UK migration body's recommendations would increase cost of employing some migrants, says expert

Out-Law Analysis | 04 Feb 2016 | 12:35 pm | 4 min. read

FOCUS: Increases to salaries for some immigrants under the UK's points system and a new charge designed to reduce reliance on foreign workers would significantly increase the cost of employing some migrants. 

The UK Migration Advisory Committee (MAC) has reviewed Tier 2 of the points based system (292-page / 3.3MB PDF) for immigrants to the UK. Tier 2 is the main route for skilled non-European economic area nationals to work in the UK, and changes to the rules are likely to affect many businesses.

The two biggest changes involve the salaries that can be paid to Tier 2 workers, and the introduction of a new skills charge.

Increased salary thresholds

The most significant recommendation is to increase the salary threshold for Tier 2 entrants.

Currently, the minimum salary is £20,800 for Tier 2 general migrants and £24,800 for short-term Tier 2 intra-company transfers, where a multinational company based overseas wishes to transfer existing staff from a country outside the EEA to the UK branch of the same company. The MAC has recommended that, in both cases, this is raised to £30,000. For new entrants into Tier 2 general, and graduate trainees in the Tier 2 intra-company transfer route, the recommendation is £23,000.

The MAC warned that the lower threshold for new entreats under Tier 2 general may need to be reconsidered if it is "targeted by lower quality migrants and less scrupulous employers".

For public sector workers, the MAC has suggested that the threshold should be phased in over time. It remains to be seen if the Government will consider any further exemptions, such as start-ups.

A new Immigration Skills Charge (ISC)

It is proposed that employers will have to pay, up front, £1,000 per year per Tier 2 worker. There would be exceptions for Tier 2 intra-company transfer skills transfer and graduate trainee routes, but no exemption is suggested for short and long-term Tier 2 intra-company transfers.

The actual level of the ISC would be a matter for HMRC. However, the MAC suggests that £1,000 is enough to encourage less reliance on foreign workers and to raise revenue, which will be spent on the training and up-skilling of UK workers. If implemented at this level, the ISC would significantly increase the cost of employing Tier 2 migrants.

Narrowing the Tier 2 intra-company transfer route

Tier 2 intra-company transfer is the most heavily used route of the points based system. It is not subject to the immigration cap and numbers have risen rapidly in recent years. A number of recommendations have been made by the MAC to attempt to tackle this: 

  • extending the qualifying period with the company overseas from 12 months to two years, for both short-term and long-term transfers. This would be a significant change for employers and may force more migrants into the Tier 2 general route which involves increased procedures and restrictions;
  • employers would be required to enter a more detailed description of the role required on the certificate of sponsorship application form, to ensure this route is focused on sufficiently specialist roles;
  • the Immigration Health Surcharge should be extended to Tier 2 intra-company transfers. Coupled with the ISC noted above, this will mean a significant increase in the costs associated with employing Tier 2 intra-company transfer migrants;
  • a new route should be created, alongside Tier 2 intra-company transfers, for third-party contracting. This would be subject to an increased salary threshold of £41,500. It has been identified that the conventional Tier 2 intra-company transfer route is increasingly used by sponsors who use the sponsored migrant to carry out work for a third-party organisation. This is particularly prevalent in the IT sector. There are concerns that such practices undercut the UK settled workforce.

 Reforms to the Tier 2 general route

The MAC has not recommended limiting Tier 2 general to job titles on an expanded version of the shortage occupation list, contrary to initial concerns that it might do so. The shortage occupation list identifies jobs for which there is a shortage of skilled workers in the UK. There is one list for the whole of the UK and a separate one for Scotland. There were also concerns that MAC would recommend an automatic sunset clause to limit how long a role can remain on the shortage occupation list, but it has not done so.

Recommendations include: 

  • the resident labour market test should be retained but improved to make it more effective and efficient;
  • temporary priority should be given to low-paid public sector jobs that are more likely to be affected when the monthly cap is hit in the allocation of restricted certificates of sponsorship;
  • graduates recruited on to a graduate scheme should be given additional weighting in the restricted certificate of sponsorship allocation process by adding £7,000 to their salary, to reflect the potential for future growth in earnings;
  • the resident labour market test should be expanded to in-country switchers from other routes and such individuals should also be included in the monthly cap. This will be of particular concern to employers who struggle to satisfy these requirements for all roles;
  • sector and trade bodies would be required to submit comprehensive evidence as to the efforts being made to address skills shortages within the UK for an occupation to remain on the shortage occupation list.

Tier 2 dependants – automatic work rights

The MAC has not recommended that restrictions are applied to the automatic work rights for dependants entering under Tier 2. This was one of the more controversial proposals the MAC was asked to consider. The MAC found that this would not improve economic and social outcomes for UK residents, nor have a significant impact on the number of people using the Tier 2 scheme.

The government will consider which of these recommendations to implement and when. The first changes could be introduced as early as April.

Joanne Hennessy is an immigration expert at Pinsent Masons, the law firm behind Out-Law.com.