MRI - Impact of Brexit on Staffing Industry

January 27, 2021

The UK and the EU have signed the UK-EU Trade Cooperation Agreement. The agreement sets rules for the entry and temporary stay of individuals for business purposes and addresses new rules for UK contractors and consultants providing services into organizations within EU countries, including possible restrictions on how UK staffing companies can operate across the EU.

There are numerous open questions regarding how the UK-EU Trade Cooperation Agreement will work and how interim staffing will be handled between the UK and the EU.

We recommend that you visit the APSCo website which currently has information regarding guidance for UK staffing companies at https://www.apsco.org/brexit.aspx. If you are based in Germany there is additional information about Brexit and how it is impacting EU recruiters. You can access APSCo Germany https://www.apsco.de.

As this is a fluid situation, we strongly recommend that you also consult with your own legal advisors and accountants to ensure your compliance with all VAT and invoicing regulations as they take effect.

Below we have shared some FAQs from a recent SIA European Article — Osborne Clark Highlights Key Concerns in New Brexit Deal for Contingent Workforce Solutions Providers, 5 January 2021:

Will EU member states be able to impose new restrictions on the ability of UK staffing and other workforce solutions companies to trade in EU countries?

The Agreement sets out commitments on market access, national treatment and local presence, with the general rule that neither the EU nor the UK can bar access to service providers.

“But that is all subject to manifold carve-outs by sector and to a multitude of national reservations and exceptions including for "placement services",” Osborne Clarke states.

While the 2008 Agency Workers Directive did at least require that excessive local laws relating to agency workers be removed, with Brexit it is now possible that the "UK parts" of the Agency Workers Directive will be repealed, allowing EU Member States again to ramp up protection of their local markets from any competition from UK (and other international) staffing companies and consultancies. The application of the Payment Services Directive may also cause issues for MSPs and others who act as payment agents across multiple jurisdictions within the EU.

UK companies who ‘parachute’ contractors from UK into EU countries

Many UK staffing and consultancy companies supply contract workers into various EU countries on a "parachute" basis (such that the, often UK, contractor or consultant is deployed to a local client in a European country by a consultancy or staffing company in the UK).

The Agreement allows EU countries to prohibit remote recruitment operations, and it is not impossible that many countries will prohibit them in the way that Switzerland effectively has (Swiss law requires anyone who places a worker with a Swiss employer to have a local establishment and licence).

It also prohibits the use of the ‘temporary stay’ provisions where the stay involves a contractor or consultant parachuted in by a UK consultancy or staffing company. The provisions require the worker either to have been employed for 12 months before being parachuted or to be engaged on a bona fide self-employed basis (which will not include many time and material-based engagements). In either case, the permission to be in country under the "contractual services" and "independent professional" rules will generally only last as long as the relevant client project with a 12-month time limit and the relevant worker needing a minimum amount of relevant specialist experience to qualify (six years seems to be the norm).

Osborne Clarke cautioned that the remote deployment/parachute model can expose its users to taxation and regulatory problems, including in relation to permanent establishment rules relating to business licencing, corporation tax and VAT.

Will transfers of personal data between the UK and EU be unlawful?

There is a four-month period from 1 January 2021 during which the UK will not be considered a "third country" for the transmission of personal data. That period can be extended for a further two months unless one of the EU or UK objects. This means that for the time being, there is no problem transferring candidate, employee and client personal data to and from the UK and the EU (provided current privacy laws are complied with).

However, in case no deal can be agreed, EU "model clauses" may be needed for personal data flows from the EU into a UK business.

Will EU employment and agency worker legislation continue to apply in the UK?

Yes. The Agreement contains reciprocal commitments not to reduce the level of protection for workers or fail to enforce employment rights in a manner that has an effect on trade. This means UK measures implementing the Working Time Directive (which gives workers the right to paid holiday etc.), the Agency Workers Directive and the Acquired Rights Directive (i.e. TUPE) will be "retained EU law" in the UK.

What about EU workers who are already here and UK workers who are already in the EU?

Any EU worker already resident in the UK or UK worker resident in the EU prior to midnight on the 31 January 2020 will be entitled to remain and continue to enjoy the benefits of residence (work, healthcare etc.). Each country has its own method for obtaining proof of lawful residence, which in the UK is the EU Settlement Scheme done through an app, and individuals have until the 30 June 2021 to make an application for their proof of residence. If they have not applied by this date, they will become illegally resident on the 1 July 2021.

Osborne Clarke advises employers to suggest their workers obtain and share their status before the end of June, however the Home Office has confirmed that employers have no right to demand that individuals apply under the EUSS and share their outcome.

Can UK staffing and consultancy companies use new workers and contractors from the EU going forward?

Chapter 4, section 5 of the agreement goes over contractual service suppliers. New provisions in the agreement allow employees of an overseas service supplier ("contractual service suppliers") and self-employed people established outside the UK ("independent professionals") to come to the UK from 1 January 2021 if all of the following apply:

• the work is under a contract to supply services to you (the sponsor) in the UK by an overseas undertaking established in certain countries (some are excluded);
• that service falls within the scope of the commitments in the relevant trade agreement with that country, for example "computer related services", medical services and accounting services. The Agreement is the relevant trade agreement with EU countries;
• the service supplier or independent professional has no commercial presence in the UK; and
• the service supplier or independent professional’s business is established in the country or territory that is a signatory to the relevant trade agreement.

The full article can be found at here.

Other possible resources for information on the impact of Brexit on our industry:

The Recruitment Employment Confederation web site (www.rec.co.uk) has numerous podcasts, webinars, and articles you can access as a non-member and provide further information on how our industry is being impacted.

pact of Brexit on Staffing Industry