The day after the EU referendum in June 2016, Peter Borg-Neal, chief executive of pub chain Oakman Inns, felt he had to speak to staff. “Many of our employees took the Brexit vote personally,” remembers head of HR Jill Scatchard. “Peter came out and told them how much he valued everyone’s contribution. I think a lot of employers felt a ripple just after the vote.”
The business’s reaction to Brexit was far from uncommon. But more than two years on, and with a little over three months to go until the UK’s official exit from the EU, Oakman, like so many others, has shifted focus. Today, what really matters isn’t reassurance but how it will recruit enough staff to secure its future, given the likely restrictions to be placed on visas after the two-year transition period is up in 2021.
This isn’t a theoretical debate. Concrete proposals on future migration requirements will take time to emerge and are less pressing than the bilateral agreements required on trading relationships or customs arrangements. But should the government adopt the recommendations made in the Migration Advisory Committee’s (MAC) report issued in September – which many believe will be the case – workers will need to hit certain salary and skills thresholds that will leave many struggling to fill the gaps.
The prime minister has promised a “skills-based” regime. But hospitality is already the sector with the single largest proportion of ‘hard-to-fill’ vacancies, according to a Department for Education study; almost two per cent of its total employment base is currently proving unfillable, just ahead of the IT industry, construction and health and social care.
“The visa threshold will affect us big time,” says Scatchard. “We recruit a lot of commis chefs and chefs de partie from the EU because that’s the type of food we offer. They earn around £23-24,000 a year – it would be prohibitive to bump their salaries up to £30,000 to hit the threshold. We’ve been trying to bring in apprentices for years but young people don’t seem to want a career in casual dining. There’s no magic wand we can wave.”
With the mood in Westminster chaotic at best and permanent solutions still some way off, it’s difficult for employers to know how to respond to events. Some have gone to extreme measures – French bank Société Générale warned its staff they may have to move to Europe or face losing their jobs; others have been paralysed into doing little or nothing.
Some are certainly seeing the upside. The current cap on visa numbers has left many employers in tech-related sectors – and, to a lesser extent, construction and scientific professions – struggling to recruit high-skilled staff. If this is removed as the MAC has proposed, such employers will be able to access the best talent from both inside and outside the EU and should receive a boost to their competitiveness.
For others, the effect could be dramatic and will vary both by sector and geography: the IPPR crunched the numbers in October 2018 and suggested that 94.5 per cent of EU migrants currently working in the north east of England would be ineligible under MAC rules. In the East Midlands, this hit 89.6 per cent, and even in London it was 60 per cent.
But the more immediate concern is what happens if the supply of talent is turned off during the transition period. In the latest Labour Market Outlook from the CIPD, only 19 per cent of employers had put contingency plans in place for the possibility of a no-deal Brexit, and around 24 per cent said they were still planning to develop one.
At the same time, there has been a sudden drop in the numbers of both EU and non-EU migrants working in the UK, which is already impacting hiring strategies. “You can forgive employers for sitting on their hands, but they need to face up to the reality of migration restrictions now, rather than waiting until March 2019,” says CIPD senior labour market analyst Gerwyn Davies. “There are strong indications from the government as to where immigration policy is heading, and it’s likely to be an extension of the points-based system we currently have for non-EU citizens.”
There has also been little indication as to how self-employment will be handled. “If we revert to the current points-based system there is no route for self-employed people,” says Marley Morris, senior research fellow at the IPPR. “In areas such as technology – which employs high-skilled and often highly paid contractors – it could make it difficult to rely on this level of flexibility in the future.”
There are a number of practical actions organisations can – and arguably should – take now. Kerry Garcia, partner and head of employment and immigration at law firm Stevens & Bolton, advises employers to look at the make-up of their workforce. “People who have been here for five years can apply for permanent residence, and if they’ve been here for six years they can apply for UK naturalisation. Work with employees to consider (and maybe pay for) these options,” she says.
“Think about whether you’ll cover the application for settled status for those who need it, and look into whether you’ll need to get a sponsor licence. This will be your main route to employing EU nationals in future.”
And rather than merely reacting to the confusing political events around us, longer-term workforce planning has to be on the agenda, Garcia adds: “Look at your turnover rates and what proportion of staff comes from the EU. Can you start to predict what actions you might need to take?”
Malcolm Lindop, CEO of AC Group, is taking just such an approach as he seeks to recruit people with strong language skills for his fast-growing business-to-business travel company. “In the past, this hasn’t been a problem – we’re based in London so usually have a ready pool of French, Spanish, Italian and Portuguese candidates,” he says. “But we’re struggling to recruit EU staff now that this pool of talent is disappearing; people are returning home to economies that have recovered and the value of the money they send home has decreased.”
The company is looking at expanding its French office and potentially opening a division in Lisbon, where wages are cheaper and there are more candidates. “We’d rather not outsource to another country, but it may become inevitable if we can’t get the people we need in the UK,” he adds.
Other employers are looking to build, as far as possible, a domestic pipeline of talent. Digital agency MMT Digital is based in Rutland, so it already has to compete for a limited pool of candidates with the right skills. “Technology changes so quickly and we find that our developers are getting calls and messages from recruiters all the time,” says Jacqui Okundaye, head of HR. The business has built direct links with local universities including De Montfort in Leicester and Nottingham Trent to recruit students on placements. It has developed an academy with a curriculum aimed at candidates who might not have a computer science degree but demonstrate the right attitude and are willing to learn.
“We train them up in our agile approach to development and get them working on real projects. We’re not going to discount people because they don’t have a first class computer science degree,” Okundaye adds.
None of these strategies will work overnight, and the approach required will depend on the sector and size of organisation involved. But that is where workforce planning and organisation design can come into their own.
According to the CIPD’s Preparing for Brexit Through Workforce Planning guide, companies facing talent shortages could look to redeploy resources; restructure how work is organised; use more contingent workers or consider automation. Other possibilities include collaborating with other employers to attract talent or finding new labour sources such as women returners, ex-offenders or former military personnel.
Perhaps the most challenging of all the potential strategies it suggests, however, is to ‘build rather than buy’, and last year’s introduction of the apprenticeship levy has focused many employers’ recruitment activity towards school and college leavers in the hope that they will fill these gaps.
For employers who have done their planning, there are green shoots to be spotted. Essar Oil UK, for example, runs a number of higher education and school outreach programmes. “We have processes in place to understand our succession planning needs and the identification and development of high potential individuals,” says chief people officer Howard Sloane. “Our talent pipeline has brought in a steady stream of apprentices and graduates to areas where we experience difficulty and expense in recruiting.”
The company directly sponsors university events and gets involved in local initiatives such as a recent ‘Amazed by Science’ festival. In a tight skills market such as engineering, getting your employer brand right is crucial, adds Sloane.
“The staff candidate market can sometimes be thin, with many people being enticed by large salaries to work as contractors. We overcome this by building a robust candidate network, focusing on our employer brand and generating social media content to highlight the attractive elements of working at Essar.”
This is an approach likely to be mirrored by Oakham Inns, according to Scatchard. “Our strategy is to continue to offer an amazing work environment, so if EU candidates are looking to work in the UK, we want to be at the top of their list,” she says. “The pool will get smaller, and we want these people to come to us. It comes to a point when it’s not just about wages.”
The company already has a high proportion of ‘boomerang’ staff who return because they enjoy the employee experience. “We hold true to our values, we offer employees and their families support with housing and with wellbeing. It’s a family ethos,” she adds.
In the short term, until there is absolute certainty on the post-Brexit immigration system, for most employers it will be a case of realistic scenario planning. “We can look at the guidance and have an idea what the rules will be, but until we know the application process we can’t advise people,” says Jonathan Beech, managing director of Migrate UK, which helps employers and staff process visa applications.
Davies believes the government toolkit explaining settled status and how staff can apply is a good place to start. “Employers need to keep working on the basis that we’ll have the transitional period where freedom of movement continues up to December 2020, and prepare for the settled status requirement after that,” he says.
In the event of a no-deal Brexit, Davies says there has been “no official notification” that this arrangement would change, so employers should be safe in proceeding based on the information they’ve been given so far. The crunch, however, will be in January 2021 when full freedom of movement is likely to come to an end.
“This is when we will see a radical impact on employers’ ability to resource their organisations, and this will clearly affect some sectors more disproportionately than others,” Davies adds. Sitting back and watching the political drama unfold, it seems, is simply not an option.