Brexit, the UK’s imminent separation from the EU, could mean that franchisors and franchisees may need to “reconsider their recruitment and employment policies”
According to the Office of National Statistics, between July and September 2018 there were 2.25 million European Union (“EU”) nationals working in the UK, 132,000 fewer than for a year earlier.
This represents the largest annual fall since comparable records began in 1997. This fall in EU national workers has hit the retail, hospitality and homecare sectors the hardest given that those sectors are the most reliant on EU national workers. Given the dominance of those sectors in the franchise industry, both franchisors and franchisees may need to reconsider their recruitment and employment policies.
The UK Government is currently trialling a new EU settled and pre-settled status application process which was due to go live in certain areas at the end of 2018 with it being fully operational by March 2019.
The online scheme allows EU nationals who have resided in the UK for five years or more to apply for settled status. For those who have not yet reached five years residence by 30 June 2021 they will be granted pre-settled status which they will later be able to convert for free.
The Government has promised a streamlined application process to reassure EU nationals already in the UK that their status will be secure post-Brexit. It further reassures businesses that under the current proposals their existing EU national employees will be able to stay.
Economically active
The Government has recently confirmed that the Home Office will continue to look to grant status rather than refuse and in line with the UK commitment to be more generous in certain respects than the draft Withdrawal Agreement, a person will not be refused status under the EU Settlement Scheme because, for example, they are not economically active or they do not hold comprehensive sickness insurance.
It has recently been confirmed that there would be some changes to the EU Settlement Scheme if the UK leaves the EU without a deal. In particular, as there will be no agreed implementation period, the application deadline will be brought forward to 31 December 2020 rather than June 2021.
Employers, both franchisors and franchisees, will need to consider how many of their workforce will be impacted by the new rules. As such, auditing the workforce is key. Franchisors and franchisees will need to communicate effectively with their staff to ensure that, when the scheme is fully open, they are in a position to apply.
Lack of preparation could result in a large portion of their workforce failing to apply which could result in them losing the ability to work in the UK which would have potentially disastrous consequences for franchisors and franchisees.
New scheme
There are a number of tools available for employers to assist them in supporting their workforce. The Government is relying on employers to ensure that they can reach the most number of EU nationals as we believe many still are unaware of the scheme.
If you are a franchisor or franchisee and you employ EU nationals, we urge you to ensure that your employees are aware of the new scheme and that any applications are made in good time.
Retaining the talent and skills already present in the UK will be vital in the coming months. The Migration Advisory Committee has recommended that post March 2019 the free movement of people from the EU as we know it will end.
Whilst EU nationals may be able to travel to the UK for business or tourist purposes without requiring a visa, they will require visas for any long term stays for work or family reasons.
Franchisors and franchisees will need to factor the additional costs associated with obtaining visas into business plans, where relevant, and franchisors for whom EU travel is par for the course may need to amend their franchise agreements and/or fees to ensure that any additional costs can be passed on.
The current proposal is to lift the current quota of Tier 2 visa jobs (for skilled workers) and extend the scheme beyond graduate level jobs. This does mean, however, that businesses which wish to employ new talent after December 2020 (or March 2019 if the UK leaves the EU without a deal) from outside of the UK will need potentially to sponsor workers under this route.
Roles may be subject to the carrying out of a resident labour market test (whereby the employer is required to advertise the job if it is not on the shortage occupation list), a minimum £30,000 salary threshold and a payment to the Government of £1,000 per year of sponsorship in respect of the immigration skills charge.
The Migration Advisory Committee has not expanded on how EU nationals who arrive after December 2020 may be self-employed. We hope that there may be clarity on this point in the coming months.
If EU nationals are brought in line with the rest of the world they will need to apply for entrepreneur visas requiring a £200,000 investment in new or existing businesses or £2 million in qualified investments. These changes may have an impact on UK franchisors who recruit franchisees from abroad, particularly if the minimum investment requirements are increased.
A white paper on the future immigration system was due this autumn but given the current nature of the Brexit negotiations we expect this to be severely delayed. Both franchisors and franchisees should watch this space for further developments.
ABOUT THE AUTHORS
Rachel Harvey is a senior associate and immigration specialist at Shoosmiths. She has 13 years’ experience in both personal and corporate immigration law. Rachel has advised global organisations, sports clubs and SMEs on all aspects of corporate immigration and work force planning. She has also assisted a large number of high-net worth individuals with their personal immigration matters.
Emma Lusty is a commercial senior associate in Shoosmiths’ business advisory division. Emma has an interest in commercial contracts, specialising in franchising and works with franchisor and franchisee clients on a wide range of franchise matters. Emma is noted in The Legal 500 for franchising and is acknowledged as a notable practitioner by Chambers & Partners and by Legal Who’s Who as an expert in franchising.
