If the UK votes to leave the European Union (“EU”) on 23 June 2016, nothing will happen for employers and employees overnight. The referendum itself does not have any legal effect and is simply an indication of the wishes of the voting public. In order to actually exit the EU, the UK government must trigger the leaving provisions in Article 50 of the Treaty on European Union (2009) by notifying the European Council of its withdrawal. There is no timetable for withdrawal in the event of a vote to leave and it is not clear how soon after the vote the government would take this step.
Once that notification has been made, however, the EU and the UK have two years to negotiate an agreement setting out the arrangements for its withdrawal. These negotiations shall take “account of the framework for its future relationship with the Union.” If alternative arrangements have not been agreed by the end of the two year period, then the UK will simply cease to be a member of the EU from this date (unless the European Council and the UK agree to extend the two year negotiation period).
During these negotiations, the UK will remain a part of the EU and it will effectively be business as normal. Employee rights and freedom of movement for workers within the EU will remain: UK nationals will be able to travel freely and work in the rest of the EU and EU nationals will be able to do the same in the UK. UK and EU nationals will continue to enjoy freedom of movement rights unless and until the UK completes the legal processes for leaving the EU.
Even if a Brexit is eventually formalised, it is possible (though probably politically unlikely) that the UK and the EU will negotiate to maintain freedom of movement. The UK could negotiate to maintain freedom of movement rights with the EU has a whole, or it could negotiate with particular EU countries to maintain freedom of movement rights with them (though this, again, is probably politically unlikely). Under the latter scenario, only nationals of those EU countries with which the UK negotiates freedom of movement rights would be able to work in the UK without a visa, and vice versa.
If the UK leaves the EU and does not negotiate to maintain freedom of movement rights, EU workers might be required to apply for visas under the UK Immigration Rules. UK nationals living in the EU would similarly have to apply for visas to work there. Subjecting UK and EU workers to the immigration requirements that currently apply to third country nationals would be costly to international employers. The costs of sponsoring a skilled worker plus two family members for 5 years in the UK is currently £6,652 and will rise to £11,652 when the Immigration Skills Charge comes into effect in April 2017.
Low-skilled workers are unlikely to satisfy the eligibility requirements for UK work visas. Therefore shortages of low-skilled workers might result from a Brexit. Employers might face higher costs as they raise salaries to attract the labour that they need.
EU-derived employment law will continue in effect in the UK unless and until it is specifically repealed by the UK government.