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Brexit - what does it mean for the recruitment sector?

on Tuesday, 12 July 2016.

Following the UK's vote to leave the EU, we have entered a period of political and commercial uncertainty.

Attention has now turned to how best to manage our exit and what our future outside the EU will look like. So, what does Brexit mean for the recruitment sector?

Key Points

  • EU derived legislation and EU case law such as the Agency Workers Regulations, the Working Time Regulations and the decisions of the European Court of Justice (ECJ) on holiday pay will continue to apply during the UK's notice period to leave the EU.
     
  • The free movement of workers will continue to apply during the UK's notice period to leave the EU.
     
  • Post-Brexit, in theory the UK Government will have the ability to reform and repeal EU-derived legislation.
     
  • UK legislation such as the Employment Agencies Act, the Conduct Regulations, the intermediaries legislation (IR35), the agency legislation and the other tax and National Insurance rules which apply to the recruitment sector, will continue to apply and will be unaffected by Brexit.

Will we see significant changes to the law?

It is highly unlikely that we will see significant changes to the law in the short to medium term.

The exit process will not begin until the UK government gives formal notice to leave the EU under Article 50 of the Treaty on European Union. Once the notice is served, it will be at least another 2 years before the UK actually leaves the EU. Until the UK leaves, it is highly unlikely any laws will change.

After the UK leaves the EU, it is still unlikely that we will see significant changes to the law. This is because:

  • The UK government is likely to agree to retain certain EU laws as part its exit package in exchange for access to the single market.
     
  • A significant amount of recruitment sector law is UK law (such as the Employment Agencies Act, the Conduct Regulations, IR35 and the agency legislation) so there is no reason for the UK Government to make changes to it following Brexit.
     
  • A number of EU laws have been 'gold plated' by the UK Government (for example, EU laws give workers the right to 4 weeks' paid annual leave per year but UK laws give them the right to 5.6 weeks' paid annual leave per year) so it is unlikely the UK Government would want to make changes to these following Brexit.

After the UK leaves the EU, it is likely the UK Government will make small changes to the law gradually over time. However, at this stage it is impossible to say with any certainty what those changes will be as they will be driven by a number of political and commercial factors.

The areas that may be ripe for reform are the Agency Workers Regulations and the Working Time Regulations (for example, recent ECJ decisions on holiday pay) which have been the subject of much criticism for being unclear and unfriendly for UK businesses.

Have you got any concerns?

Our recruitment sector team will closely monitor the Brexit negotiations and any related national legislative programme to identify issues and potential changes relevant to our recruitment sector clients.

We will follow their progress so that we can give you as much advanced warning as possible of likely changes, and the potential impact on your business.


For more information or advice, please contact Chris Mooney on 020 7665 0916.

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