Deal or no deal: trialling the new EEA settlement scheme

Two and half years after the Brexit referendum, we are only six months away from the date when the UK will formally leave the European Union. Any transition period is dependent on a deal being reached with the EU.

European Economic Area (EEA) nationals still retain the right to live and work in the UK at the moment and the Government continues to reassure this group that they, therefore, do not need to make applications to preserve their right to remain in the UK.

However, with many news reports of worker shortages in sectors which rely on EEA nationals, is this the best approach for both EEA nationals and you as their employers?

Resourcing issues in construction, hospitality and other sectors

Many sectors are reporting recruitment concerns, but this might be best demonstrated in the building industry. Recent data has shown that 28% of London construction workers hail from the EU. With EU net migration at its lowest level since 2012, and a sharp decrease in the number of EEA nationals coming to the UK to look for work, concerns about limited access to these workers following Brexit raise question marks about how targets on housebuilding and infrastructure projects will be met. This is exacerbated because over half of UK nationals working in this industry are aged over 45.

Construction is not the only industry which is being affected. The hospitality sector, which typically operates on tight margins, also employs a significant number of EEA nationals – with up to half of the workforce in some restaurants and hotels coming from Europe. Restricted access to EEA national staff could lead to an increased wage bill as companies need to increase their salaries to attract workers in a squeezed market.

What applications can EEA nationals make now?

EEA nationals who want certainty of their immigration status after March 2019 currently have three options:

• Do nothing – their rights to live and work in the UK have not yet been affected. This is the Government's recommendation.
• Apply for an EEA registration certificate – this option is open to any EEA nationals who have been in the UK exercising treaty rights (e.g. as a student, worker, self-sufficient or job seeker) for less than five years. We would not recommend this option. Holders of registration certificates will still need to apply under the settlement scheme in the future.
• Apply for a Document Certifying Permanent Residence (DCPR) - this option is open to any EEA nationals who have been in the UK exercising treaty rights for over five years. When it has been held for one year holders are able, if they wish, to apply for British citizenship.

Applications for a registration certificate or DCPR are in most cases made online at a cost of £65 per person. Applicants can use the European Passport Return Service allowing them to retain their passports during processing. Decisions are currently taking around one month.

… and in the future?

Under current Home Office proposals (which remain subject to the outcome of the ongoing Brexit negotiations) all EEA nationals who are in the UK now or who come to the UK before 31 December 2020 will be required to apply for settled or pre-settled worker status.

This application will need to be submitted between March 2019 and June 2021. This requirement will apply regardless of how long the EEA national has spent in the UK and what their personal circumstances are.

What do we know about the new settlement scheme for EEA nationals?

The Home Office has devised a simple online process (being trialled by students and NHS workers in Liverpool) which will rely on web-based forms and uploaded documents. Submission of original documents will only be required if the genuineness of the documentation is in doubt. Applicants who hold a National Insurance Number should have their eligibility checked through their tax records with HMRC, simplifying the application process.

The application will continue to cost £65 for adults (as is the case for DCPR applications now) or £32.50 for children.

So long as an applicant meets the eligibility and suitability criteria, the Home Office says it will only refuse the application if it contains a misrepresentation or submits false documents for review. Even where this appears to be the situation, a case worker will decide whether this is material to the decision and whether it is proportionate to refuse the application. This suggests that in the vast majority of cases, applications will be approved.

Current holders of a DCPR will be able to switch to the settled worker status for free if their DCPR was issued in the previous ten years and they have not been absent from the UK for more than five years. The Home Office has stated that this process will be very simple. This concession is more flexible than the current two years permitted absence and will give reassurance to those who already hold a DCPR.

Apply now or apply later?

Whilst the Home Office reassures us that the new settlement system will be straightforward and easy to operate, there are around 3.5 million EEA nationals in the UK who will all need to apply for permission to remain during the transition period: around 15 applications being approved every working minute.

In reality, many EEA nationals will not take steps to apply for their status until the end of the transition period putting more pressure on the cash strapped Home Office.

It remains to be seen whether the newly-designed processing system will be able to cope with this volume of applications.

Eligible EEA nationals, who have already lived in the UK for more than five years, and particularly those who wish to apply for British citizenship, may prefer to apply for a DCPR now. For applicants who have worked in the UK for more than five years the application is particularly straightforward.

The current one month processing time for DCPR applications may well slow down significantly in the future.

Steps for your business now

• If they have not already done so, employers should assess how reliant the business is on EEA nationals and ascertain how many of those employees already hold a DCPR or British citizenship.
• You can plan for your business' future and reassure staff and their family members by actively encouraging them to review their options now, whether by way of workshops or Q&A documents to explain the rules and how they apply. The Home Office has also published a toolkit for employers.
• Whilst there is no obligation on you as an employer to cover the costs of applications you may want to consider doing so if your business is heavily reliant on lower paid EEA national staff who may struggle to meet this cost.
• It would be wise to undertake some analysis to establish how much it would cost to support your staff in making the necessary applications whether now or in the future. This can then be factored into your business planning for the short term.
• The alternative may be paying increasing recruitment costs or overtime due to a staff short fall.