Home Office publishes response to Tier 2 MAC review

Home Office publishes response to Tier 2 MAC review

The Government has published its response to the Migration Advisory Committee reviews of the Tier 2 points-based immigration system and a number of changes to Tier 2 will be made in October 2016 and April 2017.  These changes will affect all employers who sponsor employees under Tier 2.  

As part of its drive to cut net migration, the Government asked the Migration Advisory Committee (“MAC”) to consider possible ways to restrict migration under Tier 2 of the points based immigration system.  The MAC published its recommendations for changes to Tier 2 in January 2016

Under Tier 2, employers must register with the Home Office to become licensed sponsors and may then sponsor non-EEA nationals.  Broadly, the Tier 2 (General) route enables non-EEA nationals with job offers to undertake skilled work in the UK.  The employer must be satisfied that there are no EEA nationals or other settled workers for the role.   In most cases the employer must first carry out the Resident Labour Market Test by advertising the role in accordance with Home Office guidance.  The Tier 2 Intra-Company Transfer (ICT) category enables UK employers to transfer employees from its international offices to the UK office.

The Home Office has now published its proposals for reform to Tier 2 in response to the MAC’s review.

Home Office response
The Home Office response confirms that the Government intends to accept the majority of the MAC’s recommendations.

There is a mixture of good and bad news for employers. Overall, it will become far more costly to sponsor non-EEA nationals as minimum salary thresholds are set to increase and a skills levy of £1,000 per year per Certificate of Sponsorship (“CoS”) will be introduced.  However, the Government has said that it will not implement the MAC’s recommendations that students switching from Tier 4 to Tier 2 should be included in the annual Tier 2 (General) limit and be subject to the Resident Labour Market Test.  This means that employers will still be able to hire non-EEA nationals who have recently graduated from UK universities without needing to undertake the Resident Labour Market Test.  The other good news is that the Government has confirmed that it will not implement the MAC’s recommendations that intra-company transferees should be required to have worked for their company for two years, rather than 12 months, or that transferees working on third party contracts should be restricted to a separate category.

Key changes
The key changes are set out below.  These changes will take effect in two tranches: Autumn 2016 and April 2017.

From Autumn 2016

Tier 2 (General)

  • The minimum salary threshold for all Tier 2 (General) migrants will increase from £20,800 to £25,000 per annum for experienced workers (with the new entrant rate remaining at £20,800 per annum).
  • Nurses, medical radiographers, paramedics and secondary school teachers in mathematics, physics, chemistry, computer science and Mandarin will be exempt from the increases to the Tier 2 (General) salary threshold until July 2019.
  • Nursing will remain on the shortage occupation list until July 2019 but employers will be required to carry out the Resident Labour Market Test before recruiting a non-EEA national.
  • Extra weighting will be given within the Tier 2 (General) limit (currently 20,700 per year) to businesses sponsoring overseas graduates.
  • Graduates will be allowed to change roles within a company once they have secured a permanent job at the end of their training programme.

Tier 2 (ICT)

  • The Tier 2 (ICT: Skills Transfer) category will be closed to new applicants. This is currently a useful category which enables overseas employees to transfer to the UK office for a short period to gain skills and knowledge needed to perform their role overseas, or to pass on their skills to UK colleagues. The employee does not need to have been working for the employer overseas for a minimum period of time.
  • The minimum salary threshold for Tier 2 (ICT: Short Term Staff) will increase from £24,800 to £30,000 per annum.
  • The Graduate Trainee salary threshold will be reduced from £24,800 to £23,000 and the number of trainees each employer may bring to the UK will be increased from five to 20.   This is useful to large multi-national companies as, under this route, overseas employees may temporarily transfer non-EEA nationals to the UK office to undertake a graduate trainee programme for specialist roles.  The employee must be a recent graduate with at least three months’ experience with the overseas employer.
  • Applications under Tier 2 (ICT) will no longer be exempt from the Immigration Health Surcharge of £200 per year of leave granted.  This will significantly increase the cost of sponsoring employees under the ICT route for employers as this surcharge will apply to the main applicant and each of their dependants.

From April 2017

Tier 2 (General)

  • The minimum salary threshold for Tier 2 (General) will increase further to £30,000 per annum for experienced workers (the new entrant rate will still remain at £20,800 per annum).
  • Extra weighting will be given within the Tier 2 (General) limit where hiring the non-EEA national “is associated with the relocation of a high-value business to the UK or, potentially, supports an inward investment”.  The Resident Labour Market Test will also be waived in these cases.  We await further guidance on how this will be assessed and operated.
  • Sponsors will be charged an Immigration Skills Charge of £1,000 per CoS per year.  Small and charitable sponsors will pay a reduced charge of £364 per CoS per year.  PhD level occupations, the Tier 2 (ICT: Graduate Trainee) category and those switching from Tier 4 will be exempt from this charge.

Tier 2 (ICT)

  • The Tier 2 (ICT: Short Term Staff) category will be closed to new applicants.  This route currently enables employees who have worked for the overseas company for 12 months to transfer to the UK company for up to 12 months and lower minimum salary thresholds apply.  Following this change, the only Tier 2 (ICT) categories available will be Long Term Staff, with a minimum salary threshold of £41,500 per annum, and the Graduate Trainee category.  This will have a significant impact on businesses which transfer a large number of employees to the UK under the ICT category where many of those employees currently earn less than £41,500 per annum.
  • The high earners’ salary threshold for Tier 2 (ICT: Long Term Staff) will be reduced from £155,300 to £120,000 per annum.  Intra-company transferees meeting this salary threshold will be able to remain in the UK under the (ICT: Long Term Staff) category for up to nine years, rather than the usual five years.
  • To qualify under Tier 2 (ICT: Long Term Staff) employees must have worked for the overseas employer for at least 12 months.  However, a further change means that intra-company transferees will not be subject to this 12 month experience requirement where the transferee is paid over £73,900 per annum.
  • The Immigration Skills Charge will be introduced for Tier 2 (ICT) applications in the same way as for Tier 2 (General) above. 

The Home Office has also indicated that it will be reviewing the extent to which allowances may be counted as salary under Tier 2 (ICT) and the MAC’s proposal for a review of skills in the IT sector.  Any reform in these areas is likely to take effect from April 2017.

In addition, it has confirmed that it intends to simplify the Immigration Rules and guidance to “make the system clearer and more user-friendly” for employers and applicants.  Inevitably this will result in a number of further changes.

Employers will be relieved to know that the Home Office has no current plans to reduce the Tier 2 (General) cap of 20,700 places per year; to restrict the ability of employers to recruit non-EEA nationals who have recently graduated from UK universities without carrying out the Resident Labour Market Test; nor to restrict the right of dependants of Tier 2 migrants to work.

However, the Home Office is imposing additional costs on sponsors to try to ensure that employers are deterred from employing non-EEA workers because of the increased cost.  The Government is clearly hoping to ensure that employers will only sponsor highly skilled workers whose level of seniority merits the costs involved with sponsorship under Tier 2.  The higher salary thresholds, together with the Immigration Health Surcharge, which will be extended to all Tier 2 applicants, and the introduction of the Immigration Skills Charge will make sponsorship under Tier 2 (General) and Tier 2 (ICT) significantly more expensive for employers going forward.

At the moment there is very little detail as to how the proposed changes will work in practice and employers are advised to take advice to ensure they are not caught out when the new Immigration Rules take effect.

For more information on any of the issues raised, please contact Kerry Garcia, kerry.garcia@stevens-bolton.com, or any other member of the Immigration team at Stevens & Bolton.

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