The Government has made no secret of its aim to reduce net migration to the UK. In this context, the Migration Advisory Committee (MAC) was charged with carrying out a thorough review of Tier 2 with the aim of providing recommendations to reduce migration under the Tier 2 route.
The MAC recently published their report and it isn’t brilliant news for employers. The Government has previously implemented the majority of MAC’s recommendations so this report should be viewed with some concern by UK employers.
Immigration Skills Charge
Overall the MAC recommendations would substantially raise the costs of recruiting Tier 2 migrants and yet appear unlikely to improve the UK skills shortage. One of the key recommendations in the report is to introduce an Immigration Skills Charge (‘ISC’) of £1,000 per Tier 2 migrant per year. This would be used to invest in training and upskilling UK workers in an effort to reduce employers’ reliance on migrant workers.
The upfront costs of employing a Tier 2 migrant are already substantial. The standard cost of sponsoring an individual under Tier 2 (General) who is coming to the UK for 5 years with their partner and 2 children already amounts to £8,711. If the ISC were implemented, this could add an additional £5,000 to the cost of a 5-year visa.
From our experience in assisting companies in navigating the UK immigration rules, we find that migrants are usually employed where there is a skills gap in the workforce. If £5,000 of additional training for the employer’s existing workforce were sufficient to meet this skills gap, employers would no doubt already be adopting that approach since it would be more economical than incurring the already high costs of sponsoring a migrant worker.
Increase in minimum salary thresholds
The MAC also proposes increasing the minimum salary thresholds for Tier 2 (General) and Short Term Tier 2 (Intra-Company Transfer) migrants. The MAC recommends increasing the Tier 2 (General) minimum from £20,800 to £30,000 (for experienced workers) and to £23,000 (for new entrants).
The MAC is of the view that raising the cost of recruiting a Tier 2 migrant will reduce demand. However, this logic doesn’t necessarily follow. Where an employer needs to fill a particular specialist role and it isn’t possible to find the skill set from within the resident labour market, the employer will need to look elsewhere or the business will suffer. The one certainty is that raising the cost of hiring non-EEA nationals will provide further obstacles for employers looking to recruiting key staff.
Extension of Resident Labour Market test
The Resident Labour Market Test (‘RLMT’), whereby employers must advertise the role on offer in the UK for a 28-day period before offering the role to a non-EEA national, may be extended to all those switching into Tier 2 from within the UK. At present, graduates from UK Universities are not subject to the RLMT. If this exemption is removed, it will increase the administrative burden and cost of recruiting non-EEA graduates for employers.
Tier 2 (Intra Company Transfer) route
This category enables multi-national organisations to transfer employees from international offices to their UK office. The MAC has recommended increasing the minimum qualifying period of employment with the overseas company from 1 year to 2 years.
The MAC was also concerned about sponsors, particularly in the IT sector, using the ICT route to enable Tier 2 migrants to service third-party contracts as this provides those companies with a cost advantage. The MAC therefore recommends a separate ICT route for third-party contracting with a minimum salary threshold of £41,500.
They have also recommended that the Immigration Health Surcharge is rolled out to intra company transferees and, more worryingly, that any changes to Tier 2 (ICT) are kept under active review with the strong suggestion that more restrictions to this route may be required down the line.
There are some positives to the MAC report. Thankfully the MAC has advised against restricting Tier 2 dependants’ right to work in the UK, otherwise some of the best and brightest potential employees may have ruled themselves out of a role in the UK where their partner would have been unable to work.
Furthermore they have also advised against an automatic time limit on the period for which job roles may remain on the shortage occupation list.
It would be surprising if the proposals that would raise additional revenue for the Government, such as the Immigration Skills Charge and the roll out of the Immigration Health Surcharge to Tier 2 (ICT) migrants are not adopted.
However, by assuming that raising the cost of sponsoring a Tier 2 migrant will automatically reduce demand for Tier 2, the MAC is recommending measures that could be damaging to UK business, particularly start-ups and SMEs. The changes are also likely to impact the public sector, where salaries for key roles are often below the recommended £30,000 minimum salary. Furthermore, they may make the UK less attractive to big business, potentially risking UK jobs and investment.
Employers should keep a close eye on the Government’s response to the MAC report and consider reviewing their recruitment needs now to ensure they can recruit key staff before any changes are made.
By Jackie Penlington, Senior Associate
Article first published in Personnel Today, March 2016