Tier 2 MAC Report: The effect on UK businesses

The Government is keen to reduce net migration figures and for employers to be less reliant on overseas workers.  The Government therefore last year asked the Migration Advisory Committee (MAC) to consider possible ways to further restrict migration under Tier 2 of the points based immigration system.  The Tier 2 route enables skilled non-EEA nationals with job offers to work in the UK to fill a gap in the UK labour market.  This category enables organisations to transfer employees from international offices to the UK under the Intra-Company Transfer (ICT) category and to recruit new hires under the Tier 2 (General) category.

The MAC made the following key recommendations: 

  • The Tier 2 (General) minimum annual salary should be increased from £20,800 to £30,000.  The MAC recognises the risk that the proposed higher salary thresholds could be damaging to growth.  Further, the typical pay of migrants in certain public sector occupations, such as healthcare and teaching, is below this new recommended threshold and the MAC therefore recommends this new minimum salary should be phased in.
  • The resident labour market test (RLMT) should be extended to all migrants switching into Tier 2 from within the UK, including Tier 4 students switching to Tier 2.  At the moment, in many cases, before being able to sponsor someone under Tier 2 (General), the employer must carry out the RLMT by advertising the UK role for at least 28 days and must be satisfied that no settled worker in the UK or EEA national can perform the role. However, the RLMT does not apply in certain cases, including if the role is on the shortage occupation list or if the person is switching from within the UK from Tier 4 as a recent graduate into Tier 2 (General).  If implemented this change will make it harder for employers to sponsor recent non-EEA graduates.
  • There should not be an automatic time limit imposed as to how long a job may remain on the shortage occupation list.  This is a welcome recommendation.  However, the MAC recommended that employers should provide sufficient evidence when an occupation has been on the list for a number of years.
  • Introduction of an Immigration Skills Charge. This is likely to be around £1,000 per year.  This would be a charge on businesses payable each time they sponsor an individual under Tier 2.  The MAC’s intention is that the money generated by this charge would go towards the training of British workers. 
  • The ICT route should be largely unchanged but the MAC recommended that employees wishing to transfer from an overseas company to a UK company must have worked for the overseas company for 2 years, rather than the current period of 12 months. 
  • The creation of a new ICT route specifically for third-party contracting, with an annual salary threshold set at £41,500.  This recommendation follows concerns about sponsors (particularly in the IT sector) using the ICT route to enable non-EEA nationals to carry out work for a third-party organisation, as this provides those companies with a substantial cost advantage.  There are concerns that ICT employees are being paid less than UK workers would be paid and that the use of third-party contracting in this way is not contributing to the stock of IT skills within the UK workforce. 
  • The Immigration Health Surcharge, which already applies to Tier 2 (General) applicants, should apply equally to applicants under Tier 2 (ICT) and their dependants.  This surcharge costs £200 per year in the UK and contributes towards use of the NHS.  If this is extended to the ICT route, it will lead to a further increase in cost for businesses, as companies often reimburse employees for the cost of this surcharge.
  • Dependants of Tier 2 migrants should retain the right to work in the UK.  This is welcome news as this flexibility for dependants to work, which many other countries do not permit, is an incentive for skilled employees with families to come to the UK. 

If these recommendations are implemented, all sponsors are likely to experience an increase in costs in recruiting the best skilled workers from outside the EEA, both in terms of the cost of initially bringing the worker to the UK and an ongoing obligation to pay an ever-increasing minimum annual salary. 

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