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      Current state of play

      1. Workforce regulations - UK legislation governing how employers must treat their workforce is heavily influenced by EU requirements. One example is the maximum working week. Another is the restricted right of employers to vary the contract terms of employees they acquire when taking over another business. 
      2. Employing workers across borders - It is a fundamental principle of EU law that workers can move between member states without restriction. This means that UK citizens can work in other member states without needing a visa or residence permit, and vice versa. It also means that, in principle, such “cross-border workers” are entitled to receive the same social benefits as the citizens of their host member state, such as state pension benefits and access to the national healthcare system.
      3. Providing services across borders - EU law makes it easier for service providers based in the UK (like accountants or travel agents) to do business in other member states. In many sectors, national regulators cooperate to ensure that if a service provider passes checks in its home member state, it does not have to go through those same checks in its host member state. In the financial services sector, this is achieved through the so-called “passport” system.
      4. Remuneration in the financial sector - EU remuneration rules in the financial services sector impose a cap on bonuses and require the remuneration of senior employees to be publicly disclosed.
      5. Pensions - EU prohibitions on age and sex discrimination are highly relevant to pension schemes. EU law also provides a framework allowing pension schemes that are approved to operate in one member state to admit members in other member states.

       

      What should I be thinking about now?

      • Employing workers across borders - How would a UK exit from the EU affect my ability to hire staff? Would existing staff need visas and/or residence permits if I wanted to second them from the UK to work for the firm in another European country or vice versa? Would I find it more difficult or costly to employ UK citizens in other European countries, or European citizens in the UK, if their rights to access benefits in their host country were restricted?
      • Workforce regulations - Would I want to change my approach to workers’ hours if UK law became more flexible in this area? Would the UK legal framework on workers’ rights on a business transfer be likely to change if Britain left the EU? If so, how would that affect my approach to buying businesses?
      • Providing services across borders - Do I currently rely on regulatory approval from my home regulator to operate in other EU member states? If so, how might I manage interacting with additional regulators if I could no longer rely on home regulator approval? Would it help to establish a local subsidiary?
      • Remuneration in the financial sector - What would be the effect for a financial institution currently subject to the bonus cap, or other EU remuneration requirements, if the UK left the EU and disapplied these for UK-based firms? How would an EU-based firm attract and retain talent in its UK business?
      • Pensions - How would I manage my firm’s cross-border pension scheme if it became subject to different regulatory requirements in different European countries?

       

      What could the position be following a Brexit?

      The answers to many of these questions will depend upon the nature of a post-Brexit UK/EU relationship.

      To give an idea of the range of possible outcomes, we have considered what the position would be under the ‘Norwegian option’ and the ‘World Trade Organisation (WTO) option’ – on the basis that these are at opposite ends of the spectrum of existing models for an alternative relationship with the EU. 

      What if the UK leaves the EU but joins the European Free Trade Association and remains part of the EEA? (the Norwegian option)

      The Norwegian option would probably involve less change to employment and pensions law compared to other options, especially in the short term. 

      Countries that are members of the EEA but not the EU – currently Iceland, Norway and Liechtenstein – have had to implement much of the EU legislation outlined above, including limits on the maximum working week, protections for employees on the transfer of a business, and the bonus cap for employees in the financial sector. 

      For the UK to disapply EU-derived legislation in these areas, it would likely need to negotiate exceptions to the EEA Agreement with other EEA countries, in particular the EU member states. While we would expect the current UK government to want to do this, the process would not be completed quickly.

      Finally, the fundamental principle of free movement of workers applies throughout the EEA. So under the Norwegian option, nothing would change for the UK in this respect.

      What if the UK leaves the EU without any form of free trade agreement? (the WTO option)

      Compared with the Norwegian option, the WTO option could result in fairly extensive changes to UK employment and (to a lesser extent) pensions law. 

      For example, the UK would have greater scope to change such laws as it would not have to comply with EU law under the EEA Agreement. 

      However, we would not expect the UK government to allow all EU-derived employment laws to fall away after a Brexit. Instead, we anticipate a transitional period, during which the current framework is largely kept in place. The government would review all employment legislation and gradually repeal or amend individual laws as it sees fit. Possible candidates include limits on the maximum working week and the bonus cap.

      As far as the fundamental principle of free movement of workers is concerned, it would cease to apply under the WTO option. As a result, the UK and EU member states would be able to impose visa and/or work permit controls on the cross-border movement of workers.