What Does Brexit Mean for HR?

Since Freedom of Movement within the EU came into existence through the Maastricht treaty in 1992, UK companies have had access to an almost limitless pool of foreign worker to recruit into the workplace. As more countries joined the EU, this pool grew larger and filling vacancies within the company became a relatively simple task.

There was also an incentive for EU workers to work in the UK due to the favourable exchange rate bearing in mind that most would send part of their salary back home to their families (in 2015 £1 would get you €1.4). However, since the decision to leave the UK in 2016, the pound has slipped to about €1.10 to the pound for those EU nationals repatriating their earnings back home, this represented an effective 20% pay cut since 2016.

This has removed much of the incentive to work in the UK and many EU nationals have or are planning to return to their home country. In addition, the pending border controls have created uncertainty and concern among foreign workers in terms of whether they can remain in the UK and how easy it will be to travel back and forth. As a result, high numbers are returning to their native countries in order to have guaranteed stability for their families. At the same time, the number of foreign workers wanting to come and work in the UK has dropped off for the same reason – uncertainty following Brexit.

Figures from the ONS report that EU migration is at its lowest levels since 2010 and that the number of EU nationals returning home has increased by 50% since the referendum. For organisations that have relied on EU workers, this represents a significant challenge as not only are they losing workers, but also struggling to replace those workers through traditional routes. With the unemployment rate at 3.9% – its lowest level since 1974 – the available pool of workers has reduced even more significantly. The impact of these changes is likely to be felt across every HR department with longer lead times to fill a vacancy, increased recruitment budgets and inflations busting pay reviews.

However, whilst the HR department is often left with the problem, the solution may lie elsewhere. To understand the solution, we need to explore whether the limitless supply of workers diminishes the need to improve workforce productivity, since 2008 UK productivity has flat-lined. If the UK had continued to improve productivity as the same pre-2008 levels, then we would be 20% more productive. In practical terms this means that organisations could have achieved 20% more without increasing their staff headcount.

So, what went wrong? This has yet to be entirely answered, but there is a convincing argument that during the 2008 recession many organisations stopped investing in productivity improvements. When the growth did return many organisations took the expedient route of increasing the head count which was accommodated by the pool of available EU workers. Indeed, there is some correlation between the period of productivity stagnation and increased EU workers within the UK.

Regardless of what caused productivity stagnation, the solution lies within the organisation by focusing on and investing in staff productivity. If you can improve the productivity within your existing workforce by just 5% that can reduce the need to increase headcount. As always whilst the solution may not be within HR, often it is left to HR to lead the initiative.

Often productivity is considered hard to measure and organisations find it difficult to identify the areas that require improvement, but there are 5 key areas to explore;

  1. Workforce Planning: do staff rosters align to business demand? Is it such a basic question that it is more overlooked than any other factor? Often the question cannot even be answered without detailed study. In our experience there can often be a 10% productivity gain through alignment of rosters to business activity. Often the issue is that whilst the rosters were originally aligned – albeit with a bit of guess work – they were never updated to reflect the changing and evolving business activity.
  2. Process and Technology: too many manual and/or cumbersome processes that consume too much time and are inefficient.
  3. Training: poor or infrequent training results in poor quality (and increased rework).
  4. Tools: providing the right tools to do the job is essential in maintaining high levels of productivity.
  5. Staff Retention: high staff turnover impacts productivity significantly as new recruits take time to come up to speed and often require time and intervention from other colleagues.

Focusing on these 5 areas will boost productivity and ensure that more can be achieved without needing to add to headcount.

However, there is a greater prize. Companies with high productivity levels have lower costs, increased profit and are more resilient to economic cycles.

Whilst many problems end up on the desk of HR to solve, now is the time for HR to take a strategic lead and present the problem – and solution – to the wider business. At HFX our solutions are powerful tools to help you improve productivity. Contact us via email at sales@hfx.co.uk or via telephone at 03333447872 to find out how our software solutions can help your productivity. Alternatively visit: https://www.hfx.co.uk/solutions/workforce-optimisation/ to find out more.

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