of early warning indicators of the need for action. My advice? For businesses and HR teams, plan but continue with business as usual; For recruiters, take the opportunity to reinvent yourselves. Be ready to disrupt and collaborate rather than be a ‘me-too’ recruiter.
For businesses, building a relationship with a recruitment agency that has its finger on the pulse and can provide the advice and guidance needed is going to be even more vital.
Planning for Brexit
- Start Now: The conundrum that many organisations face is that they are having to plan for a future and they are not entirely clear what it is. You need, however, to assess the situation as best you can and try to make the most of all the opportunities. This is not a time to put your head in the sand and hope for the best. Your business needs to start planning now.
- Plan to Grow Not Stagnate: It might seem easy to put everything on hold, but what businesses actually need to do is build up resilience and protect themselves. Leadership is as vital now as it has ever been. Make sure you have the right people in the right places and figure out which strategies will pay off in this new world order. It’s time to review growth plans and bring them into line with the new landscape.
- Attracting Top Talent: If the rules are going to change for immigration, your business will need to review its policies and procedures in respect of attracting great employees. How is this going to impact your business if the immigration status of EU nationals is going to change? Can you develop existing staff to fill any possible skills gap? It’s not just new employees that need to be planned for but how existing EU nationals working for your company are going to be treated and, hopefully, retained.
- Motivating Employees: With so much uncertainty, giving special attention to motivating your staff is going to be another key factor. That might include reviewing bonuses and incentives as well as providing the valuable support and strong communication that keeps everyone on board and engaged.
- The Brexit Lull: There’s no doubt that the prospect of leaving the EU has already had an impact on doing business. A number of large scale projects have been put on hold, awaiting clarity from the government. Do you have the skilled employees available when things do start moving again and where can you source the best from? Once Article 50 is triggered, things will start to change quickly and businesses will have to make sure they are prepared to suddenly carry on with projects that were stalled.
- Processes and Systems: Remember to explore practical issues too; changes to paperwork, employment contracts and your HR systems and tools – they will most likely require change or reconfiguration to ensure you stay the right side of any new legislation that arrives as a result of Brexit.
- Implementing a Plan of Action: Implementing your Brexit survival and growth plan may mean retaining key staff but also employing new ones who have the skill set to cope with the challenges ahead. You might need to explore new markets and look further afield for top quality employees who are going to make a real difference.
Stagnating is not an option. For all businesses in the current environment, planning as best they can for the future is important. It’s not going to be easy but there are certainly reviews and changes that you could be putting in now to ensure that the future comes as less of a surprise.
Particularly for HR and staff hiring, it is the right time to build relationships with recruitment agencies that can help your business get the right procedures in place and plan effectively for the future.