Is Payroll In Trouble Now Brexit Is A Reality?

24th June 2016

BrexitWith a UK vote confirming that Brexit is a reality, we start to explore what may be the impact on payroll.

If you avoid all the political positioning and big statements and drill down to the detail, here are our predictions on what might happen. Just so you know, however, it could take some two years after a vote to exit the EU under Article 50 or the EU Treaty, so nothing will happen overnight.

  • Uncertainly may see changes in Head Offices – we may see some shuffling within bigger businesses regarding the siting of key offices. Currently the UK hosts more HQs than Germany, France, Switzerland and the Netherlands combined. The ability to place workers into the Europe may also become more complicated.
  • Skill shortages – there is no doubt that migrant workers have had an impact on the EU debate. The impact of leaving the EU in terms of skills shortages would depend on what model is adopted in the free movement of labour. Nonetheless skill shortages may impact on overall payroll costs for businesses.
  • Increased wage demands – certain services may increase in price affecting household income. This could drive call for bigger wage increases to compensate.
  • Data Security may need untangling – a number of payroll teams now deal with employees based out of Europe and this will probably all need to be untangled. Whilst data security laws here are covered by things such as ISO 27001, European legislation is much stricter under the European Union (EU) Data Protection directive. On leaving the EU it would be unclear how this would work going forward
  • Social Regulation and taxation – exiting the EU would free up the UK to potentially undercut the EU to restore a competitive edge. Reduced social regulation and taxation simplification to achieve this could be a reality as a direct result of leaving.
  • Simpler processes, especially for SME’s – A recent estimate indicated that national regulations could be up to two and a half times more effective than EU regulation. This could potentially be better for hard pressed small business, trying to negotiate the cost implications of auto enrolment and National Living Wage.

Whatever happens there continues be a prolonged period of uncertainty, both politically and economically. The two years it will take to disentangle ourselves from Europe will be difficult. Payroll team should prepare themselves for that now, ensuring tight systems and procedures are in place, and payroll is legislatively compliant.