planning for brexit: talent implications€¦ · the referendum was announced. ever since...

P L A N N I N G F O R B R E X I T:

TA L E N T I M P L I C AT I O N S

M E R C E R S U R V E Y R E S U LT S

S E P T E M B E R 2 0 1 6

© MERCER 2016 2

Here are the people you can contact to discuss the themes from the

survey and their implications for you in more detail:

M B L , U K TAL E N T

Mark Quinn

+442071783341

mark.quinn

@mercer.com

G E T I N T O U C H

TAL E N T

S T R AT E G Y

Natalie Jacquemin

+442071785363

natalie.jacquemin

@mercer.com

C O M M U N I C AT I O N S

Susannah Hines

+442071783812

susannah.hines

@mercer.com

E X E C U T I V E

R E WAR D

Amanda Flint

+442071783276

amanda.flint

@mercer.com

M O B I L I T Y

Kate Fitzpatrick

+442071785653

kate.fitzpatrick

@mercer.com

W O R K F O R C E

R E WAR D

David Wreford

+442071785598

david.wreford

@mercer.com

On the morning of 24th June the outcome of

the referendum was announced. Ever since

“Brexit” – or the UK’s vote to exit the European

Union – has been a major concern for the

business community.

With trade relationships worth £510bn

between the UK and EU, 2.1 million EU

citizens working in the UK, and 1.2 million UK

Nationals living in other EU countries

(according to the Office of National Statistics),

organisations have started to grapple with the

implications of the decision even though, some

two months on, the roadmap remains unclear.

This report shares the responses of senior HR,

Talent and Reward directors in over 180

organisations to questions covering the

spectrum of issues likely to be affected by the

referendum vote.

O P E N I N G T H O U G H T S

© MERCER 2016 3

6 2 % W I S H T O

R E P L I C AT E E X I S T I N G

E U A R R A N G E M E N T S

T H R O U G H A N E E A

A R R A N G E M E N T

3 6 % O F O R G A N I S AT I O N S E I T H E R

H AV E O R W I L L R E V I E W T H E

C O S T I M PA C T O F C U R R E N C Y

D E VA L U AT I O N O N T H E I R G L O B A L

M O B I L I T Y P O P U L AT I O N

5 8 % E N V I S A G E W O R K F O R C E

P L A N S W I L L C H A N G E I N T H E

L O N G E R T E R M

7 6 % A R E C O N C E R N E D

A B O U T A D D I T I O N A L

O R G A N I S AT I O N A L

E F F O R T W I T H L I T T L E

O R N O R E S O U R C E

7 2 % O F O R G A N I S AT I O N S

R E P O R T T H AT E M P L O Y E E S

A R E “ S O M E W H AT

C O N C E R N E D ” B Y T H E

I M PA C T O F T H E V O T E

Y E T O N LY 11 % A R E

C O M M U N I C AT I N G

O P E N LY AT T H I S

S TA G E

8 2 % O F

O R G A N I S AT I O N S F E E L

R E S P O N S I B I L I T Y F O R

C O M M U N I C AT I N G

W I T H E M P L O Y E E S

A B O U T T H E I M PA C T

T H E H E A D L I N E S

© MERCER 2016 4 © MERCER 2016 4



SURVEY HIGHLIGHTS

© MERCER 2016 5

• 82% of the employers surveyed feel

either very or somewhat

responsible for communicating with

employees about the implications of

the EU referendum result.

• Employers who are communicating

appear to be focussing on providing

reassurance to employees, with the

economic outlook for the

company and job security being

the most discussed issues.

• Interestingly, the survey also

highlighted opportunities to work

abroad, diversity and international

mobility as other key issue.

E M P L OY ER S B E L I E V E

T H E Y H AV E A

R E S P O N S I B I L I TY TO

C O M M U N I C AT E T H E

I M PAC T O F B R E X I T TO

T H E I R E M P L OY E E S • Just 39% feel communications will be

affected in the next three months.

• 74% believe communications will be

affected in the next 12 months.

T H E R E W I L L B E A B I G G E R

L O N G E R T E R M I M PAC T O N

C O M M U N I C AT I O N S

• 74% of employers see employees as

somewhat concerned or very

concerned about the future.

E M P L OY EE S AR E

C O N C E R N E D

Employers should take a considered approach to communications whilst

uncertainty exists. Some aspects to consider include:

• Be transparent in what Brexit means to the company and ensure the

communications are delivered in a timely manner;

• Don’t give uncertain facts – stick to known facts to avoid any confusion;

• Be aware of unintended outcomes, don’t build a need or concern if you are

unable to offer further information;

• Don’t just focus on one employee segment – Brexit will affect all employees;

• Consider your channels, when employees are feeling vulnerable, face to face

interaction is best and should be delivered by line managers;

• Be sensitive to the human aspect of the referendum recognising that it was an

emotive and personal experience for all employees; and

• Aim to use communications to bring employees together by referring to your

Company vision and values.

E M P L O Y E E C O M M U N I C A T I O N S

© MERCER 2016 6

O R G AN I S AT I O N S

AN T I C I PAT E A F O C U S

O N B U I L D

• There is an emerging impact on

workforce planning, but this

will occur over time.

• 17% anticipate a shorter term

impact on workforce planning.

• 42% anticipate a medium term


• 58% anticipate a longer term


AN T I C I PAT E D I M PAC T S O N

W O R K F O R C E P L AN N I N G

AR E L O N G E R T E R M

M O S T O R G AN I S AT I O N S

AR E I N ‘ WAI T AN D S E E ’

M O D E

• 28% expect changes to workforce

structure.

• 47% anticipate the HR delivery

model to change.

“At this stage

we have not

planned much.”

“Completely

depends.”

“All in

limbo.”

• The concern over the loss of access to

the EEA/EU workforce, and concerns

over retaining EEA/EU high potentials,

has created a stronger focus on

recruiting from within the UK and

improving development programmes

for existing staff.

• 66% anticipate focusing on “build”

– developing and promoting talent

from within.

• 21% of anticipate focusing on

“buy” – hiring from the external

labour pool.

• 13% anticipate focusing on

“borrow” – contract or temporary

arrangement.

• 11% of organisations currently

anticipate that some jobs may move

from the UK to other locations.

There is a natural tension between

waiting to understand what workforce is

needed - taking account of external

factors (i.e. demand), and having

enough time to create a workforce with

the right skills (i.e. supply).

The former is in flux, and the latter

takes time. Scenario planning helps HR

become more agile and responsive, by

anticipating different likely futures and

deciding on the best plan of action

under each scenario, in advance.

T A L E N T M A N A G E M E N T

© MERCER 2016 7

G L O B A L M O B I L I T Y

D E VAL U AT I O N O F G B P I S

H AV I N G T H E L AR G E S T

I M M E D I AT E I M PAC T O N

M O B I L I T Y P O L I C Y

I M M I GR AT I O N

C H AN G E S AR E A

P R I M ARY C O M C ER N

F O R E X PAT R I AT E S

T H E M AJ O R I T Y O F

O R G AN I S AT I O N S

H AV E N O T C H AN G E D

T H E I R M O B I L I TY

P R O G R AM M ES Y E T

The devaluation of GBP against most

major currencies since 23 June 2016

has negatively impacted the value of

salary and allowances paid exclusively

in GBP, which in turn has generated

queries regarding currency protection

mechanisms and the payment and

timing of cost of living adjustments in

particular.

(It is important to remember however

that those not paid in GBP are likely to

have benefited in the short term).

• Only 2% of organisations reported

that the UK referendum result has

had a significant impact on their

current mobility programme with

regard to assignments into/out of the

UK.

• 26% identified some impact,

with the remaining 72%

reporting no impact.

• 13% of organisations do expect to

see a decrease in UK inbound

assignee numbers over the next two

years, but 57% say that it is too soon

to tell.

• Only 14% of respondent organisations

have conducted any cost analysis in

response to the GBP devaluation, but

another 22% anticipate doing this next

quarter.

• One-third of organisations reported that

in light of the devaluation of GBP, Long

Term Assignees had expressed concern

or requested additional compensation.

• 18% have allowed long-term assignees to

split their pay or be paid in an alternate

currency as a result of the referendum

result.

• 22% have indeed conducted an interim

cost of living or currency review for their

long-term assignees, with another 11%

considering it.

• Respondents reported a wide range of

practice regarding the exchange rates

used to set assignment compensation and

allowances in the first place, so of the

magnitude of the devaluation will vary by

organisation depending on the rates used.

• Multiple organisations reported

receiving queries from EU nationals

resident in the UK, seeking assurances

as to the longer term viability of their

position, as well as requests for

support in relation to permanent

residence applications from eligible

employees.

© MERCER 2016 8

H O W E V E R T H E R E I S

G E N E R AL AG R E E M E N T

T H AT R E WAR D F O R K E Y

TAL E N T W I L L G O U P

AN T I C I PAT E D I M PAC T S O N

W O R K F O R C E P L AN N I N G

AR E L O N G E R T E R M

O R G AN I S AT I O N S AR E

U N C L E AR AB O U T W H AT

T H E E U R E F E R E N D U M

M E AN S F O R R E WAR D

AC R O S S T H E I R

O R G AN I S AT I O N • 50% of organisations believe that there

will either be a marginal

(35%) or significant (35%) increase

in market pay for key talent.

Whilst most organisations are adopting the ‘wait and see’ approach, some are taking

the opportunity to review their current positions, understand the options available

and develop response strategies in line with their strategic workforce planning

outcomes.

• Whilst 2/3rds of organisations

anticipate financial implications

of Brexit;

...less than half anticipate

additional challenges with

the availability, attraction and

retention of talent, and

… 41% perceive that there will

be no impact on market pay

level, and where they do

perceive an impact they are

divided on whether this will have

a marginal inflationary (30%) or

deflationary (27%) impact.

“Reward impact

is largely

unknown”

“Most

organisations

are ‘waiting

to see’.”

“Key talent

will be a

priority.”

• 3/4 of organisations do not anticipate

changing their reward management

practices.

• A small population will be either

centralising or decentralising

their governance to a greater

extent.

• 94% will be maintaining the current

basis for rewarding their staff.

• Few organisations will be adjusting their

current pay and bonus budgets as a

result of the EU referendum.

• In keeping with participant views that

the longer-terms implications for Brexit

can not be fully understood

organisations see little impact on future

pay and bonus budgets.

W O R K F O R C E R E W A R D

© MERCER 2016 9

E X E C U T I V E R E W A R D – F S & O T H E R S E C T O R S

P L AY I N G I T S AF E I N F S ,

K E E P I N G I N L I N E W I T H

THE VARI ABLE PAY CAP

G RE ATE R I NTE RE S T I N

P E R F O R M AN C E G R AN T I N G

P L AN S , L E S S I N T E R E S T I N

E X T E N D I N G H O L D I N G

P E R I O D S

D I V I D E D O P I N I ON S O N

T H E E F F E C T O F

L O S I N G E U B U S I N E S S

AR R AN G E M E N T S • The vast majority of our respondents

were considering including flexibility

within the remuneration policy for

variable pay to exceed the 2x fixed pay

cap.

• 6% had just reviewed their

remuneration policy.

• 8% are unable to disapply the cap.

• 8% already had a remuneration

policy with built in flexibility.

• Clearly, companies are keeping within

the boundaries in Financial Services

and this is not the time for radical

change.

• 40% will invest in mainly existing

non-UK EU locations (e.g. Dublin,

Lux).

• 33% will set up mainly new locations

outside the UK.

• 27% will invest in business

developments outside the EU

“Huge

implications for

FS companies”

“Not the time

for increasing

pay packets”

“No

extensions

on holding

periods”

• The majority of companies responding to

this section currently have either a

performance vesting plan or performance

granting plan.

• 8% of companies plan on introducing a

combined performance granting/vesting

plan.

• 3% plan on introducing a performance

granting plan, equally to performance

vesting plan.

• There was equal interest in assessing

performance granting by discretionary

forms of company / individual

performance with less onus on

formulaic performance assessment.

• Organisations tend to consider payout by

the total variable pay compared to each

component.

• Only 4% of companies are extending post-

vesting holding periods from 6 months to 1

year.

For FS organisations, early planning

on location strategy will need to take

account of Talent supply alongside

other considerations. Most

organisations are adopting the ‘wait

and see’ approach whilst remaining

ready to adapt as the landscape

unfolds.

© MERCER 2016 11

S H O R T T E R M R E A C T I O N S

A R E F O C U S E D O N

M A N A G I N G G L O B A L LY

M O B I L E P O P U L AT I O N S

E N G A G I N G I N O P E N

D I A L O G U E W I T H

E M P L O Y E E S I S

C R U C I A L

TA K I N G T H E

O P P O R T U N I T Y

T O E M B R A C E T H E

C H A N G E

The immediate reaction of businesses is that

they wish to replicate existing EU

arrangements as much as possible through

an EEA or EEA style arrangement (62%).

In relation to pay policy – at both “executive”

and an “all employee” levels – the majority of

respondents are in a “wait and see” cycle,

particularly in the Financial Services sector.

An early area of focus and action relates to

the globally mobile employee group –

particularly for long-term assignees (33% of

organisations) with a high volume of

individual queries affecting Cost Of Living

Allowance (COLA) adjustments, FX

movements, and future security of moves –

both into and out of the UK. 36% of

organisations either have or will review the

cost impact of currency devaluation on their

GM population: a high response so early in

the Brexit process.

Our respondents indicate that

businesses feel a duty to communicate

with employees about the impact of

leaving the EU (82% of employers feel

either very or somewhat responsible) –

and with good reason: 72% of

organisations report that they feel that

employees are at least “somewhat

concerned” by the impact of the vote

and 48% believe it will reduce or

significantly reduce morale.

However only 11% of respondents are

communicating openly at this stage

(due to uncertainty). Initially

conversations have focussed on

economic outlook for organisations

(64%) and job security (48%).

58% of organisations envisage their

workforce plans changing in the

longer term (>2 years) with an

overwhelming majority suggesting

an increase on developing and

promoting Talent from within

(66%).

There are some concerns about the

impact of additional effort within

organisations (including the HR

function) from 76% of respondents,

but with little or no additional

resource.

C L O S I N G T H O U G H T S

© MERCER 2016 12

Data confidentiality standards

To ensure the confidentiality of all data, a minimum number of observations is required in order for statistics to be displayed.

Three organisations must report at least three observations for a variable in order for the mean and frequencies to be

displayed.

Four organisations and four observations are required for display of the median.

Five organisations reporting at least five observations are required to display 25th and 75th percentiles.

In single-answer questions the total may not equal 100% due to rounding.

In multiple-answers questions organisations may indicate more than one option, therefore the total may exceed 100%.

A double hyphen i.e. “--” has been indicated where there are insufficient data for analysis.

Survey usage

The information and data contained in this report are for information purposes only and are not intended nor implied to be a

substitute for professional advice. In no event will Mercer be liable to you or to any third party for any decision made or action taken

in reliance of the results obtained through the use of the information and/or data contained or provided herein.

D A T A C O N F I D E N T I A L I T Y A N D S U R V E Y U S A G E

planning for brexit: talent implications€¦ · the referendum was announced. ever since...

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