As the UK approaches its proposed exit date from the European Union later this month, businesses around Europe are busy contingency planning for life after Brexit. With the proposed exit date of 31 October looming closer than ever, it seems like there is no escaping Brexit and the multitude of possibilities it could mean for both global mobility (GM) teams and international assignees. However, many companies are still in the dark over the full implications of Britain leaving the EU, and the planning that needs to take place both before and after Brexit.
Whether it’s a hard or soft Brexit, or somewhere in between, we have outlined and explained the key issues that global mobility professionals will need to consider before Britain exits the European Union.
Immigration
Whilst tracking and monitoring expatriate staff has always been an important consideration, Brexit has undoubtedly added an extra layer of complication to compliance for GM teams. If not already in place, robust policies and processes will need to be established in order to track assignees and business travellers. For any employee that could potentially be impacted by Brexit, GM teams will need to:
- Prepare for any delays caused by the application process required when organising visas or necessary work permits for affected assignees. It’s important to bear in mind that processes of this nature can often be lengthy and time-consuming, so it is always best to plan as far in advance as possible and flag any potential delays due to processing timelines earlier rather than later.
- Consult with any assignees who may be deemed as Third Country Nationals (TCN) post Brexit. Any EU nationals on assignment from UK, or UK nationals on assignment from an EU country may not necessarily continue to have the right to work in their home country post Brexit. For example, a UK passport holder employed in Germany and currently on assignment to the USA may need a work permit to continue working in Germany if being repatriated after Brexit. GM teams will need to identify this population and consult their talent management teams on potential redeployment or start preparing the necessary visa or work permit applications.
- Consider the impact of any temporary absences from the UK for EU nationals who are working towards gaining UK citizenship. Timelines can vary but individuals are usually required to have lived in the UK for at least five years before applying for permanent residence or Indefinite Leave to Remain (ILR) status, followed by an additional 12 months of in-country stay to apply for UK citizenship. It is not yet clear if any temporary absences from UK on long-term, short-term, commuter or rotator assignments will create a potential roadblock in attaining permanent residency or ILR, or if the ‘clock’ would then need to be started again. The UK government’s stance on this is not yet clear but many EU nationals may understandably be reluctant to accept any assignments out of UK, at least until the situation is a little clearer.
- Review any cross-border working arrangements. Any existing or future commuter or posted worker agreements will need to be checked to make sure they are now fully compliant and will not result in any immigration, social security or tax repercussions for the assignee. Further measures may also need to be considered for international commuters, depending on how future Brexit discussions turn out.
Social security and tax implications
A key area of international mobility that may be affected by Brexit, and one that has still not been settled or agreed upon, is tax and social security. As there are not currently any final decisions in place for beyond the Brexit date, it is important for companies to budget for all eventualities, including a no-deal or hard Brexit. This would mean planning for possible non-reciprocity of existing social security treaties, which could lead to double contributions, i.e. assignees having to contribute to both their home and host country schemes. Additionally, for UK outbounds this could also mean losing out on making full UK social security contributions after the first 52 weeks and only having the possibility of making reduced voluntary contributions thereafter, as per UK’s existing non-reciprocal social security treaty arrangements.
It is not clear if applications for new A1 certificates or extensions thereof beyond the Brexit date (currently 31 October 2019) will be entertained by social security authorities of member EU countries and if there is a risk of authorities undertaking surprise checks on validity when employees travel. From an operational standpoint, GM teams should undertake an audit of their A1 certificates to ensure compliance and as a precautionary measure, consider making applications for new assignments/extensions before the UK leaves the EU.
Another possibility which has been in the news is that of re-activating historic social security treaties which existed before the EU was formed, but it is not clear whether these treaties are fit for purpose and cater to all aspects of modern mobility, such as multi-state working arrangements. Companies will therefore need to ensure that no matter what the outcome, their assignees do not end up being out of pocket.
There are other tax implications to consider too. Similar to the issues around social security, it is not clear if tax treaties or double tax agreements (DTAs) may also be affected in the event of a no-deal Brexit. It is important that any tax-related changes are looked at and accounted for so that assignees and business travellers are not subjected to double taxation on the same income. Consequently, GM teams may need to review their tax calculations between EU countries and the UK, as Brexit could have a major impact on any estimates made at the start of an assignment and could result in hidden costs.
Exchange rates and additional costs
Although no-one can predict with certainty what, if any, effect Brexit will have on foreign exchange rates and currencies, it is prudent to prepare for the possibility of currency volatility. It is likely that the pound and euro will both be impacted to some extent, at least in the short term, and there may be a need for interim reviews of COLA and your company policies in response to exchange rate volatility.
There may also be reimbursement required for any additional costs that assignees have had to cover post-Brexit. This potentially covers a range of miscellaneous costs but things such as conversion of driving licences, additional local registrations, private medical insurance (especially if European Health Insurance Cards are discontinued) all need to be taken into account by GM teams and fully accounted for.
Repatriation considerations
One other important issue that may need addressing is that of repatriation guarantees in existing assignment documentation. They will need to be reviewed immediately in line with any new immigration restrictions imposed post-Brexit, particularly if the UK leaves without a deal. Additionally, the documentation will also need to be reviewed in light of any changes brought under employment legislation due to Brexit. This could be wide-ranging, but companies will need to ensure that both they and the assignee are wholly compliant with any changes in the law.
It goes without saying that this is not an exhaustive list, and there is likely to be a number of further areas for GM professionals to consider based on how Brexit discussions shape up and the final manner in which the UK leaves the European Union. However, no matter what the final outcome, it is important that GM teams actively engage and communicate both with the business and assignees to discuss and plan for the impact that Brexit will have.
FIND OUT MORE
Please contact us to speak to a member of our team directly.