With Scottish Independence turning into a closer race than previously thought - what impact would a ‘yes for independence’ vote have on your reward strategy?

For organisations with significant business operations north of the border, independence will mean a re-think of employee reward.

1. What currency will people be paid in? The ‘yes’ campaign are adamant that Scotland will keep the pound, and salaries and pensions will be paid just as they are now, but with pushback from the Bank of England and HM Treasury, this is less certain than it appears.  Will a Scottish pound be worth less? The nightmare scenario is a ‘floating’ pound where there is no clear rate of exchange and yet the Scottish pound is not accepted at parity in the UK. We know about the Thai Baht, the Croatian Kuna and the Indian Rupee, but setting up pay in a new system with an unknown currency has us scratching our heads over what will unfold.   
2. The proposals for independence include increases to the minimum wage to make up for the short-fall in increases since 2008 when compared with inflation.  This will add approximately £675 in salary per year per full-time equivalent employee – it’s not clear from the proposal how this will work – one fell swoop or over a period of time.  However, there is a firm commitment from the Scottish  government to increase the minimum wage at a higher rate than the rest of the UK.
3. The SNP have declared their intention of setting up ‘Revenue Scotland’ with different tax filing systems to the HMRC.  This will require the likelihood of a new payroll system and different systems for reporting, tax credits and actual taxation levels.
4. Pension funds which are run by Scottish fund managers and held by employees and investors in the rest of the UK will be under question.  Will savers want their nest eggs held in a foreign country? The Sunday Times reported they’d already seen investment pots being moved south of the border by cautious investors.  On that note, will insurers (for life insurance, critical illness, medical insurance etc) charge differently for Scottish employees within your workforce?  A smaller group of employee usually means higher cost per person…
5. How mobile will your workforce be?  With Scotland potentially being outside the EU, at least initially, transfers are potentially problematic in comparison to now.  Will English, Welsh or Northern Irish employees demand repatriation?  Or key employees based in Scotland look to move employer to stay within the UK.  On the other hand, there may be a number of retention issues for organisations: English employees based just south of the border may look to more favourable Scottish benefits and employment laws in the future.
6. Uncertainty over housing finance may leave Scottish employees with higher mortgage payments, negative equity or less opportunity to borrow money.  Can you put in place financial education, access to counselling or even set up arrangements with mortgage brokers to help employees going through house moves and changes to their payments?
7. There have been concerns raised over the potential lack of investment that an independent Scotland may suffer.  The obvious implications for pay levels, benefits, investment in people and their development would result in far reaching and long term damage to businesses. Economists are forecasting a fall in GDP for both Scotland and the rest of the UK if a separation occurs.  This could certainly reverse business confidence and the increase in pay settlements that we’ve seen over the last year.

There is no doubt that a ‘yes’ or ‘no’ on Thursday will have an impact on business in the UK.  Even a ‘no’ vote would still bring further changes to personal taxation and employment law for organisations to accommodate.  We’ll keep you updated with our thoughts, so look out for more updates from us on this issue.

 

Info gathered from a range of media sources and the Scottish Govt website

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