What effect will Brexit have on your business’ HR & Payroll?

Since the UK voted ‘leave’ on 23 June 2016, companies have been waiting for clarity on how it will affect their day-to-day business. Since the UK officially left the European Union on 31 January 2020, more developments have come to light. With Brexit predominantly affecting the workforce, it’s no surprise that HR and Payroll are feeling the aftermath.

Here are some key effects that Brexit will have on HR and Payroll in your business:


Once the UK left the European Union, it was no longer bound to adhere to EU European Law. Parliament can now make adjustments and overturn legislation that was previously enforced by EU case law. Anti-discrimination rights, family leave, annual leave, and working time all under this legislation. While most are likely to remain the same, some are in question.

One of the biggest changes is that the UK is no longer able to refer cases to the ECJ (European Court of Justice), which had offered guidance to UK courts and tribunals on applying, and aligning with, EU law. The UK is no longer required to follow ECJ decisions, leaving employment tribunals unsure as to whether they should conform or reject future judgements made by the ECJ.

For HR professionals, it’s required to ensure that you are up to date on any legislative changes. As we mentioned, most of the legislation will likely remain the same, but companies still need to make sure that they’re following the letter of the law to avoid potential issues. People that have been in their industry for many years may know the law like the back of their hand and miss out on any changes. It’s always best to avoid falling foul of the system and keep on top of any changes.


As of 1 January 2021, the UK adopted a ‘points based system’ which scores migrants depending on how skilled or talented they are. That means, migrants that are deemed ‘low-skilled’ are not allowed to move to the UK for work permanently. Also, no migrants from the EU or elsewhere can come without a firm job offer, unless they’re highly skilled. They’ll be judged on their salary, English language proficiency, qualifications, and the type of work they’re planning to do. Areas like social care and hospitality, of which European staff make up a large proportion of the workforce, will hugely feel the effects of this ‘scoring’. A huge 70% of EU citizens currently living in the UK, who make up a good portion of the workforce, would not have been eligible. 

For companies to recruit workers from outside the UK, they need to start by getting on the Home Office approved sponsor list.

The process takes about eight weeks, here’s what you do:

  1. Check that your business is eligible for approved status
  2. Choose the type of licence you want to apply for, or choose both
    Tier 2 is for skilled workers with long-term job offers
    Tier 5 is for skilled temporary workers
  3. Decide who will manage sponsorship in your business
  4. Apply online and pay the fee – the amount varies depending on the size of the business and type of licence you’re applying for, but starts at £536

Most workers will need to earn £25,600 to be eligible, and this has faced criticism from Opposition parties and Government officials. Diane Abbott, the Shadow Home Secretary, said “This isn’t an ‘Australian points-based system’, which is a meaningless Government soundbite. It’s a salary threshold system, which will need to have so many exemptions, for the NHS, for social care and many parts of the private sector, that it will be meaningless.”


With importing and exporting causing issues and facing increased delays, companies might see their profits reducing. HR and payroll may have to introduce cost-cutting measures and tighten up their spending. In the case of redundancy or dismissals to cut costs, HR professionals must ensure that they are entirely fair and transparent throughout the process.

Multinational companies will feel the effects of this more than those with just UK offices, but the payroll function may need reassessing to ensure it’s operating effectively across all EU offices. There are many considerations to make in terms of compliance, tax, and legislation, so adaptability is key.


As of 1 January 2021, an employee coming to work permanently in the UK from the EU, Norway, Lichtenstein, Switzerland, or Iceland, will only pay social security in one country, likely to be the UK if that’s where they’re working.

If you have an employee going to work in an EU country, it’s vital to check if that country has agreed to apply the detached worker rules, to avoid any problems in the future.

How Phase 3 can help your HR and payroll teams navigate post-Brexit

Overall, it’s still a windy road to a clear, post-Brexit life. As the workloads of HR teams continue to increase, it’s important that companies support their professionals and one key way to do that is by outsourcing their HR and payroll processes. This ensures that no mistakes are being made when it comes to legislation, employees are being paid on time and correctly, and takes the burden off busy HR and Payroll departments. As HR and Payroll specialists, we understand the importance of getting it right. Whether it’s becoming your payroll department, or finding the HR software that’ll work best for your company, we’ll ensure that you get the most out of your investment. If you’d like to chat about how we can support you, get in touch today.

Laura Lee image
Written by : Laura Lee

Laura’s role as Head of Marketing sees her continually looking for new opportunities to tell the world how great Phase 3 is.

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