The UK skills gap - is casting the net globally the answer?

30 June 2023

Recent UK workforce commentary has covered the reduced numbers of workers available to the UK workforce and associated skills gap issues, in part linked to Brexit. This is alongside the war for talent and the focus many organisations put on retention and recruitment. Our recent publication supports this commentary with 37% of businesses having experienced skills shortages and 31% having had difficulty recruiting new employees, therefore supporting the skills gap rhetoric.

The challenges driving the recruitment of new employees were varied. Most significant challenges were around the cost of labour and competition for roles locally. However, the lack of available qualified workers was noted as a challenge to a great extent (26% of respondents) and to some extent (46%) by the respondents. Post-Brexit immigration policy was cited as a challenge to a great extent (23%) and to some extent (39%) by the organisations surveyed.

Clearly, there are challenges in the UK skills market. Businesses are struggling to recruit and retain talent, so could looking at a global talent pool be the answer?

The impact of globalisation on talent

In total, 52% of respondents advised that they had sourced more labour from outside of the UK, 19% indicated they had sourced a lot of labour, 33% had sourced slightly more labour, and 79% of the recruitment was targeted at specific countries and mostly within the EU.

The change since Brexit is such that there is no longer freedom of movement for workers and a post-Brexit immigration policy has impacted workforce and recruitment strategies. However, such a high proportion of overseas recruitment is surprising in many ways. Whilst casting the net wider and more globally clearly creates a bigger talent pool, particularly when this relates to a niche skillset, there are additional considerations to be factored into the decision-making process

Post Brexit, where an individual is sourced from within the EU, there are certain immigration considerations and obligations if the individual is to relocate to the UK to carry out the role. To get the appropriate right to work/immigration coverage in place has a cost attached. It can take time, and there is an administrative burden on both the individual and the organisation.

Many organisations, where the work type allows, choose not to ask overseas recruits to relocate to the UK. Instead, they allow those individuals to perform their role from their home location. This can raise a number of relatively complex considerations which need to be managed by both the employer and employee.

If we take the example of a UK-based company with no overseas entities, recruiting an employee in the Netherlands, and allowing that individual to work from their home. This creates a number of potential issues.

  • Permanent Establishment (PE): has the employee created a PE/corporate presence for the UK company in the Netherlands?
  • Payroll: where is the individual paid? If this is from a UK payroll, should there also be a Dutch payroll? Should UK PAYE be paid?
  • Social Security: is National Insurance deducted via the UK payroll? This may instead be due where the work is performed (the Netherlands) and the UK company may need to register overseas.
  • Employment Rights: whilst a UK employment contract may be issued, employment rights can be generated in the overseas location.

Some organisations will seek to manage these risks by using an EoR (Employer of Record) arrangement, which can be appropriate in some cases but not in all.

The war for talent and the UK skills gap certainly is an ongoing challenge for many organisations in the UK. Whilst recruiting from overseas certainly increases options for recruiting and retaining talent, the globalisation of talent brings additional considerations and risks which should be understood by organisations.

For more information or advice on global mobility arrangements, please contact Joanne Webber.