Brexit: What does it mean for immigration?

in Legal, Tax, 04.07.2016

Only a few weeks have passed since Europe was in an uproar after the UK’s vote to leave the EU. It’s too early to understand the referendum’s full impact and exit negotiations have yet to begin.

Unfortunately, companies cannot wait for the picture to become clear. They need to start now: assessing how Brexit might affect their business and future strategy; defining what risks might emerge; and outlining how best to address these challenges.

How do you assess Brexit’s impact on immigration considerations? Companies with globally mobile employees should bear in mind the following points when dealing with immigration issues after the “leave vote” – now and in the future.

The Swiss perspective

From a Swiss perspective, it’s difficult to predict Brexit’s impact on immigration. However, one assumes that UK nationals will have to be treated just like all other non-EU nationals in the future – unless Switzerland enters into a bilateral agreement with the UK which provides relief for UK nationals.

Nonetheless, there are subtle differences depending on whether the person is a local hire, an assignee or a resident.

What is the impact on UK local hires?

For UK nationals hired locally in Switzerland, this would mean that the priority for domestic and EU/EFTA employees becomes applicable. As a part of the work permit application, a Swiss employer interested in hiring a UK national would have to provide evidence that recruiting efforts in the domestic and EU labor markets were in vain. In practice, this often means that the government will not grant a work permit for the non-EU national, even if he/she is the preferred candidate.

However, if the “stop mass immigration” initiative is (ever) implemented verbatim, the priority requirement will apply to UK nationals (and all other EU nationals) anyway – with or without Brexit.

What is the impact on UK assignees?

The non-EU status will have a different impact for UK assignees, specifically those nationals remaining on a UK contract assigned to Switzerland for a limited period of time. It would mean that the assigning employers located in the UK could no longer use the simplified registration process (“Meldeverfahren”) to clear the Swiss immigration status of their assignees for up to 90 days per calendar year. In order for UK employers to legally staff Swiss projects with UK personnel, they would have to endure significantly longer lead times, increased administrative efforts and higher costs related to their short-term assignees.

One advantage of the status change from EU to non-EU could be that the tight quota for EU assignee permits for more than four months would no longer apply and be replaced by a less restrictive quota for non-EU assignees. It might actually become easier to get a permit for UK nationals assigned to Switzerland for more than four months. Finally, the drop in the pound against the Swiss franc affects all assignees who are paid partially in pounds, regardless of their nationality (see next section).

Outlook and recommendations: What will happen with existing permits?

It is important to understand that UK nationals continue to have free-movement rights until the UK formally leaves the EU.

However, the pound’s drop against the Swiss franc has an immediate effect on all assignees who are currently working in Switzerland and paid in British pounds – regardless of their nationality. The reason being: Swiss immigration law requires that employees temporarily working in Switzerland must be compensated at a level that is at least commensurate with the Swiss reference salary of the industry, profession and geographic location in question during the whole period of assignment.

In light of the pound’s fall, at the end of every month, the salaries of assignees currently working in Switzerland must be:

  • assessed against the Swiss reference salary requirements by applying the monthly average exchange rate issued by the Swiss Federal Tax Authorities, and
  • increased retroactively if undershooting Swiss requirements. Overall, assignments to Switzerland (including new ones) will become more expensive.

Employers paying their assignees in pounds may want to consider written agreements with their mobile workforce. These agreements should specify that in the event of currency exchange rate movements (e.g. +/- 5%), adjustments to assignment allowances paid to the employee to align compensation with Swiss reference salaries may be made at any time and without the employee’s consent. However, the legality and enforceability of such an agreement should be checked in advance and on a case-by-case basis.

Looking ahead, one may assume that UK nationals holding a valid Swiss permit when Brexit takes effect will not be affected until their permit expires – considering the legal principle of prohibition of retroactive effect. However, afterwards if an extension or renewal is due, they will likely be subject to the restrictions set out above as if they were “new to Switzerland”.

We recommend that UK nationals intending to stay in Switzerland work towards attaining the proficiency in their local language (German, French, Italian) required in order to apply for a permanent settlement permit (C permit) as soon as possible. Typically, a C permit is issued after five consecutive years on a B permit. Moreover, those who already fulfill the requirements for naturalization may want to consider applying for Swiss citizenship.

Immigration to the UK

It’s important to note that nothing will immediately change regarding Swiss immigration to the UK. Rather, Swiss and EU nationals will continue to enjoy free-movement until the UK formally leaves the EU.

At a later stage, it’s expected that there will be transitional arrangements for Swiss and EU citizens currently in the UK – involving a formal application process – to prolong their stay in the UK.

How long someone has already been in the UK makes a difference – more than five years and there may be an option to apply for a card certifying permanent residence, giving that person the right to live in the UK indefinitely. Persons living for more than six years in the UK may be eligible to apply for British citizenship.

For those with less than five years in the UK – business travelers, students, self-employed people or entrepreneurs – visas or another form of authorization to remain in the United Kingdom may be required.

The referendum result is unlikely to have an immediate effect on UK tax rates and allowances. The one immediate impact is the pound’s drop against all major currencies, including the Swiss franc. In the short term, the cost of sending people to work in the UK on home-based packages will be cheaper and sending assignees from the UK to Switzerland will cost more. How long this will last obviously depends on the forex market.

Click here to find up-to-date information and analyses on Brexit for Swiss companies.

 

 

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