What contractors need to know about the Brexit deal

With the pandemic continuing to hold up the finer details of the Brexit deal, an agreement was nevertheless reached on the 24th of December. The deal sought to establish how trade and services could be maintained now that the UK has left the EU. While the negotiations have ensured that the UK continues to have tariff-free access to one of the world’s biggest markets, favourable terms were not achieved in all areas. An end to free movement and discontinued access to the Internal Market Information system could have significant implications for contractors - here we take a closer look at why.

One of the shortcomings of the Brexit deal was the focus on goods rather than services. Considering that service exports in the UK account for some 46% of overall exports, this could be seen as a major stumbling block. The loss of access to the EU’s Internal Market Information system could also create problems for contractors who rely on the ability to use data freely in order to advise and assist their end clients. There’s also no more automatic recognition of qualifications for professionals such as doctors, nurses, accountants, solicitors, architects, dentists, pharmacists, vets and engineers. Practitioners will now have to seek recognition from the member state they work in, which could mean terminating or renegotiating work assignments outside the UK.

Undoubtedly the biggest impact on contractors will be the loss of freedom of movement. From 1 January 2021, free movement in and out of the UK came to an end and EU nationals (apart from Irish nationals) wishing to work in the UK are now subject to the same visa requirements as their non-EU counterparts. However, if any EU nationals (and their family members) take up residence in the UK by 31 December 2020, they will have the option to apply for Settled or Pre-Settled Status, under the EU Settlement Scheme. The deadline for applications under the Scheme is 30 June 2021, but the individual must have established residency in the UK by 31 December 2020.

From 1 January 2021, most EU nationals who are not eligible for Settled/Pre-Settled Status will require a work permit in order to be employed in the UK. In order to access the work permit visa route for EU national contractors, the hiring company would first need to obtain a Sponsor Licence. The key route of entry for contractors will be the Skilled Worker route, a reciprocal arrangement that facilitates “short-term business trips and temporary secondments of highly-skilled employees”. In order to obtain such a visa, a contractor would need a minimum amount of relevant specialist experience - usually around six years and the offer of work must meet the following criteria:

• The job offered must be at skill level RQF3 or over (this is equivalent to an A-level)
• The prospective employee must speak English
• The sponsoring employer must pay a salary of £25,600 or the going rate for the job (whichever is higher)
• Minimum salary can be reduced to a minimum of £20,480 if able to ‘trade’ points based on certain specific characteristics, for example if it’s a ‘shortage occupation’ or if the individual has a relevant PHD.
• The permission to be in-country under the “contractual services” and “independent professional” rules will generally only last as long as the relevant client project, with a 12-month time limit.

This will force many UK staffing and consultancy companies to rethink the basis on which they deploy UK contractors and consultants into EU states depending on their business model and sector. Lower skilled/paid EU national contractors will not be eligible for a work permit under the Skilled Worker route. Additionally, the immigration rules generally only allow employment agencies (which includes employment businesses and umbrella companies) to apply for a Sponsor Licence for their own staff, not individual who will be supplied to an end-user client. Organisations hiring or deploying contractors should also be aware of how the terms of engagement will affect employment classification under the new IR35 reforms scheduled for April.

The complications resulting from the end of freedom of movement under the Brexit deal are likely to make the UK a less attractive prospect for EU contractors. This could result in widening skills gaps in high demand areas such as IT and healthcare, where European candidates currently account for a significant amount of the UK talent. This could see competition for skills in these areas drive up contractor rates as companies try to secure access to talent. However, restrictions placed on UK nationals working in Europe could make it more likely they will source domestic contracts within the UK, evening out supply and demand in the long run. Contractors are advised to consult with their end clients or third-party engagers on the impact of Brexit to ensure they are compliant in all areas.