As news and speculation around Brexit continues to increase, organisations are now actively starting to make contingency plans. Global payroll managers are no exception. So if your company has existing or planned interests in the UK, here are some helpful tips on what you need to be thinking about in contingency planning terms right now.
If your organisation is starting up in Europe for the first time
If your company is planning to enter the European market and is considering where to locate in the European Union (EU), the UK remains a great place to start. It has a business-friendly culture, costs relatively little to set up and operate in and is a great place to live. At the time of writing, it is likely that the UK will remain in the EU until early 2019 so there will be little change for the next two years.
But there is no certainty that the UK will continue to have access to the EU’s Single Market once it leaves. The Single Market enables businesses to sell to over 500 million people across 32 European countries. Not all of these countries are in the EU, but non-members have signed up to a deal that allows them membership of the Single Market.
There is no guarantee that the UK will obtain such a deal. No fixed timetable for negotiations has been agreed as yet, so businesses will not have certainty on the outcome for some time to come.
If your business wants to be certain now that its new location will operate in the Single Market on a permanent basis, it might make sense to choose a location in one of the 31 Single Market member states other than the UK. At the time of writing, no other member states are considering leaving, so your business would have guaranteed access to the Single Market.
But it is not just trade that is affected by the referendum vote in favour of Brexit. A wide range of other business-critical areas are also regulated by the EU such as data protection, free movement of labour and banking. If your business is located in an EU country, you will have access to EU-wide programmes and will need to comply with EU rules and regulations.
As a result, global payroll managers and their businesses need to plan in order to meet the compliance requirements involved in setting up payroll in a new country. These requirements are largely driven by the location of the overseas legal entity created by your organisation.
From a compliance standpoint, it makes life easier to base this legal entity where you plan to locate your managerial and/or sales staff. So if, for example, your sales staff will be based entirely in Germany, consider setting up your entity in that country.
If your company has discretion about where to set up, remember that the cost of creating new entities and of ongoing compliance varies widely across Europe. But there are also other important factors to consider such as labour laws and tax rates as these likewise vary country-by-country.
If your organisation has an existing business in the UK
If your organisation has an existing entity in the UK, there is no need for global payroll managers to make any significant changes right now. But once the UK leaves the EU, your business could be affected in a number of ways:
Commerce and trade
From a commercial perspective, trade could be affected in a number of ways. UK businesses currently trade on a tariff-free basis with the EU, which means that they can import and export within the Single Market without additional charges. The UK is also part of a Customs Union, which reduces border controls for goods entering the Single Market.
But both tariffs and customs checks could increase after the UK leaves the EU. Global payroll managers should remain alert to the potential commercial impact of such change on their UK businesses as they could lead to shifts in employee headcount.
EU staff working in the UK
One category of worker that has already been heavily impacted by the Brexit vote is that of the three million people who have come to the UK from other EU countries. These workers face a more uncertain future after Brexit as they no longer have guaranteed employment and residency rights.
Before Brexit, these workers assumed they could live life permanently in the UK, owning property and raising families on the same footing as UK citizens, for example. After Brexit, they no longer have such certainty and many are already finding the situation very unsettling. It is still unclear what rights they will gain in the UK’s negotiations with the EU.
“There is no certainty right now as to the changes that may take place in the UK’s labour laws.”
Global payroll managers would be advised to monitor the situation of these staff closely. Certain categories of worker are less likely to be affected than others as they are protected under existing UK law. These include Irish nationals and people who have been resident in the UK for more than five years. But it would be best to consult a UK employment law specialist if you wish to get a fuller understanding of the current legal situation.
While Brexit negotiations are continuing, there will be ongoing speculation about the rights of EU staff. As a result, you might find it useful to join one of our regular Brexit webinars organised by the Global Payroll Association in order to help you keep on top of these issues and separate the facts from the hype.
UK labour laws, taxes and social security
The UK complies with a number of EU employment laws as part of its EU membership. Once the country leaves, it will be free to alter them, which could have a major impact on the payroll function.
There is no certainty right now as to the changes that may take place in the UK’s labour laws. The UK Government has just announced that all EU legislation, including that relating to employment, will initially stay the same. Employment taxes and social security are already set by the UK anyway and so should not be directly affected by its departure from the EU.
If your organisation has UK staff working in the EU
Global payroll managers should carefully monitor the situation of any UK nationals working elsewhere in the EU. Once the UK leaves, these employees may no longer have guaranteed employment and residency rights. Again, you can keep in touch with the latest developments here by joining our regular Brexit webinars.
John Galvin is CEO of awardwinning Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards. He and his team provide straightforward, fast advice and set-up support for a fixed price in over 70 countries. If you have any queries about the information in this article, or would like to know more, please contact John at john.galvin@galvininternational.com.
As news and speculation around Brexit continues to increase, organisations are now actively starting to make contingency plans. Global payroll managers are no exception. So if your company has existing or planned interests in the UK, here are some helpful tips on what you need to be thinking about in contingency planning terms right now.
If your organisation is starting up in Europe for the first time
If your company is planning to enter the European market and is considering where to locate in the European Union (EU), the UK remains a great place to start. It has a business-friendly culture, costs relatively little to set up and operate in and is a great place to live. At the time of writing, it is likely that the UK will remain in the EU until early 2019 so there will be little change for the next two years.
But there is no certainty that the UK will continue to have access to the EU’s Single Market once it leaves. The Single Market enables businesses to sell to over 500 million people across 32 European countries. Not all of these countries are in the EU, but non-members have signed up to a deal that allows them membership of the Single Market.
There is no guarantee that the UK will obtain such a deal. No fixed timetable for negotiations has been agreed as yet, so businesses will not have certainty on the outcome for some time to come.
If your business wants to be certain now that its new location will operate in the Single Market on a permanent basis, it might make sense to choose a location in one of the 31 Single Market member states other than the UK. At the time of writing, no other member states are considering leaving, so your business would have guaranteed access to the Single Market.
But it is not just trade that is affected by the referendum vote in favour of Brexit. A wide range of other business-critical areas are also regulated by the EU such as data protection, free movement of labour and banking. If your business is located in an EU country, you will have access to EU-wide programmes and will need to comply with EU rules and regulations.
As a result, global payroll managers and their businesses need to plan in order to meet the compliance requirements involved in setting up payroll in a new country. These requirements are largely driven by the location of the overseas legal entity created by your organisation.
From a compliance standpoint, it makes life easier to base this legal entity where you plan to locate your managerial and/or sales staff. So if, for example, your sales staff will be based entirely in Germany, consider setting up your entity in that country.
If your company has discretion about where to set up, remember that the cost of creating new entities and of ongoing compliance varies widely across Europe. But there are also other important factors to consider such as labour laws and tax rates as these likewise vary country-by-country.
If your organisation has an existing business in the UK
If your organisation has an existing entity in the UK, there is no need for global payroll managers to make any significant changes right now. But once the UK leaves the EU, your business could be affected in a number of ways:
Commerce and trade
From a commercial perspective, trade could be affected in a number of ways. UK businesses currently trade on a tariff-free basis with the EU, which means that they can import and export within the Single Market without additional charges. The UK is also part of a Customs Union, which reduces border controls for goods entering the Single Market.
But both tariffs and customs checks could increase after the UK leaves the EU. Global payroll managers should remain alert to the potential commercial impact of such change on their UK businesses as they could lead to shifts in employee headcount.
EU staff working in the UK
One category of worker that has already been heavily impacted by the Brexit vote is that of the three million people who have come to the UK from other EU countries. These workers face a more uncertain future after Brexit as they no longer have guaranteed employment and residency rights.
Before Brexit, these workers assumed they could live life permanently in the UK, owning property and raising families on the same footing as UK citizens, for example. After Brexit, they no longer have such certainty and many are already finding the situation very unsettling. It is still unclear what rights they will gain in the UK’s negotiations with the EU.
“There is no certainty right now as to the changes that may take place in the UK’s labour laws.”
Global payroll managers would be advised to monitor the situation of these staff closely. Certain categories of worker are less likely to be affected than others as they are protected under existing UK law. These include Irish nationals and people who have been resident in the UK for more than five years. But it would be best to consult a UK employment law specialist if you wish to get a fuller understanding of the current legal situation.
While Brexit negotiations are continuing, there will be ongoing speculation about the rights of EU staff. As a result, you might find it useful to join one of our regular Brexit webinars organised by the Global Payroll Association in order to help you keep on top of these issues and separate the facts from the hype.
UK labour laws, taxes and social security
The UK complies with a number of EU employment laws as part of its EU membership. Once the country leaves, it will be free to alter them, which could have a major impact on the payroll function.
There is no certainty right now as to the changes that may take place in the UK’s labour laws. The UK Government has just announced that all EU legislation, including that relating to employment, will initially stay the same. Employment taxes and social security are already set by the UK anyway and so should not be directly affected by its departure from the EU.
If your organisation has UK staff working in the EU
Global payroll managers should carefully monitor the situation of any UK nationals working elsewhere in the EU. Once the UK leaves, these employees may no longer have guaranteed employment and residency rights. Again, you can keep in touch with the latest developments here by joining our regular Brexit webinars.
John Galvin is CEO of awardwinning Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards. He and his team provide straightforward, fast advice and set-up support for a fixed price in over 70 countries. If you have any queries about the information in this article, or would like to know more, please contact John at john.galvin@galvininternational.com.
