Transcript - Episode 9: People planning

Gaenor Bagley: Welcome to the next episode in our series of Beyond Brexit podcasts. Today, we’re discussing the people and immigration issues. I’m Gaenor Bagley, PwC’s Head of Corporate Purpose. On many previous episodes of these podcasts, we have talked about the need for business to evaluate the impact on their business of various Brexit scenarios, and the key areas to look at are people, trade, and economics. This podcast discusses some of the people issues businesses should be considering.

Today, I’m joined by Ben Wilkins, People and Organisation Partner in the UK, and Katrina Cooper, Director in our Immigration Practice. So, Ben, what is the key people issue you’re seeing your clients include in their Brexit planning?

Ben Wilkins: Okay, well I think the first thing that clients are focussing on is data. So, that’s understanding who their people, who potentially are affected by Brexit, are. So, where their EU citizens sit in their organisation, where their UK citizens based in the European Union are located. What are the skills those individuals have, and how valuable those skills are to the organisation. And then look at other metrics around their population who are affected by Brexit. So, that’s the base case. That’s understanding what’s at risk: what areas do you need to be conscious of in terms of your people.

Secondly, I think clients are really focussed on integrated planning, making sure that what they do from a people perspective is linked into their broader Brexit planning. There’s no point doing these things in isolation, and one has got to follow the other - people has got to be a subsidiary of the overall Brexit strategy for the organisation. And thirdly, I think  operational considerations are really key at the moment, because we’re only  a year-and-a-half or so away from March 2019; and if you’re planning back from that timeframe, and thinking about what changes you’re going to need to make in your organisation, there isn’t a lot of time to think about it. And whilst the political debate is ongoing, and clarity really isn’t there yet, organisations are increasingly no longer having the luxury of being able to wait around. So, really planning into your operational cycle, the changes that you are going to need to make.

Gaenor: So, data is absolutely key and actually the integration point is really relevant, isn’t it, because you may find you are very reliant on EU nationals in a key link point of your supply chains, so you have got to look at both together.

Ben: Absolutely

Gaenor: And what about further down on the supply chain. Are you seeing actual clients starting to think about, do I have somebody on my supply chain that is very dependent, that is going to be really impacted by this?

Ben: Absolutely, that is also key because organisations, particularly the kind of just-in-time market in which we operate at the moment, if one of your key suppliers within your supply chain is heavily dependent on EU citizens or on Brits in a certain part of the European Union, knowing that that dependency exists, and knowing that the organisation is doing something about it, I think, is equally important. So, really, integrated planning, and that is not just about your own organisation, but your broader supply chain network.

Gaenor:  Yeah. So, we’ll come back to some actions in a minute. But, while we are talking about planning, of course, we can talk about the impact of business as a whole - but we are talking about people here. So, what are we seeing clients do actually to support the actual individuals who may be impacted?

Katrina Cooper: So, Gaenor, I’ve been really lucky to be able to work with, you know, a really broad cross-section of clients in terms of looking at, you know, the people in the immigration and to Ben’s point, you know, I mean, data has been critically important. You know, a lot of clients, just did not even have the data, I mean, whilst they have done the right to work, checks, etc., it is about how they have recorded that. So, you know, a lot of clients have just been struggling to get that data on their systems, so they can start doing that sort of analysis.

I think it is fair to say that there is probably different industry sectors, who have been more advanced in terms of that planning element. You know the FS sector is, you know, a prime example, you know. They have got critical, you know, regulatory requirements that they need to make. So, understanding their people perspective has been, you know, very crucial.

For me, one of the first things that clients need to really think about is their communication, and how they communicate, and that communication piece actually will vary depending upon their EU workforce. So, for instance, I had one client, who had a very young EU workforce, who, you know, they were pretty agile in terms of their ability to come and go, and that is the attitude they took. But, I had another client, you know, where 80 percent of their board was actually EU nationals, and you know, they were key decision makers and being able to really understand and ensure how they were going to stay in the country was critically important. So, we have been working with a variety of clients on, one, different communication strategies, different opportunities to be able to also support their employees in a different way.

At the very end of the spectrum, you know, I’ve had a real pleasure of being able to work with one client, who supported the registration of 900 EU nationals within the UK, and it was an incredible project, because it was the emotional goodwill that it generated within the business. So, even though they understood that there may have been registration at the end of all this, it is also going to be required, what really transpired is that a lot of these individuals, sort of, had their head in the sand, and some of them were actually crying at the opportunity of what their employee was doing. I mean, that is absolutely one end of the spectrum.

But, for those clients where citizenship is an option, and it’s quite often that it’s not the employee who is the problem, it’s the dependants. And that’s where, you know, a lot of the concern comes. So whilst the employee might have been working for 5 years, it’s the dependants which are quite often the challenging piece. So, being able to, you know, whether or not clients want to support them, or the communication that they give to them is also something that, you know, clients need to start thinking about. So, that just gives you an idea of the sort of things we are seeing from a client perspective, and it really is across the range in terms of the levels of support that they are being able to give.

Gaenor: So, it still comes down to the same answer, you know, understanding who’s likely to be impacted and, sort of, honest, transparent communication. And some are going as far as really supporting. So, particularly, if you’ve got people, who you think have been there for a long time, who might want citizenship, that’s a really important thing to think about.

Katrina: Absolutely!

Gaenor: Yeah, interesting. So, we talked about actual planning and Ben you mentioned that actually, if you think about the timescale, there isn’t much time - it’s like one and a half recruitment cycles I’ve heard you say. So what actually are you seeing people actually do?

Ben: So, really in terms of practicalities, Katrina, you picked up on communications and having a clear communication strategy to engage with the populations that are really affected – we’ve talked about that. Analytics, using that data to make insightful decisions and insightful interventions in the workforce, that might, for example, be, if you are aware of the fact that a significant population of your junior talent are EU citizens, it might be thinking about, and if you foresee that under whatever scenario we end up with post Brexit, there may be constraints on that junior talent coming into the UK. Thinking about a different recruitment strategy, thinking about training strategies, thinking about how do you source that talent differently in the future, recognising there will be more of a level playing field between the EU and the rest of the world from an immigration perspective and casting the net a bit more widely than previously. So clients are certainly beginning to think about the operational changes there around recruitment.

Training, I think, is a really interesting one. If you think, as well at the same time is Brexit is, kind of, looming on the horizon, we have had the advent of things like the apprenticeship levy in the UK, which should be moving training and skills development up the agenda from a people perspective.

Clients, I think, at the moment are seeing the apprenticeship levy as a cost. I think, they will quickly begin to think about it, more of as a resource, and understand what they can get out of the levy, out of the fund, to help them train replacement resources for those that they may no longer be able to source from within the EU.

So, I think, it is a mixture of looking at recruitment strategies going forward, training strategies. Brexit probably also has been a bit of an accelerant for organisations thinking about automation and digitalisation of their delivery model; and really beginning to see some of those thoughts becoming actions. So, for example, in certain industries, retail, hospitality, travel, where human interaction is part of the delivery model at the moment, organisations really are beginning to think about robotics and automation of processes.

I think that is a reaction to the perception that perhaps cost of labour will go up, and particularly, at the junior, at the less skilled end of the labour force - and thinking about how that spend could be directed differently to replace that labour going forward.

Gaenor: So, that is still, you know, for everyone, it’s still very uncertain. So, we’re not seeing lock, stock and barrel big movements or big actions, but if people are already planning, it’s maybe accelerating some of their plan.

Ben: I think, with the exception of the FS sector, where there certainly has been lot of activity moving roles, moving jobs into the European Union, into subsidiaries from a regulatory perspective, other organisations are at the beginning of focussing on those moves. I think, once organisations decide that they need to move roles, and then many of them have well organised mobility functions and processes for doing that, I think one of the areas that we will see increasingly is more commuter-type movement. So, a situation where a role moves from the UK into the European Union, but potentially the individual only wants to go three or four days a week because of family connections back into the UK. Now, that is something that employees really do need to be aware of, because there are considerable employment tax, permanent establishment, social security, employment law considerations with that type of working pattern.

So we are certainly seeing an uptick in clients realising that that will be part of their workforce of the future and beginning to plan around it.

Gaenor: So, that is quite a good way of thinking there, because that’s quite a flexible strategy: just do it part time, let us just move the bare number of people - but what we are saying is make sure you still take advice around that, because there are different issues if you take that more flexible approach. That is interesting.

Katrina, I do want to bring you back in, because I know you have been involved working with the Home Office on the consultation they are doing, these migration advisory committees. Are you able to share a little bit about your experience working with the Home Office on that?

Katrina: Absolutely, and it has been really fascinating actually. You know, the whole point of the consultation, the Home Secretary asked the Migration Advisory Committee to really go out to businesses, to drill down on the data that they hold. So, whilst the Home Office has a good understanding of the number of EU nationals, they do not really have any data in terms of the impact that they have from a social and economic benefit for, you know, businesses per se. So, part of that report was that they were asking, or the commission, they are asking businesses to really have a look at the migration trends, the recruitment practices, training and skills and, of course, the economic, social and fiscal impacts.

We ran a series of industry based round tables, and there were certainly themes that came through in each of those round tables that we did run with the MAC and some of those themes, were, first of all is the uncertainty. I mean, everyone, it is this level of uncertainty and the inability to make, you know, clear decisions. So, even though, there was the offer of the settled status paper that, sort of, came out as a suggestion and also around, sort of, the leaked whitepaper, which gave a suggestion that, you know, over time it could possibly be like a registration process, and even it is quite common knowledge that the immigration minster has suggested that this registration process will be as simple as renewing a drivers licence, although having recently renewed it, I am not sure that that is as simple as it sounds. But, there are options available, but it is still the uncertainty that businesses are finding terribly important to create further decisions around their recruitment, their training, etc. To your point, Ben, actually around the cost, whilst you were focussed on the apprenticeship levy under obviously the T2 scheme, they have recently introduced the immigration skills levy. That adds an extra £5000 to every non-EEA national that businesses bring over.

And one of the themes that was coming out in those discussions was that the businesses that were paying this, did not think they were actually getting enough of that back for the purpose of training. You know, they are fully committed to training, you know, the local population, the resident labour market, and they want to upskill them, but they thought there should be more engagement with Government in terms of how that pot is being split.

Gaenor: Yeah that is interesting. So, that is really interesting to think about. There could well be an additional cost of some additional admin, but it is quite difficult for businesses to evaluate that cost. Presumably, there is a worst case scenario, that businesses could be doing – are you seeing that sort of analysis, is the government seeking that worst case scenario evaluation?

Katrina: So, it is difficult to say whether government is seeking that worst case scenario, but, you know, from the client perspective, I mean, they are starting to build up worst case scenarios. And, for them, you know, one of the other key areas is the compliance and the administrative burden that this may have on them. You know, we are already seeing, compared to several years ago, a lot of the compliance departments or immigration in itself, you know, is now, you know, a department where it never was previously. So, clients are almost having to do bit of a stress test on their existing compliance department. Because, if it is not coping at the moment, you know, whose burden will it be if there is now a requirement to cross reference right-to-work checks for all of their EU population? So, you know, it is these questions that they are starting to think about.

Gaenor: So, at least the conversation is happening, and some of the issues that business may have is starting to be surfaced. But I guess, what you’re saying is that the conversation has only just started.

Katrina: Correct

Gaenor: There is another problem, we’ve talked about it before, and it’s that it’s very easy to focus on, sort of, permanent or medium term transfers. But, of course, in the services industry, such as our own, lots of people move around just for short-term work, and that is really important to factor into any conversation with the government, isn’t it?

Katrina: Absolutely, and I think I would definitely be encouraging clients to again analyse their data and analyse their businesses, because, you know, for years, you know, us Brits have been able to (says an Australian) just, you know, go over to Europe and work, you know. Even within PwC, we have people regularly on secondment on a week in, week out basis. But ultimately, depending upon what the final agreement will be, we will have to work out if that’s even possible, because not only would there be tax and other implications, but what is an allowable business visitor activity is going to be questionable depending upon which European country they are going to be visiting, and whether or not, you know, their ability to work is going to be possible. So, there’s a lot of questions that are, at the moment, unanswered.

Gaenor: Yeah. So, going back to the scenario planning where we started, factoring in some additional admin or actual real cost of bringing in non-EU, or even actually EU people into the workforce (or the other way around) needs to be factored in.

Katrina: Absolutely.

Gaenor: Well, that was a very rich discussion. I think that, probably, we’re going to have to have more of these actually, as the negotiations progress! Thank you very much to both of you for your input and thank you to everyone for listening.

You can find all of our Brexit related content, including other episodes of the podcast on our website www.pwc.co.uk/brexit

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