June 2016 saw the EU referendum make history and for a year and a half since, a good deal of the column inches in the British press. Progress in determining what the future looks like has been slow, leading to a lot of uncertainty over what the UK’s withdrawal from the European Union means for business in Britain.
The current situation is less than ideal given that economies can flounder when uncertainty and ambiguity swirl around a country’s future. The triggering of Article 50 is already having an impact on the investment decisions of two out of five businesses which, 98 per cent of the time, is negative, according to the Confederation of British Industry.
Even more worryingly, Brexit Secretary, David Davis recently admitted that the nation should be prepared for a “paradigm change” in the economy, predicting that the shift in the way the economy operates will be on a similar scale to that of the 2008 financial crisis.
Only time will tell what Brexit really looks like and what it means for the country, but on the face of things, it poses a number of issues for those organisations looking to expand their operations into other European territories. It’s worth understanding what those issues are, and where there are already challenges for organisations looking to internationalise their business, which are likely to be further impacted by Brexit.
Many businesses widely underestimate just how long it takes to establish a business in Europe. Even simply registering a new entity usually takes between fifteen and sixty days, depending on the country. If we look at Spain as an example, it’s particularly challenging due to the complexity of its registration process, usually taking between three and four weeks compared to two to three weeks for Sweden, Ireland and Switzerland.
Other areas in which employers tend to misjudge timescales include hiring new staff, getting to grips with payroll and tax regulations, all of which have varying nuances depending on the country and also sorting out documentation.
Payroll rules are different in each EU country as they are based on local accounting and tax regulations, which vary widely in terms of complexity and cost. For example, in France, employers are expected to withhold 50 per cent of each employee’s salary in tax and social insurance payments, while the figure is more likely 30 per cent in Germany. Another important consideration that payroll teams must be aware of is knowing when to file tax returns, pay levies and inform employees that they need to submit returns too.
The Data Protection Directive – a framework data protection legislation that each EU member state is bound to adhere to – may be in place however, each country has implemented it in a slightly different way, causing havoc for expanding organisations.
In many instances, different countries have added their own rules on top, meaning that different regulations apply in different jurisdictions. This complexity is only expected to grow as the General Data Protection Regulations (GDPR) come into force in May 2018.
Billed as the EU’s most stringent data protection ever, GDPR applies to any organisation that employs European workers. But just because Brexit means leaving the EU, it doesn’t mean organisations will be let off the GDPR hook. Not if they want to continue exchanging information and trading with their European partners, that is.
This is already making things difficult, particularly for international businesses with Google having fallen victim to the commission nationale de l’informatique et des libertés (CNIL) when it discovered the internet giant was not compliant with the Data Protection Directive after it tried to consolidate over sixty private policies into one. As a result, Google is now facing separate regulatory investigations from data authorities in the UK, Germany, Italy, Spain and the Netherlands, all of which are deciding on whether or not to impose penalties on it.
One of the most efficient ways for businesses to get around the challenges outlined above, is to utilise the services of a direct ‘employer of record’ (EOR) service provider. Third-party companies that take on all the legal responsibilities involved in employing staff in a new country on behalf of an organisation, EOR providers can remove the hassle and complexity of business expansion, especially in the wake of Brexit.
But what does this mean? Well, on paper at least, the EOR provider is the primary employer of an organisation’s workers, taking on all the administrative responsibilities relating to their employment including, writing employment contracts, hiring and on boarding staff and dealing with the local nuances which differ to those countries an organisation is already present in. All of this means an EOR can set up a local entity in new markets in a matter of days, rather than weeks.
Given that the complexities of the post-Brexit world are only set to increase, partnering with a direct EOR provider can drastically simplify business expansion for UK organisations, without restricting their global ambitions.