The end of free movement: what SMEs need to know

27 January 2021

EU free movement rules ended for the UK on December 31 2020. As a result, recruiting an EU citizen who is not already living in the UK now involves a visa application.

This is usually a Skilled Worker visa, which requires the employer to have a sponsor licence. The new visa system applies in the same way to workers from the EU and outside.

Skilled Worker visas are only available for jobs on the Home Office’s list of eligible occupations. The range of jobs on the list now is much wider than it was under the Skilled Worker visa’s predecessor – called Tier 2 (General) – but in many cases the dividing line between eligible and ineligible jobs is arbitrary.

It is certainly not in tune with a common-sense understanding of the differences between skilled and unskilled jobs. Personal assistants are eligible for example but legal secretaries are not. Flower arrangers are eligible, but care home workers are not. What is the logic behind this?

Businesses which until recently relied on a stream of EU citizens moving to the UK for jobs not on the Home Office list – junior roles in offices, restaurants and warehouses for instance – will run into trouble.

For a while they may be able to get by with recruits from the resident UK workforce, which includes EU citizens living in the UK.

The Home Office has said that until 30 June 2021 it will not require employers to distinguish between EU citizens who moved to the UK before the end of 2020 – who are eligible to stay under the EU Settlement Scheme – and new arrivals. But over time this source of labour will dry up.

Skilled Worker visas are expensive. The standard government fees for a five-year visa come to nearly £6,500. That figure includes the discount for small businesses – otherwise it is closer to £10,000. For a hedge fund these fees might be chickenfeed.

A residential architectural practice with tight margins might struggle to afford them. Some businesses pass on visa fees to the people they sponsor but they are not allowed to do this with one of the biggest fees – the Immigration Skills Charge.

The Home Office has done this deliberately. The aim is to discourage employers from relying on foreign workers – and it may well do this, although nobody knows because the policy has never been properly evaluated.

Businesses wanting to expand to the EU now face the task of having to get visas for any British citizens they want to send there.

There are other requirements for a Skilled Worker visa. There is a minimum salary – usually at least £25,600 per year, more for certain jobs. In most cases the candidate must pass a Home Office-approved English language test.

The job must be genuine – it cannot be created just to allow the person to apply for a visa. And the employer must have a sponsor licence, which comes with an extensive set of duties to the Home Office. The guidance for sponsors runs to many hundreds of pages.

The end of free movement cuts both ways. At the end of 2020 British citizens lost their right to live and work in the EU (unless they were already living there, in which case they can apply to their host state’s equivalent of the EU Settlement Scheme).

This means that British businesses wanting to expand to the EU now face the task of having to get visas for any British citizens they want to send there. Each EU member state sets its own visa rules, and in some the process is long and bureaucratic.

Even short trips by British citizens could be tricky. In the Schengen area there is a maximum stay of 90 days in any 180 days, and in some member states there are strict limits on what visitors can and cannot do as part of a business trip.

For businesses which already are used to sponsoring workers from around the world there is an upside. The Home Office has abolished the resident labour market test – the convoluted advertising requirement which used to apply to Tier 2 (General) visas.

This is a welcome change, and it helps multinational companies and others which want to move people to the UK quickly from overseas. For many businesses it is irrelevant. The end of free movement and the lack of visas for jobs which the Home Office regards as unskilled, combined with the high fees for Skilled Worker visas, will force them to look inwards when they recruit.

The idea is that the new system will encourage employers to train resident workers. Maybe it will. Let’s hope the Home Office makes an effort to find out this time, and that ministers will think again if the policy doesn’t work.

This blog was first published in SME on 27 January 2021.

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