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12 April 2016

Major Tier 2 reform coming in Autumn 2016 and April 2017

On 24 March 2016 the government issued its preliminary response to the comprehensive review of Tier 2 (General) and Tier 2 (Intra-Company Transfer) (ICT) routes carried out by the Migration Advisory Committee (MAC). Significant changes will be made to both sub-tiers, but these will be undertaken in two tranches (Autumn 2016 and April 2017) to enable employers to plan ahead.

What aspects of the reforms are likely to cause most concern for employers of Tier 2 migrants?

A colleague recently wrote an article on the recently announced changes and the title of the document was ‘The Good, The Expensive and the Uncertain’; which I think is a good summary of the changes.

Having said that, I believe that the area of most concern is that of costs, this is because the Home Office is introducing a new Immigration Skills Charge to be levied on employers who sponsor migrant workers under both Tier 2 General and ICT.

The charge will be £1,000 per sponsored worker per year from April 2017 with a reduced rate of £364 per person for smaller companies and charities. However, an exemption will apply to migrant workers in PhD roles, Tier 2 (ICT) Graduate Trainees, and those switching from Tier 4 to Tier 2 (General).

Bearing in mind that employers currently pay for certificates of sponsorship (CoS), entry clearance/leave to remain fees, immigration health surcharge (IHS) payment and relocation costs, adding £1,000 each year means that these fees are quickly stacking up.

What aspects are employers likely to welcome?

Fortunately, the changes announced by the Home Office are not all doom and gloom as there were a number of positive changes. The reduction of the ‘high earners’ salary threshold for the long-term staff sub-category of Tier 2 (ICT) from £155,300 to £120,000 from April 2017 will be a welcome development. This means that once an employee earns in excess of £120,000 they can remain in the UK for up to nine years.

In addition to this, the removal of the requirement for those in the long-term staff sub-category to have 12 months’ employment with the overseas entity before they are eligible for sponsorship where their salary is over £73,900, is also a welcome development.

Further good news includes the keeping in place of the resident labour test exemption for Tier 4 students switching to Tier 2, and that:

  • overseas graduates will be given extra weighting in the annual Tier 2 (General) limit, meaning it will be easier for prospective employers to obtain restricted CoS for them
  • nurses will remain on the Shortage Occupation List but employers will need to carry out the resident labour market test before recruiting from overseas
  • nurses, paramedics, radiographers and some teachers will be exempt from the new increased Tier 2 (General) salary threshold for experienced workers (the exemption will end in July 2019)
  • the current minimum salary threshold of £20,800 for new entrants will remain in place (although note that the Standard Occupational Classification (SOC) Codes may still require a higher salary level to be paid)
  • graduates will be able to switch roles within the same employer once they have secured a permanent job at the end of their training programme

One of the most welcome developments was the government’s decision not to implement one of its initial proposals (which the MAC recommended was not taken up) not to allow dependants to work. To have brought this in would have placed the UK at a clear disadvantage against other countries.

How do you think employers will react to the additional cost burdens of the reforms?

At a time when organisations are looking to reduce spend, we believe that this will have a huge impact on determining whether or not it is cost-effective to hire an overseas worker as opposed to sourcing staff from the UK labour market. Employers may soon find themselves recruiting an unsuitable or even unqualified EEA national simply because they cannot afford to transfer their own employee or make a new hire who is the most suitable individual to undertake the role.

£1,000 for a migrant each year is a significant amount which excludes other fees as discussed above. Once the fees are introduced the average fee for sponsoring an overseas worker will amount to £7,500 for a single applicant. In the event that an overseas worker has dependents this figure will be considerably higher.

How do you think employers will respond to the closure of the short-term subcategory for intra-company transferees in April 2017?

The short term visa category has been a preferred visa option for a number of employers and clients alike. This is because it enables employees to undertake training for a period of six months under the skills transfer visa. In addition to this, it enables employers to send employees to the UK for a short period before determining whether the employees’ services are required long term. We believe that most of the employers to be affected by the closure of this route are those in the information technology (IT) sector. This is because most employees are required to come to the UK to work on short projects which is in line with the contracts signed between the parties. Employers will therefore need to review their recruitment practices in readiness for these changes. One option may even require taking the work offshore which will have a negative impact on the UK economy as a whole.

Are there any issues that require further clarification?

Some recently introduced Tier 2 changes have led to uncertainty and one cannot but wonder how some of these new changes will be implemented or the impact which this will have on businesses. A typical example is the introduction of a waiver for the resident labour market test and higher priority of Tier 2 General restricted CoS places where the visa grant(s) are in support of the relocation of a high value business to the UK, or potentially an inward investment project.

What steps should employers be taking now to prepare for the changes?

In light of the recently announced changes by the Home Office, employers will need to undertake a full review of their recruitment practices in order to determine whether employing a non-EEA national worker is cost beneficial.

Also, certain employers, especially those within the IT sector, will need to determine whether they are still able to provide the personnel in order to work on projects in light of the minimum salary increases (from April 2017 all new ICTs bar graduate trainees will be required to qualify under a single visa category with a minimum salary threshold of £41,500), and whether they need to renegotiate longer contracts so as to enable their employees to come to the UK for a longer period.

Overall, the general impression seems to suggest that the Home Office’s intention is to make the immigration process so expensive that employers are forced to recruit from the resident labour market, irrespective as to whether candidates are suitable or sufficiently qualified for the role, which is a model that most employers will want to avoid in order to remain competitive.

Originally published in an interview with Evelyn Reid for Lexis Nexis, April 2016.

For more information, please contact Matthew Powell, PR Executive on +44 (0)20 7438 2248.