On 18 September 2014, the people of Scotland will vote on whether their nation should be a country that is independent from the rest of the United Kingdom. If they vote “yes”, the Scottish government is planning to negotiate to enable Scotland to break away from the rest of the United Kingdom in March 2016. What would an independent Scotland look like in terms of business, economic, legal and constitutional changes?

1.
Scottish independence – potential implications
for employment and pensions
Publication Date: 22 July 2014 | Author(s): Russell Brimelow (Lewis Silkin),
Bethan Carney (Lewis Silkin), Georgina Beechinor (Sackers) Member Firm(s):
Lewis Silkin & Sackers Country: United Kingdom
On 18 September 2014, the people of Scotland will vote on whether their nation should be a
country that is independent from the rest of the United Kingdom. If they vote “yes”, the Scottish
government is planning to negotiate to enable Scotland to break away from the rest of the United
Kingdom in March 2016 and the first Scottish parliamentary elections would be held in May 2016.
The Scottish government has published a white paper setting out its vision for an independent
Scotland, including the business, economic, legal and constitutional changes it would like to make
if the yes vote carries the day.
Initially, a newly independent Scotland would most likely be cautious about making significant,
abrupt changes. The new government would be reluctant to alarm business by doing anything too
radical in the immediate aftermath of the referendum. In any event, the government would have a
lot on its plate in the first few months, and maybe years, of independence: it would not be able to
make changes on all fronts simultaneously. Over time, however, certain employment laws would
most likely be adapted or abandoned, meaning Scotland’s employment law landscape may
eventually evolve to be quite different from that in England, Wales and Northern Ireland.
The nature of any changes made would, of course, depend upon which party was elected. The
current Scottish government’s proposals could be encapsulated as “left of centre”, including
changes to immigration policy and the minimum wage, the establishment of a National Convention
on Employment and Labour Relations (NCELR) and the introduction of a written constitution
incorporating equality and human rights principles.
The government is committed to ensuring that the national minimum wage rises at least in line with
inflation and also proposes to set up a Fair Work Commission (FWC) which, among other things,
would advise on the minimum wage. The FWC would also advise on other factors “relating to
individual and collective rights which contribute to fairness at work and business competitiveness”.
Members of the FWC would come from business, trade union and other backgrounds.
It is proposed that the FWC would work with the NCELR to foster a “constructive and collaborative
approach to industrial relations policy”. The NCELR would be a forum for key stakeholders to
discuss employment-related policies and regulation. These could range across issues such as
labour market reform and addressing skills shortages in particular sectors.
According to the white paper, achieving fair levels of pay is a fundamental objective. The Scottish
government backs the living wage campaign and is funding a charity, the Poverty Alliance, to
deliver an accreditation scheme to promote it. However, despite this support, it has not committed
to making the living wage a legal requirement.

2.
The Scottish government has made various commitments on equality and human rights and is
proposing a written constitution setting out key principles, including the rights contained in the
European Convention on Human Rights. It could also include the right to equality of opportunity
and entitlement to live free from discrimination. In addition, the government would expect public
and private organisations to improve the diversity and gender balance of their leadership. It intends
to consult on a target for female representation on company and public boards and, if necessary,
would legislate to meet it.
The white paper indicates that the government would foster a collaborative approach between
government and employer and employee associations, working with the Scottish Trades Union
Congress and business to encourage wider trade union participation. It would also consult on the
best form of employee representation on company boards.
The Scottish government has revealed that it would reverse certain recent employment law
changes, without specifying exactly which ones. It is committed to abolishing the UK’s new
employee shareholder status, whereby employees give up some employment law rights in
exchange for shares in their employer. It also plans to restore the 90-day consultation period for
redundancies affecting 100 or more employees (recently reduced to 45 days by the UK
government). Other changes on the cards include action on zero-hours contracts, the reduction (or
removal) of employment tribunal fees, the reduction of the qualifying period for unfair dismissal to
one year and removing the cap of one year’s pay on compensation.
Changes to immigration policy would be aimed in particular at reversing the impact of recent UK
government restrictions on the ability of Scottish universities and colleges to attract international
students. The Scottish government would reintroduce the post-study work visa, allowing recent
graduates to work or set up a business in Scotland for 24 months. They intend to use a points-
based immigration approach, targeted at Scottish circumstances, and lower the current financial
maintenance thresholds and minimum salary levels for entry. This could make it easier for
businesses to bring skilled individuals from overseas to work for them in Scotland.
For pensions, the white paper promises that UK pensions law would continue to apply to Scotland
after independence (until amended, replaced or repealed), but such a transition is unlikely to be
easy.
Currently, individuals saving into a private pension arrangement are protected by the regulatory
regime in the UK. This includes the Pension Protection Fund (PPF), which pays compensation to
members of underfunded ‘defined benefit’ (DB) schemes whose sponsor has had a qualifying
insolvency event. Given that some 17,500 people (according to Scottish government estimates)
are receiving compensation from the PPF, going it alone would be expensive for Scotland.
Assuming an independent Scotland becomes a member of the EU (not a given, as this would need
to be separately negotiated), changing the sovereign relationship of England and Scotland to that
of EU member states would mean the need to comply with the provisions for cross-border
schemes. In addition to registration requirements, a scheme operating cross-border must be “fully
funded” at all times. This is in contrast to the position for schemes which do not operate cross-
border, which can set their own period for making good any deficit, subject to regulatory scrutiny.
The requirement for full funding would kick-in overnight if Scotland becomes an independent state.
Whilst there are no plans to make immediate changes to the tax treatment of private pensions at

3.
the point of independence, the white paper suggests that the tax relief system could diverge in the
future, if adjusting the arrangements would improve incentives to save.
State pension provision is a key issue in the referendum, with the white paper proposals seeking to
better the current UK offering. The planned increases in the state pension age are also set to be
reviewed – a canny move in a country with some of the lowest life expectancy rates in the UK.
The programme is wide-ranging and ambitious, but is clearly some way from becoming law.
Whether employers and their staff love it or hate it, there is still the small matter of the referendum
– not to mention any ensuing election.
Taken from the Ius Laboris Knowledge Base: www.globalhrlaw.com
About Ius Laboris
Ius Laboris is an alliance of law firms offering employers cross-border employment and pensions
law advice. It has 1,300 specialist HR lawyers in over 150 cities and 44 countries. Ius Laboris
offers access to the best local HR law experts in one global team with 20% more ranked
employment lawyers (Chambers & Partners, November 2013) than any other global HR legal
services organisation. Further, Ius Laboris has 50% more recommended lawyers than its nearest
rival in a recent survey in PLC's employment law guide. Clients include many household names as
well as multinational companies in all sectors ranging from energy, retail and technology to
pharmaceuticals. For more information on Ius Laboris, please visit iuslaboris.com.