MerrillApril.1

When expanding into the UK, US institutions need to be aware of differences in employment law, as well as culture.

It has been said that England and the US are “two countries separated by a common language”. As US private equity (PE) and banks continue their rapid expansion into the UK, what are some of the challenges of integrating US and UK operations from an employment perspective?

It is widely known that because of a combination of EU law, which has been implemented into English law pre-Brexit, and of English law rights, UK employees have greater employment protection and access to benefits than their US counterparts. The focus historically has been on the difference between termination at will, which has no UK counterpart, and on holiday rights and other benefits.

For example, after a month-long employment, UK bankers will be entitled to notice of termination. The norm in the sector is one month, but in fact there is a statutory floor of one week per year of service – so that bankers with 12 or more years of employment will be entitled to 12 weeks’ notice. After two years’ employment, a banker can only be dismissed for a prescribed reason – the main ones being redundancy, incapacity and misconduct – and only after a fair procedure has been followed, which requires consultation with the individual prior to taking a decision to dismiss.

In a situation where a manager in the UK no longer wants to work with a team member, the impact of these individual rights is a fetter to hasty decisions and, in terms of employment planning and managing budgets, the inevitable delay in implementing change must be factored in.

Despite pre-Brexit suggestions that the regulation of working time may change once the UK left Europe, currently UK employees remain entitled to 5.6 weeks of paid leave per year and all but the most senior autonomous executives are entitled to cap their average working week to 48 hours. This means that UK employees required to get in step with the US prevailing long-hours culture have a legal means to challenge such unpopular working practices.

The UK is also bound by the retained EU law in relation to processing of personal data. And as the UK emerges from the pandemic – and employers wrestle with issues of ethics and privacy as regards to initiatives such as workplace testing and certification status – these UK rights which differ from the position in the US are likely to prove similarly testing for US employers wishing to integrate a UK workforce.

US controllers of data who process the data of UK employees will be governed by the more strict UK privacy provisions, even if the processing is carried out in the US; in some cases, a UK representative must be appointed.

Hybrid working

The vast majority of UK employers, including in the PE and banking sectors, are now working to get their employees back into offices; many, like NatWest, whose contracts previously required full-time work from the office, are nonetheless opting to implement hybrid work patterns requiring only two or three days a week in the office.

Any new entrants to the UK market need to be aware not only of the legal issues outlined above, but also of the cultural shift which is taking place, with HR directors actively recruiting transformation specialists and even considering a new C-suite role of chief remote officer to deal with the complex issues that are arising.

While the debate about mandatory vaccination has died away and is unlikely to return in any sector, in February 2022 the UK government announced its strategy for living with Covid-19, as the pandemic transitions to an endemic. As of April 1, all remaining legal restrictions were removed, leaving the onus on UK employers to determine their own strategy on issues such as testing, sick pay, status certification and face coverings. The UK government issued its guidance: “Reducing the spread of respiratory infections, including Covid 19, in the workplace”. This guidance includes a direction to “try to work from home, if possible”; and if not possible, employees should talk to the employer about the options.

In the UK the onus is firmly on individuals to reduce transmission and, in our experience, UK employers are for the most part being very flexible. This is, in part, to try and reduce the number of employees off sick and unable to work because of the impact on productivity, and also because of the great resignation and the war for talent, from which the financial services sector is not immune. Indeed, both Citigroup and UBS have been vocal about their view that the pandemic has changed the world of work forever and they see hybrid working as a means to attract and retain banking talent.

The trend in the sector seems to be a move to capitalise on hybrid working advantages, for example by decreasing office space or negotiating to reduce, or ultimately abolish, London weighting allowances for remote workers’ salaries. Goldman Sachs, on the other hand, is continuing to insist on a full-time return to the office for most of its employees even after the latest shut down for the Omicron variant. JPMorgan Chase and Morgan Stanley are reportedly also taking a hardline approach. It remains to be seen whether ultimately such a stance will result in key departures and a competitive disadvantage.

Merrill April is a partner and employment and partnership law specialist at CM Murray.

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