Brexit and payroll implications

As businesses debate the impact of Brexit, I wonder how many have considered the payroll implications? I have asked myself, will being in or out be better for payroll?

We of course must remember that under Article 50, if the UK votes to leave it could take as long as two years for this to happen, so at least nothing could impact overnight, well on payroll legislation anyway.

When I first heard about this important referendum, aside from being most grateful we live in a democratic country, I started to think about what it might mean for my industry.

Payroll is a necessary evil in that employers have to pay for, or provide professional payroll services and some of our largest corporate companies have head offices, here in the UK; if we left the EU would they all leave the UK? Now they might not all leave but they almost certainly will do some shuffling around. Many UK payroll professionals operate global payrolls; would companies remove this from UK operations?

According to Bond Payroll the UK hosts more HQs than Germany, France, Switzerland and the Netherlands combined; so not insignificant.

Many suggest that migrant workers have had an impact on the EU debate. Would the UK end up with skills shortages and whilst I doubt the payroll profession will be hit hard, some of our clients might. Our farming industry, manufacturers and the retail industry are known to rely on migrant workers. If we leave the EU, will this mean we don’t have the necessary resources to supply our services home or abroad?

We know that recently we have had the introduction of the National Living Wage, should the UK leave the EU, would this mean an employee market i.e. employees lobbying for even higher increases under the “supplier/demand” scenario? For payroll that could mean many more legislative changes throughout the year and for employers an increase in their labour bill?

A critical factor for payroll is data security. For those payroll teams who deal with foreign countries there are many hoops to jump through as the EU can often mean stricter data security law; I know this is very hard to believe when you think what the UK already has to do! What we do know is, it is unclear just how this might work and what the impact might be on UK businesses; we should have two years to figure it though.

I can hear a positive from the payroll industry for leaving and to be fair probably the HR community too, in respect of legislation changes. Currently so much comes out of the EU e.g. Alabaster for maternity, working time directive, holiday pay and sickness rules, holiday pay and overtime/commission and so the list goes on. However, at the moment many “blame” the EU for all this, but we must remember the UK does have a voice in these debates. The against leaving say we wouldn’t have all this and the UK would make their own decisions on employment law, whilst those for staying say, if left to the UK it might be even worse for employers. Then let’s look at our employees; would they be better off or worse off?  For payroll this is probably going to be the biggest change, dealing with UK case law only and not EU cases. Quite often the EU make a decision and each country has to interpret it and have a timeframe to implement the changes. In reality and from my experience, the UK seems to be one of the most compliant in this aspect compared to other countries.

Questions in the payroll industry have been asked such as; will it reduce the “red tape” on business, especially the smaller business?

Bond Payroll states that a recent estimate indicated national regulations could be up to two and a half times more effective than EU regulation. When considering all the costs including automatic enrolment and the National Living Wage, would it make a difference?

Whichever way it goes the payroll industry and businesses will need to prepare and deal with the outcome.

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