How a Brexit could change EU contracting

As the conjecture around the EU referendum on June 23rd shows no sign of abating, it is perhaps worth establishing a fact that both the ‘leave’ and ‘remain’ camps would agree on – the position of UK contractors working within the European Economic Area will change if there’s a Brexit, writes Matt Walters of overseas contracting advisory Capital Consulting.

Why there’s lots of conjecture

But the reason there is some much conjecture is a good one: the exact details of how the UK’s independent workforce will be treated when contracting in an EU country – if the UK is no longer an EU member - will not be known until treaty negotiations are concluded. This is a ‘known unknown.’

It stems from the fact that a whole host of bilateral treaties will need to be agreed if Britain votes to leave. And the areas affecting contractors are vast and each has their own implications; those areas include (but are not limited to) taxation; freedom of movement, employment law, social security and other public services such as healthcare.

Adding to the conjecture might not be helpful so these issues will be only touched on in this article, but they will definitely affect UK contractors who work overseas if Britain votes to leave the EU. There seems to be more value in drawing on the current regulations for non-EU workers, as these may come into force for UK contractors, following a Brexit.

If these two focuses are still too speculative for your liking, consider a new website that has been set up by academics to offer rigorous, independent, non-partisan and research-based evidence on the UK’s relationship with the EU. So contractors unsure how to vote can now get the impartial information they’ve been craving, thanks to The UK in a Changing Europe.    

Travelling to an EU country to work: Now Vs post-Brexit

If Britain exits Europe, the ability of UK citizens to travel to and stay in EU countries will be altered. More than that though; it is not inconceivable that restrictions would be put into force that curtail some residency rights that are broadly available for UK citizens within the Eurozone. More importantly still as far as UK contractors are concerned, UK citizens can currently travel to their country of choice and then complete requisite paperwork. So today, you can apply for, convert or upgrade various visa or residency paperwork to cover your ensuing employment as a contractor in their country – you don’t have to make applications in advance of travelling to the EU destination.

So it may be the case that, in the event of a Brexit, any potentially increased restrictions slow down the process for contractors seeking roles overseas. A knock-on effect of this would almost certainly be a reduced appetite from EU clients and agencies for UK contractors compared with contractors of EU nationalities. Since the former would require considerably more notice before beginning work, it seems that UK contractors may well be put at a disadvantage when vying for roles with EU nationals. But because EU clients would still want UK talent, one likely upshot is that UK contractors would be expected to have greater levels of qualifications and/or experience, in order to remain competitive and viable as professional job candidates.

Case study: Contracting in Germany if there’s a Brexit

In Germany, for example, we can see that some changes if Britain bails on its Brussels membership may result in the introduction of additional burdens or restrictions regarding travel, residency and work permits. Theoretically, should Britain negotiate a similar relationship with Germany as countries like the US, Australia and Canada have done, then UK citizens could enjoy the same ability to travel to Germany -- without a visa -- and apply for one of a number of residency and/or work permits upon arrival.

However, once in Germany, applications for residence permits, which may have a knock-on effect on employment in the country, could conceivably become more onerous should the UK leave the EU. For example, there may be cases where priority for employment is given to EU-nationalities. Although it is entirely possible that highly skilled workers (such as UK IT contractors) may be exempted, it seems equally possible that citizens of non-EU countries may be required by the German authorities to go through a full registration and work permit process. Again, this would seem to put UK workers at a potential disadvantage due to the increase in red tape.

Tax, Social Security & Health Cover – how each may change

While UK contractors will be keeping a close eye on the freelance market’s opportunities if the Brexiters triumph in 36 days’ time, the day-to-day impact on those workers should they lose their EU status is a concern they might come to have. Treaty changes in relation to taxation will certainly impact contractors in both the short and long term, both while earning abroad and when returning to the UK. So it’s probable that there could be significant changes both from the UK’s HM Revenue & Customs, as well as in reciprocal arrangements with individual EU states.

One particular area or impact to look out for is social security, and any changes around the ability to count contribution periods in EU states towards pension time stamps for the UK. Whether in the future it is going to be in the interests of the UK government to keep this in place is a question to which the answer could ultimately determine if the UK’s EU-contractors are going to have to take on a new financial burden.

Similarly, health insurance may become a key area of concern for some contractors. Currently, different EU jurisdictions have different requirements for EU citizens. However, in some countries there are potential benefits for EU citizens when compared with non-EU citizens, such as guarantees on pricing/costs of access to certain levels of healthcare.

Barriers, Hurdles or New Doors?

Ultimately, a Brexit appears to deliver a range of risks around the current freedoms that we know UK contractors enjoy on a professional basis within the EU. The uncertainty surrounding subsequent treaty negotiations can be viewed either as instituting various barriers and hurdles (that other international workers have had to overcome) or as opening new doors and untapped opportunities. Whichever of these outlooks you have, a vote to leave will invariably bring in a period of uncertainty which is unlikely to benefit the UK expat contractor, at least in the short-term.

May 18, 2016