Targeting the wrong people and shooting itself in the foot - the MAC proposes significant changes to the Tier 2 sponsored immigration route

20 January 2016

The Migration Advisory Committee (MAC) was tasked with undertaking a wide-ranging review of the Tier 2 visa route, with the ultimate aim of advising the government on the various options available to restrict the number of non-EEA skilled workers coming to the UK.

Their recommendations, published yesterday, do not make for easy reading for UK and global businesses with a UK presence.

Firstly, as we warned in a client seminar last year, hiring and sponsoring highly skilled migrants will become far more expensive for businesses.  The MAC has recommended, as expected, both the increase in minimum salary thresholds to be paid to migrants and the introduction of a “skills levy” of £1,000 per year of the visa. The latter would add £5,000 to the cost of hiring a non-EEA national, as visas are usually issued for five years.  While it was somewhat unexpected that the levy would also be applied to the Tier 2 (Intra Company Transfer) short term route, this is not surprising in light of the MAC views on the need to cool demand for overseas IT staff working on UK client contracts. 

Global IT companies with operations and clients in the UK will be hit particularly hard, especially if they are sending staff to the UK for short periods to deliver IT services to UK clients. Not only will they now have to pay these staff a minimum of £41,500, but they will also have to pay a contribution towards NHS treatment, even when the staff don’t live in the UK and are here in some cases for a few months. As stated above, their employers will also need to pay the skills levy. According to the MAC, the increase in the minimum salary level for third party contractors (mainly from India), would prevent 72% of those coming to deliver services to a UK client from coming to the UK - so they will have to be paid more.

The MAC’s recommendations come 10 weeks before they are likely to be turned into law on 6 April 2016. Businesses that have already planned to bring in staff from their overseas office, either to service UK contracts with UK clients or to second staff internally, are now faced with a significant change - the MAC wants the government to increase the period employees who they wish to transfer to the UK have worked for the company from 12 months to 2 years. Not only is this significantly more restrictive than most similar visas schemes for intra-corporate transfers run by other developed countries, which typically only ask for 6-12 months prior employment , but it would create chaos with the system and with businesses planning. We would urge to Government not to implement this requirement at all, or at least to delay its introduction until 2017.

The MAC has also recommended that those who can currently change visa status in the UK to Tier 2 employer sponsored visas in the UK should be subject to the” resident labour market test” and should fall within an extended annual numerical limit (currently 20,700) on Tier 2 visas. The main casualties of this rule will be those who have graduated from a UK University under the Tier 4 (Student ) route, who at present can switch into the work route without the employer needing to show that they have advertised the job and found no suitable UK or EU candidate. The Government has already come in for repeated criticism for making the UK less attractive to international students and damaging one of our largest exports - this will only make the UK less attractive and make it more difficult for UK employers to pick the best global talent from within the UK. We believe that the government should not accept this recommendation.

While there are some small mercies, such as continuing to allow family members of sponsored migrants to work in the UK, the recommendations, if they are implemented as expected, will make the UK less attractive for business. The visa and skills levy costs will make the UK one of the most expensive places to hire highly skilled people and will punish responsible employers who already do their bit to up-skill UK workers.

The MAC has indicated that if its recommendations are followed, it will reduce the number of Tier 2 migrants in the UK by 20%. If reducing the number of the world’s most highly skilled people in the UK by this level is seen as a positive outcome, then the government really has lost its mind on immigration.

Further information

For further information about the proposed changes, please see our blog - Migration Advisory Committee publishes its Tier 2 review findings

Should you have any questions or concerns about the issues raised in this blog post please contact a member of our immigration team.

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