Brexit and international workforces

The vote to leave the EU has created uncertainty for EU nationals in the UK and UK nationals living and working in the EU. We have been told that the UK will not take any action until September or October this year. So while we wait for direction what actions should employers with internationally mobile staff take now?

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Jul 15, 2016

Exchange rates

The last few weeks have seen regular and generally downward movements of UK sterling. In the days prior to the referendum £10,000 bought $14,700 or €13,000 but now the same sum buys $12,956 or €11,723. We even saw the impact of Boris Johnson announcing he would not stand for Conservative Party leader in the ‘Boris Bounce’.

It is forecast that rates will continue to move on a daily basis with the Great British Pound getting weaker. So, playing this out for businesses with employees abroad there is a need to review policies, financial forecasts and tax payment obligations.

For employers operating an exchange rate policy the effect on employee’s compensation packages will need to be reviewed including the impact on tax payments made on behalf of the employee. In particular, consider the timing of these payments, for example can tax payments be deferred without incurring penalties. To ensure that exchange rate changes do not negatively affect the employee it may be worth considering making payments in local currency. It is also important to look at the financial forecast and the impact of fluctuating exchange rates on this.

Social security
Social security rights and payments are set by the local government of each country within the EU and typically workers posted away from their home country remain within their home country’s Social Security system. An A1 certificate is valid for 2 years and protects the employee from being subject to multiple social security payments.

When the type of exit Britain will have from the EU is agreed this will impact the present social security agreements in place between the UK and other EU member states. Agreements may be re-written and the current system of coverage, and also healthcare provisions, may be affected.

In the short term employers should ensure that employee records are up-to-date for mobile workers where the UK is either the host or home country. It will be important to know which employees are covered by which social security system, what Certificates of Coverage are currently in place, due to expire or can be extended. Extensions should be applied for where possible in the stagnant period to October. Records of healthcare provisions for all employees should also be reviewed in order to consider whether further private medical coverage may be needed for any employees.

Income tax
Unaffected by Brexit is the income tax system in each of the members' states. Discussions have been held over the years on the matter of tax harmonisation within the EU but thankfully it remains within each country to set their own income tax laws and rates. So business as usual here.

Expatriate planning
With uncertain times ahead expatriate planning will become more unpredictable. We will be reviewing the changes and their impact on such planning in the coming months and further update articles will appear on our website.

Brexit and the potential impact on Global Mobility
If you're interesting in hearing about the potential impact of Brexit on immigration, tax and HR why not come along to our event on 19 July at Buzzacott's offices in London.Further details and tickets can be found here.

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Struan Mackenzie

Owner, Buzzacott

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