Are retailers ready for post-Brexit immigration rules?

From 1 January 2020, a new immigration system will come into force in the UK, marking one of the biggest changes to the UK’s immigration system in recent history.

Our latest research among the UK’s top 100 retailers suggests that there are still preparations needed to ensure a strong pipeline of talent and comply with the incoming rules.   

The EU Settlement Scheme

On 31 December 2020 at 11pm, the transition period agreed between the UK and the European Union (EU) will come to an end. Any EU nationals (and those from the wider European Economic Area and Switzerland) who wish to continue to live and work in the UK beyond this date must apply under the EU Settlement Scheme (EUSS). Certain non-EU family members of EU nationals will also be eligible.

The applicant must in the vast majority of cases be resident in the UK before 11pm on 31 December 2020 and, assuming they meet this deadline, their application must be submitted by 30 June 2021. The application is free and in most cases can be completed entirely online or via a mobile app. 

Two types of status can be awarded under the EUSS – “settled” and “pre-settled”. Pre-settled status is for those who have been in the UK for less than five years and settled status is for those who have been in the UK for longer. Individuals with pre-settled status must then apply for settled status after they have been in the UK for five years, assuming continued compliance with EUSS rules.

If EU nationals do not apply under the EUSS by the deadline set out above then they will either require a visa under the new immigration system (see more on this below) to remain in the UK or they will be required to leave the UK.

In light of the above, retailers are advised to:

• Determine how many EU nationals currently work for them and how many individuals may therefore need to apply under the EUSS. According to our research, 57% of retailers could not estimate what percentage of their workforce are EU workers. Knowledge of reliance on EU nationals is key for both compliance and business planning purposes.
• Ensure that all employees are aware of the EUSS and encourage them to apply sooner rather than later, and in any event before 30 June 2021.

The requirement for a sponsor licence

To date, UK employers have been able to take advantage of EU freedom of movement laws meaning EU workers have not required a visa to live and work in the UK. 

However, on 31 December 2020, freedom of movement will come to an end and after this date all non-UK nationals (whether they are from within or outside the EU) coming to work in the UK will need a visa and, in most cases, this will be a sponsored work visa.  

Although some individuals with certain UK immigration permissions (including EUSS settled and pre-settled status) will not require sponsorship, the need to sponsor will be likely in a high proportion of cases.

Before employers can sponsor workers, they must first obtain a sponsor licence from the Home Office. According to our survey, 62% of retailers do not have or do not know if they have one of these.

The application is done online and currently costs £1,476 for large or medium sized employers, or £536 for small or charitable employers. A licence will be valid for four years and those retailers who have a licence already will retain this under the new system until the licence’s planned renewal date.

As part of the application process, employers need to provide the Home Office with numerous documents and information to demonstrate that they are a genuine organisation and that they are ready to comply with the obligations and duties which the Home Office expects of all sponsors. If they secure a licence, retailers will be subject to the following obligations:

Reporting duties

Sponsors must report various matters to the Home Office either within ten working days (such as where a sponsored worker’s circumstances change e.g. their pay or job duties, and where a sponsored worker is affected by TUPE) or twenty working days (such as where they go into administration or are subject to a merger or acquisition).

Record keeping duties

Sponsors must keep vast, up-to-date records and documents in relation to each of their sponsored workers. This includes, for example, copies of the worker’s payslips, national insurance number, contact details, contract of employment, passport and biometric residence permit.

Compliance with the law 

Sponsors are under a general duty to comply with UK immigration and employment laws, including ensuring all workers are paid the national minimum wage.

Co-operation

There is a general duty on sponsors to co-operate with the Home Office, in particular during any compliance visits.

The Home Office may visit the employer before they decide whether or not to grant the application, which can involve auditing the employer’s recruitment processes and interviewing employees to check that the employer is ready to comply with its sponsor duties. 

Our survey shows that 22% of UK retailers do not have anyone specifically responsible for immigration compliance in their organisation or do not know who is responsible for this. Our data also suggests that of those retailers with a licence, 63% do not know how many workers are sponsored.  

The Home Office requires sponsors to appoint specific individuals in their organisation to be responsible for immigration compliance, and so retailers that do not have such a person would be advised to decide who will take this on. Knowledge of the identity and number of sponsored workers within an organisation is key to ensuring compliance with Home Office requirements.

The application process for a sponsor licence can take up to eight weeks, and possibly longer if the Home Office conducts a pre-licensing visit as mentioned above. Employers without a sponsor licence should therefore consider if a licence is required as a matter of priority, so that they can hit the ground running with an application at the earliest opportunity in 2021. 

Difficulties retailers are likely to face 

Unfortunately, even with a sponsor licence, retailers are likely to face challenges sponsoring workers under the new immigration system. 

To qualify for a work visa and sponsorship under the new system, there are two key requirements:

• The role must be “skilled” to an A-Level standard or above. This does not mean that candidates must have A levels to apply for the role, but it means that the role must be at or above this level of skill.
• The worker will typically need to be paid a minimum of £25,600, unless some limited exemptions apply.

The above requirements would therefore rule out a large number of retail assistant roles, and would only capture those at a managerial or executive level. The cost of hiring EU workers will also increase under the new system, given the various fees and charges that must be paid to the Home Office as part of the process.

Retailers are advised to start thinking now about how reliant they are on recruiting foreign nationals and how they will plug any possible gaps in recruitment. Incidentally, more than a third (37%) of retailers told us it’s getting harder to attract and retain talent generally. 

Now is the time to make contingency plans – including the possible need for a licence – for a future reduction in available EU workers. Although nearly four million individuals have secured either settled or pre-settled status, the number of national insurance numbers issued to EU nationals between July and September 2020 was down 99% on the same period in 2019. This creates an uncertain outlook for retailers, but taking the right steps will help to ensure a strong pipeline of talent as they emerge from the pandemic and look to the future. 

John Smith and Fraser Vandal are solicitors at TLT

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at December 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.