The 'big MAC': Tier 2 report suggests IT recruitment costs could rise

Kerry Garcia, partner, Stevens & Bolton, explains that firms could end up paying more for skilled overseas workers thanks to the recent Migration Advisory Committee report

The Migration Advisory Committee (MAC) report, commissioned as part of the government's determination to reduce net migration figures, was published last week. The report's recommendations reflect the government's desire for employers, including those in the IT sector, to be less reliant on overseas workers. The MAC was asked to look at possible ways to restrict migration under Tier 2 of the points based immigration system. The Tier 2 route means skilled migrants with job offers are able to come to the UK to fill a gap in the UK labour. It 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.

Often, employers will find that, before being able to sponsor someone under Tier 2 (General), the position must be advertised in the UK for at least 28 days and they must be satisfied that no settled worker in the UK or EEA can perform the role. However, there is no need to advertise roles on the shortage occupation list. A number of IT related roles are currently on that list and there were fears that the MAC would recommend significant changes to the shortage occupation list, including a time limit on how long a job may remain on the list. However, the MAC has recommended that jobs should not automatically be removed from the shortage occupation list after a certain period of time.

The MAC has instead focussed on increasing the cost of employing non-EEA nationals to deter employers from using the Tier 2 route and to encourage employers to upskill UK workers. With this in mind, the MAC has recommended introducing an Immigration Skills Charge of around £1,000 per year to be paid by businesses each time they sponsor an individual under Tier 2. The MAC's intention is that money generated would go towards the training of British workers.

A key recommendation of the MAC report is the commission of a more in-depth review of skills shortages within the IT industry, which heavily replies on the ICT category. During the 12 months ending August 2015, over 50 per cent of applications under the ICT category were for IT related roles and there were concerns the MAC would recommend restrictions on the ICT route. Although the MAC proposes leaving the ICT category intact, it does advise that employees wishing to transfer from the overseas company to its UK branch should have worked for 2 years in their original post, rather than the current period of 12 months.

The MAC was also concerned about sponsors in the IT sector using the ICT route to enable non-EEA nationals to carry out work for third-party organisations, which gives businesses a considerable cost advantage. There are concerns that ICT employees are being paid less than UK workers would be paid and that this is not contributing to the stock of IT skills within the UK workforce. The MAC recommends a new ICT route for third-party contracting with an annual minimum salary of £41,500.

In addition, the report suggested 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.

It therefore looks like it will become more costly for IT employers to recruit 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 higher costs could be damaging to growth in the tech sector, particularly in relation to start-ups, but it is likely that the government will still take the view that reducing net migration figures is of utmost importance.

Kerry Garcia is Partner at Stevens & Bolton, and Serena Spinks is associate at the firm