Unless you’ve been living on a different planet for the past two years (and we sometimes wish we had been!), you’ll know that the UK is due to leave the European Union (EU) on 29 March 2019. While most organisations’ focus until now has largely been on ensuring business continuity, we are beginning to see acceptance that there could be people-related ramifications, particularly if we leave with no deal. But what does it mean to be Brexit-ready (“B-ready”?!) from a rewards perspective? Based on our research and conversations with clients, this month we set out our checklist of five practical action points to think about as the countdown continues, to ensure “EU” are prepared!
1 – International employees
Our research shows that 37% of organisations are placing more of a priority on attracting and retaining EU nationals with specific skills into the UK, and 32% are prioritising attracting and retaining a sufficient number of staff within the UK to meet business needs1. There are several issues to be aware of here:
- From a workforce planning perspective, understand which of your critical or high-volume roles are filled by EU nationals within the UK, or UK nationals in the EU. This will help to identify key risk areas for mitigation planning.
- Due to currency volatility, ex-pats may feel their packages are worth less than they were. We don't generally see companies doing anything to reduce this risk in the short term (and of course, it could go back the other way) but it is something to be mindful of.
- Last, but certainly not least, there’s the question of critical hires coming from outside the UK – given the (you’ve guessed it) uncertainty, will they need extra assurances to make the move?
2 – Communication
As newspaper headlines continue to remind us, this is a time of significant uncertainty for everyone in the UK, including your employees. After the initial flurry of employee communications post referendum (45% of UK organisations released communications to employees about Brexit1), messages in the interim have tended to be targeted to specific groups or focused on operational updates.
The next step may be to get more proactive, positive messages out to the workforce. These could be about business continuity, Brexit readiness, or even just reinforcing positive messages about the organisation’s culture and values. You may not even reference “the B-word” explicitly, but let your employees know that you are thinking ahead, and will support them through whatever the next few months bring.
3 – Pension
As if Brexit wasn’t enough to deal with, the pension world is also adjusting to the policy and regulatory changes arising from the DB White Paper and GMP equalisation. Our research shows 22% of organisations identified pension costs as a higher priority following Brexit1. The impact of Brexit is likely to be felt most keenly on DB schemes, where it is vital to check the impact of currency volatility. Schemes should ensure they have sufficient short-term liquidity for the next few months, and avoiding big transactions before the end of March would probably be sensible in most cases. You can read more from our Willis Towers Watson pensions experts here.
4 – Target setting
No matter how good your target setting crystal ball is in a normal year, even the most accurate fortune teller would struggle to make watertight performance predictions in 2019. So what can you do to minimise risk, but incentivise performance at this critical time? Well, first ensure you have sufficient flexibility where possible when setting targets, and consider revisiting them at mid-year to give yourself the ability to adjust, bearing in mind this is unlikely to be possible at executive director level. You could also use broader ranges to allow for different eventualities. And finally, allow for controls on spend at the end of the year, as things could look very different by then!
5 – Share awards
The extended share plan exemption – which allows non-EU companies to offer shares to EU employees without filing an EU prospectus – came into force on 20 July 2017, and will be applied in full on 2 July 2019. The eagle eyed among you will have noted that the second date comes almost four months after "B-day" – so what does that mean for you? Well, if the UK leaves the EU with no deal, and you plan to issue share awards from a UK PLC to EU employees in the months immediately after Brexit, then you should check with your lawyers whether you will have to file an EU prospectus, or follow any additional steps.
Willis Towers Watson’s view
While no one knows what the next few months will bring, we can be pretty sure that this will be a time of stress and uncertainty for employees and employers alike. By understanding your international workforce, sending positive communications, protecting your pension, setting appropriate targets and understanding share awards, you can ensure that you will be as “B-ready” as you’ll ever be!
1 Willis Towers Watson Brexit Talent and Rewards Survey February 2017