Brexit: the underestimated importance of personnel

Previously published here: http://blog.kpmg.lu/brexit-the-underestimated-importance-of-personnel/

Over 50 companies have already publically announced that they will relocate their headquarters or parts of their workforces in the light of Britain’s exit from the EU. Most companies are still deciding what to do, or have chosen the wait-and-see approach, and many have set up special Brexit committees to investigate the implications for their company. These committees focus on regulatory aspects, especially in the financial services industry, as well as corporate tax, VAT, and customs. But what about people?

Human resources departments are often underrepresented in these Brexit committees, at least in the early stages. People are not forgotten, of course, but often the discussion is limited to a high level review of living conditions, availability of housing, and maybe personal income tax rates. The details are typically not addressed until the decision is made and it’s time to figure out how to manage the move. And this where it’s realised that people are a company’s most important asset.

Short, medium, and long term

For tax and regulatory reasons, moving headquarters is not just a paper exercise—it must have substance.[1] This requires people on the ground with the seniority, expertise, and autonomy to carry out the business. An important factor in the lasting success of such a relocation is the need for adequate short-, medium-, and long-term workforce planning.

For the short term it will mostly be current personnel who will move to set up business in the new location. For the medium term, new personnel may need to be hired, locally and/or internationally. For the long term, new talent from universities and colleges will be needed. Selecting the right people for each phase is key to success.

Let’s have a closer look at short-term, intercompany relocations.

Intercompany relocation

Sending current employees to the new location can be either temporary or permanent. Temporary relocations, or assignments, are mostly used for those involved in the setup of the new location and then who’ll move on to other projects. But for those whose jobs will now be done in the new location, permanent transfers are offered.

While young and highly skilled employees may be excited about an international move, not everyone is going to share that enthusiasm. Moving internationally has a big impact on an employee’s personal life—partners with their own careers, children in school, house ownership, etc.

Many companies have policies for short-term and long-term assignments and for permanent transfers. However, the circumstances, following Brexit, have changed, especially for the permanent transfers. Normally, one of the major instances where the permanent transfer policy[2] is applied is when the employee initiates the relocation. With respect to Brexit, however, most employees will face the “decision” of either relocating… or finding another job.

Brexit relocation requires different approach

Brexit’s unique circumstances require a different approach. There are many stakeholders in these relocations, and communication among them is critically important. Relocating one or two employees could be managed like any permanent transfer—but when the group of relocating employees becomes bigger, it is more challenging.

Among employees there will be a lot of uncertainty. People talk, do their own research, and find a lot of conflicting information. Clear and timely communication helps avoid uncertainty and misinformation. Involving (external) specialists adds to the credibility of the information provided. Showing solidarity and providing moral support is important. Employees want to hear a clear commitment from their employer. They want to feel wanted, needed, and supported.

Based on our experience in these situations, the main lessons learned can be summarised as follows:

• Plan ahead and involve stakeholders early on.
• Communicate clearly and regularly.
• Show your willingness to support your employees.
• Help them understand the potential impact of the new situation.
• Look beyond a transactional and factional approach.
• Consider long-term implications for social security and pensions.
• Use positive messaging.

In short, your employees are key to your success: take good care of them, and they will take good care of your company.

[1]For more information on substance, please refer to our articles Substance for Alternative Investments, Substance for the Banking Industry, or Beneficial Ownership Issues.

[2]Our Global Assignment Policies and Practices survey 2017 shows that 61% of the surveyed companies have a permanent transfer policy.