Kerry Garcia is partner at Stevens & Bolton LLP. In this article, co-authored by Serena Spink, associate in the Employment team at Stevens & Bolton LLP, she explores how Migration Advisory Committee recommendations on employing overseas workers could impact UK technology firms.
Employers in the tech sector often struggle to find suitable candidates to fill key roles, meaning many have to look outside of the EEA for suitable candidates. However, there are already a number of hurdles, which often make it difficult for employers to hire non-EEA nationals.
Despite this, the UK government continues to insist net migration figures must be reduced and employers must be less reliant on overseas workers. The government tasked the Migration Advisory Committee (MAC) to consider whether there are ways to further restrict migration under Tier 2 of the points based immigration system.
The Tier 2 route enables skilled migrants with job offers to come to 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.
Strict requirements
In many cases, before being able to sponsor someone under Tier 2 (General), the employer must advertise the UK role for at least 28 days and be satisfied that no settled worker in the UK or EEA national can perform the role. However, this advertising requirement does not apply if the role is on the shortage occupation list.
A number of tech related roles are currently on that list, including IT product managers, systems engineers, senior developers and cybersecurity specialists. One of the concerns was that the MAC would recommend significant changes to the shortage occupation list, including imposing a time limit on how long a job may remain on the list.
However, the MAC has recently published its findings and has not, as some had feared, recommended that jobs should automatically be removed from the shortage occupation list after a certain period of time.
The MAC is keen, though, that employers should be encouraged to upskill UK workers and one recommendation put forward by the MAC to incentivise employers to upskill UK workers is the introduction of an Immigration Skills Charge of around £1,000 per year. This would be a charge on businesses, payable each time they sponsor an individual under Tier 2.
If introduced, this would further increase the cost of employing a non-EEA worker. The MAC’s intention is that money generated by this charge would go towards the training of British workers.
Skills shortage review
The MAC report recommends that the government should commission a more in-depth review of skills shortages within the tech industry, which heavily relies, in particular, on the ICT category.
The ICT route allows multinational companies to transfer key personnel from their overseas branches to the UK for up to five years. During the 12 months ending August 2015, over 50% of applications under the ICT category were for tech-related roles.
There had been concerns that the MAC would recommend restrictions on the use of this route. However, the MAC proposes leaving the ICT category intact, but has recommended employees wishing to transfer from the overseas company to the UK company must have worked for the overseas company for two years, rather than the current period of 12 months.
The MAC was also concerned about sponsors 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 ICT employees are being paid less than they should be 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 MAC, therefore, recommends creating a new ICT route specifically for third-party contracting with an annual salary threshold set at £41,500.
Further cost increases
In addition, the MAC recommends that 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.
All sponsors, including those in the tech sector, are likely to experience an increase in costs in recruiting the best skilled workers from overseas, 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.
The MAC’s view is that demand for specialist skills should be reflected in the wage on offer and they have recommended that the Tier 2 (General) minimum annual salary should increase from £20,800 to £30,000. The MAC recognises the risk that the proposed higher salary thresholds could be damaging to growth in the tech sector, particularly in relation to startups.
One positive outcome is that the MAC has not recommended restricting the right to work for dependants of Tier 2 sponsored employees. This flexibility for dependants, which many other countries do not permit, is an incentive for skilled employees with families to come to the UK.
In addition, there has already been a positive change for the tech sector in the form of the recent introduction of the Tech Nation visa scheme, designed to help businesses operating within the digital technology sector to attract and secure world-class talent.
This gives potential non-EEA employees in that sector a greater chance of qualifying for a Tier 1 (Exceptional Talent) visa if they can obtain endorsement from Tech City UK. This scheme may become all the more important for tech businesses if the MAC’s recommendations are implemented and the cost of sponsoring non-EEA workers under Tier 2 becomes too prohibitive for employers to secure the best and brightest workers from overseas.