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GUEST ANALYSIS What does the end of free movement mean for retailers?

On 19 February the Government released a policy statement, outlining some of its plans for the UK immigration system to be launched from 1 January 2021. The new system will not be (at least initially) radically different from the existing one. However, employers will need to apply the system to all EEA/Swiss nationals (EEA nationals) who are not eligible to apply under the EU Settlement Scheme (EUSS).

The fundamental problem is that the immigration system is expensive to use and complex to comply with. This will cause headaches for retailers, who will need to take a combination of short and long-term actions to minimise the impact of the end of free movement on their businesses.

Action point 1: Minimise the need to use the immigration system

One set of actions will focus on how to minimise the need to use the immigration system. These might include a fresh wave of operational restructuring, for example through seeking to further automate warehouse and other functions and to eliminate roles through business process modifications such as self-checkout in outlets. Some businesses may choose to look again at where centralisation, outsourcing and offshoring may prove worthwhile. Employers may also choose to refresh programmes to attract and retain staff, particularly in low to medium-skilled roles that will be ineligible or too costly to justify sponsoring. 

One initiative that should not be overlooked is maintaining communications with existing EEA national staff and their family members to encourage them to apply under the EUSS before the deadline on 30 June 2021. This may include offering support to make applications under the scheme or for British citizenship. Employers should also consider organising recruitment campaigns so that EEA nationals enter the UK by the end of this year and are therefore eligible to apply under EUSS.

There may also be employees or contractors who meet the definition of a ‘frontier worker’ ie a person who works in one EU country but lives in another and returns there once a week. An obvious example might be someone whose work involves transporting goods between the UK and the EEA/Switzerland. Those people will be eligible to apply under EUSS if they enter the UK by 31 December 2020. However, as a general rule they (like all other scheme participants) will only be eligible to apply for settled status in under EUSS if they spend more than six months of the year in the UK over a continuous period of five years. The Government has also confirmed it intends to create a new visa for frontier workers who do not qualify under EUSS to allow them to continue to work in the same way they currently do. This may prove helpful in some circumstances.

Action point 2: Engage with the new immigration system

Employers in the sector will need to take stock of the extent to which they anticipate needing to use the new system, and plan their budgets for recruitment, mobility, salaries and immigration compliance accordingly. This will include setting or revising policies on what kinds of immigration-related support will be offered for sponsored and unsponsored immigration routes and British nationality.

It will be possible to sponsor workers for occupations skilled to Regulated Qualifications Framework (RQF) level 3 (A-level equivalent), instead of workers needing to be skilled to RQF level 6 (bachelor degree equivalent). This will open up the possibility to sponsor a range of occupations not currently eligible, including buyers and procurement officers; retail, warehousing and storage managers; transport and distribution clerks; IT operations technicians; customer service and sales supervisors; butchers; bakers; and florists.

The current cap on sponsored skilled worker numbers will be dropped, as will the requirement for resident labour market testing to be carried out. However, there will still be an English language requirement, and in general, skilled sponsored workers will need to earn a salary of £25,600 or the going rate for their occupation, whichever is higher.

In view of these changes, some employers may need to look at applying for a sponsor licence for the first time. Others may need to expand the scope of their existing licence, for example to cover intra-company transfers where they have connected businesses based in the EEA. They may also need to request a higher allocation of certificates of sponsorship to take into account the number of EEA workers they anticipate needing to sponsor from 2021.

Employers already holding a sponsor licence may choose to review their compliance policies and systems, which may include engaging an external adviser to carry out a mock audit of these and recommend improvements. This may be a prudent step where the sponsor licence will be relied on more heavily in the future.

It may be necessary in some cases to re-structure the salary package and working hours for some roles. This is because only basic gross salary will be counted for sponsorship purposes, in most cases based on a 39-hour week. This is a backward step from the current system, which allows both basic gross salary and allowances guaranteed to be paid throughout the employment, provided these are also paid to settled workers in similar circumstances. Those who work for less than 39 hours a week will still need to meet the relevant salary threshold, according to what their actual basic salary will be. This means that in many cases part-time workers will not be eligible for sponsorship.      

The Government has also stated it will open up a new capped, unsponsored route for highly skilled workers and will consult with stakeholders on this during the course of the next 12 months. This route could be beneficial to fill some roles, so retail employers should consider whether to engage with the Government on its proposals for it.   

Action point 3: Lobby to have the labour needs of the sector addressed

The retail sector is one of those most likely to be affected by the end of freedom of movement of EEA nationals, so it will be important to lobby the Government on its needs, both in the short and long-term as the system evolves.

Businesses may engage with the Government and the Migration Advisory Committee (MAC) individually, through retail trade associations, or through a firm specialising in immigration law that engages in dialogue with them on behalf of clients. Approaches should be made to the Home Office through its stakeholder engagement activities, or to other Government departments as appropriate, for example the Department for Business, Energy and Industrial Strategy.

There are a range of lobbying areas the retail sector will want to address.

Firstly, the Government has confirmed it intends to commission the MAC to produce a shortage occupation list for the skilled worker route and to keep this under review. The sector should lobby for occupations it considers are, or will be, in shortage, at all skill levels. This is because, under the Government’s plans, those who will fill a job included on the shortage occupation list will only need to be paid £20,480 (instead of £25,600), or the going rate for the job, whichever is higher. It is also possible for occupations with a skill level lower than RQF level 3 to be sponsored if they are included on the shortage occupation list. 

Secondly, the immigration system is uneconomical for businesses, and even more so when sponsoring medium-skilled workers on lower salaries. The cost of sponsoring an individual skilled worker is currently around £7,500, and can be substantially higher if dependants, legal fees and compliance costs for the employer are included. Significant work will be required to convince the Government that these costs are an unreasonable burden on businesses.

Thirdly, consumers want a variety of online and in-person retail shopping options. Both of these require workers to deliver them, whether they be IT, ecommerce and logistics specialists, or customer-facing and other personnel running outlets. Input is required from the sector to elaborate what is possible and desirable in terms of the mix of technology, automation and workforce to meet customer needs and ensure that businesses remain profitable.     

Lastly, although it is currently unlikely that the Government will move to lower the overall general salary threshold of £25,600 as this is the level considered appropriate by the MAC, there may be scope to look at this again in the future if the level proves to cause a substantial problem for the sector. 

Naomi Hanrahan-Soar is managing associate at law firm Lewis Silkin

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