As the reverberations from last week's Brexit vote continue to be felt worldwide, employers with operations in the UK and the wider EU face a number of uncertainties. Though the vote has no immediate effect on the UK's laws, and the timing of the UK's exit from the EU is unclear, there may be a significant impact on both immigration and social security compliance for companies with workers moving between the UK and the remainder of the EU when it does leave.
The issue of immigration was perhaps the most emotive aspect of the pre-Brexit campaign on both sides. At present, EU nationals (including those in the UK) are free to live and work anywhere in the EU without the need to obtain a visa or other permission under the principle of free movement enshrined in the EU Treaty. That remains the case after last week's vote. However, the significance of the issue in the pre-referendum campaigning suggests that the UK Government will seek to depart from that principle in its negotiations over its future relationship with the EU post-Brexit.
Quite what impact that will have on the ability of UK nationals to work in the EU, and vice versa, is a matter of conjecture, depending as it does on what the UK Government seeks to negotiate with the EU (and how successful those negotiations are). One suggestion made in pre-referendum campaigning was that the UK Government would introduce a points-based immigration system like that in place in Australia. In fact, in 2008 the then changes to our immigration system were introduced as an "Australian style" points based system. It is therefore very difficult to tell what a new "Australian style" points based system might look like, for example whether it will keep its existing form and be extended to EU/EEA country nationals or whether a completely new system will be introduced.
Currently, employees moving between the UK and another EU state are covered by EU Regulations which determine in which state social security contributions are payable. The UK also has a number of bi-lateral agreements with certain other countries governing social security payments, and a set of default rules which apply where employees come from or leave for states outside the EU with which the UK does not have a bi-lateral agreement.
The EU Regulations and the UK's bi-lateral agreements contain provisions for seconded workers to remain in their home state social security system for a number of years, subject to certain conditions. This can be advantageous, for example for workers wishing to continue to accrue social security benefits (such as a state pension) in their home country. The UK's default rules do not permit this.
When the UK leaves the EU, it will cease to be covered automatically by the EU Regulations on social security. It is possible that the UK could seek to negotiate with the EU for the Regulations to continue to apply (in much the same way as Switzerland has). Alternatively, the UK could seek to enter into bi-lateral agreements with EU states individually. If neither of these courses of action is taken, the UK's default rules governing social security will apply, and absent further changes to them seconded workers will no longer be able to remain in their home state social security system.
In addition, until it is clear what approach the UK intends to take in relation to workers working in or moving between the UK and another EU country, it will be difficult for companies to plan how the social security costs should be attributed been those countries and what the compliance requirements will be.