Labour market in flux as living wage and EU referendum loom

The global war for talent could be about to get a lot harder for British employers, according to research from Manpower, as a vote to leave the EU would restrict the UK’s access to foreign workers.

According to the latest employment figures from the Office for National Statistics, of the 521,000 jobs created in the last year, 215,000 were filled by non-UK nationals from the EU.

As hiring intentions among Britain’s employers are at their strongest level since 2007 – up 7 per cent on the previous quarter – Manpower’s research suggests that employers’ reliance on foreign workers to plug vital skills gaps will only increase as UK organisations continue to compete on the international stage.

James Hick, a director at Manpower, said employers relied heavily on the free movement of talent inside Europe, and warned that the UK economy would suffer if that access was restricted.

“Let’s be realistic: we simply won’t be able to replace overnight the skills these people [non-UK workers] bring to the UK if we leave the EU,” he said.

He added that with unemployment at its lowest level since 2006, and several reports suggesting that job vacancies were steadily increasing, it was important to protect the talent pipeline.

“It’s unrealistic to suggest there’s enough slack in the labour market out there to fill these jobs,” he said.

“We’ve already heard that some major UK employers plan to switch high-quality jobs from the UK to other countries in the event of Brexit – for example, HSBC has threatened to shift 1,000 banking jobs from London to Paris if Britain leaves. We think there’s a real danger this could be the tip of the iceberg.”

Later today (Tuesday 8 March) a long-awaited review of the EU’s Posted Workers Directive is expected to further clarify how the free movement of workers applies to employees temporarily sent elsewhere.

In 2015, Jean-Claude Juncker, president of the European Commission, promised that EU workers undergoing temporary work in another country would qualify for the host country’s minimum wage and working conditions.

But business groups have warned that revising EU laws could undermine existing approaches to wage setting, and could effectively lead to foreign workers being paid more than domestic employees.

The Manpower Employment Outlook Survey also suggests that current government policy is encouraging employers to consider alternative recruitment options, with some organisations opting to hire young workers to avoid having to pay the national living wage (NLW) come April.

Hick said: “Some companies are taking advantage of the age rules by hiring under-25s who are not eligible for the new pay rate, while others are changing their overall compensation packages to lessen the impact of the changes on their profits.”

According to the Manpower survey, those who qualify for the £7.20 an hour NLW – 50p higher than the minimum wage – will see little difference in their overall pay packets as businesses look to make savings in other areas.

“We expect many [organisations] to reduce pay for overtime and bank holidays or to flatten their structures and reduce the number of better-paid supervisory roles,” said Hick.

“The next six months will show the effect any ‘levelling down’ of wages has on the workforce, and long term we believe there will be job cuts.”