Tackling the skills gap in the UK life sciences sector

Out-Law Analysis | 07 Apr 2021 | 10:17 am | 7 min. read

With lack of access to the necessary skills and expertise seen by many in the life sciences sector as a barrier to innovation, businesses should be seeking to diversify their workforce and recruitment pool.

Creating an inclusive culture where people feel a sense of belonging and are able to bring their whole selves to work is critical to talent attraction and retention, while an increase in working from home and other flexible working models during the coronavirus pandemic have shown businesses how to accommodate staff who may be discouraged by the traditional 9-5 office-based working model.

In a competitive market, whilst they may not be able to match salaries and other benefits offered by more established companies, innovative early stage life sciences and healthcare companies are usually able to offer highly tax-advantaged equity awards as part of the overall remuneration package. There are also a variety of sponsored and non-sponsored immigration routes available for companies seeking to attract top talent from outside the UK.

Donaldson Susannah

Susannah Donaldson

Legal Director

The first step is to gather the data to establish what talent gaps your business is facing

The diversity challenge

Businesses will need to attract the right talent with the right skills set and qualifications to deliver increasing use of technology and AI. Recent research commissioned by Pinsent Masons from Meridian West found that a lack of digital skills and talent was a particular concern for senior individuals in the life sciences sector, with one chief risk officer in Ireland telling researchers that "expertise is the single biggest barrier" to innovation. Life sciences companies face a particular challenge due to increasing competition from high-paying, forward-thinking technology companies for specialist sector talent, such as computational biologists and bioinformaticians.

Implementing a diversity and inclusion (D&I) strategy is a key differentiator in the race to recruit and retain top talent.  Research has shown that diverse and inclusive businesses are more profitable; more innovative; better placed to answer their shareholders; more able to win and retain clients and customers who are increasingly interested in these issues; better placed to attract and retain talent. For these reasons diversity and inclusion are increasingly at the top of the agenda for businesses in the life sciences sector.

The first step is to gather the data to establish what talent gaps your business is facing. To this end, the collection of employee diversity data has become a priority area for businesses. Accurate data is not just needed for mandatory reporting and target setting: it is also essential to assess the effectiveness of policies and to monitor trends. There could, for example, be systemic bias built into decisions around hiring, progression and promotions, particularly amongst under-represented groups. However, diversity data is 'special category' data subject to stringent data protection rules and potential cultural sensitivities, particularly for multi-national businesses operating in different jurisdictions. Employee participation is essential and therefore 'hearts and minds' campaigns are needed to engage them.

Many companies are also undertaking a cultural audit of their businesses, including an evaluation of training, review of policies and procedures and focused leadership and employee interviews and listening groups. Such audits help them identify priority areas for action, facilitate target setting and the embedding of behavioural and cultural change.

Whilst D&I strategies should focus on the full spectrum of diversity strands, the attraction and retention of women is a particular challenge for the life sciences sector and indeed all businesses in the STEM space.  The gender pay gap within the UK life sciences sector is one of the highest in Europe and women remain under-represented at senior levels. This is a particular issue for healthcare businesses for whom women are essential stakeholders – women comprise the majority of healthcare professionals, in addition to being the main healthcare decision makers at home.

Senior level female representation is critical because it ensures diversity of thought in shaping the business culture and priorities as well as providing strong role models. However, it is also essential to focus on the female talent pipeline and invest in recruitment initiatives to attract more female graduates. Pfizer, for example, has used augmented writing software to check that job adverts use gender neutral language and do not inadvertently discourage certain groups of candidates from applying, while others have focused their campaigns on younger generations of women at graduate, undergraduate and school age.

Benns Fleur

Fleur Benns

Legal Director

The no risk investment profile of an EMI option, together with such favourable tax treatment, means that they are an important tool in attracting key strategic hires for early stage, high growth companies

Incentivising talent

While early stage businesses in this space may struggle to match salaries offered by technology companies competing for the same talent, offering equity as part of an overall remuneration package can incentivise recruitment and retention of key employees. This is particularly true where a company can take advantage of the tax benefits offered under the terms of share awards such as enterprise management incentive (EMI) share options, which offer capital gains tax treatment on future growth in value.

Share options give an employee a contractual right to acquire shares in the future, at a price fixed at the date of grant. For early stage high growth companies like those in the biotech space, the future acquisition date is generally linked to a liquidity event such as an initial public offering (IPO) or share sale, meaning employees can exercise their options on such an event and sell the shares acquired. Options can also be granted subject to time vested, or performance conditions which must be met before exercise can occur, and 'leaver' provisions are generally also included.

As employees are not required to pay anything for the grant of their option they are a risk free investment, as there is no obligation for the employee to exercise the option. For the company, there is little cash cost in providing share options to employees, and it is also possible to transfer any liability for employer's Class 1 National Insurance contributions arising on the exercise of an option to the employee further reducing the costs. Looking ahead to an exit, on a share sale the value of any option gains realised on exercise by the employee should be subject to a corresponding corporation tax relief for the company which, depending on circumstances, can be a valuable asset.

Smaller companies with fewer than 250 full time equivalent employees and gross assets of £30 million or less will be able to grant the highly tax efficient EMI options. If EMI options are granted with an exercise price equal to the market value of the shares at the date of grant, there will be no tax charge arising on the exercise, assuming there is no intervening 'disqualifying event'. Instead, on the sale of the shares acquired, the gain – that is the difference between the sale price and the option exercise price – will be subject to capital gains tax. If the shares are sold more than two years after the date of grant of the option, the employee will be able to take advantage of business asset disposal relief, reducing the tax rate payable to 10% subject to the £1m lifetime gains limit.

The no risk investment profile of an EMI option, together with such favourable tax treatment, means that they are an important tool in attracting key strategic hires for early stage, high growth companies.

Louisa Cole

Senior Associate

There are a variety of routes allowing skilled talent to enter the UK for research projects, studying or work

The global talent pool

As the UK has now left the EU, more life sciences businesses will require a sponsor licence to broaden the pool of talent available to them. Historically, businesses could freely hire EU nationals who benefitted from freedom of movement. Under the new immigration system, all international workers who do not qualify via another route, such as the EU Settlement Scheme, will need to obtain a work visa in order to come to the UK to work.

Skills shortages in the life sciences sector has remained a priority for the UK government in recent years, and there are a variety of routes allowing skilled talent to enter the UK for research projects, studying or work.

Sponsored routes

Prospective employers must hold a sponsor licence in order to recruit from outside the UK, while those applying to come and work will have to satisfy skill and salary thresholds as part of their sponsored visa application. Many roles in the sector can be found on the UK shortage occupation list (SOL). Roles on the SOL benefit from salary concessions, meaning those undertaking those roles can be paid lower salaries while still satisfying the visa requirements; while certain science-based roles on the SOL also benefit from fee concessions, meaning cost savings for employers in the sector.

Those seeking roles in this sector will tend to qualify for sponsorship with relative ease based on skill and salary provided, English language requirements are met. Failing this, the intra-company transfer route is an option – although this has higher salary thresholds which are often a barrier to new entrants and those starting out in their careers.

Non-sponsored routes

The global talent scheme allows highly-skilled scientists and researchers to come to the UK without a job offer. The use of this route should go some way to encouraging skilled talent to come to the UK to look for work in the sector even without securing a permanent role. The route does, however, require endorsement from a recognised body.

The life sciences sector lobbied the government for many years to reinstate the post-study work visa route. The new immigration system has introduced a very similar route called the graduate route, available to those who have valid UK immigration status as a student who have successfully completed a course of study in any subject at undergraduate level or above at an approved UK higher education provider. The visa will allow eligible students to work, or look for work, in any career or position of their choice, for two years after completing their studies. This will assist businesses in the life sciences sector in retaining skilled talent in the UK for short or long-term research projects, as well as filling vacancies within their businesses.

Co-written by Louisa Cole of Pinsent Masons.