Earlier this year, changes were introduced to the eligibility criteria for skilled migrant workers from outside the EU seeking settlement in the UK. In addition, the offence of employing illegal workers was extended and next year a skills levy on employers will come into force.

Post-Brexit, it is possible that any changes which currently only affect workers from outside the EU could, in future, be extended to workers from within the EU depending on the outcome of negotiations with the EU progress. This article discusses the impact on UK manufacturing employers and skills gaps in the manufacturing sector.

Changes to UK immigration policy

Employing illegal workers

On 12 July 2016 new provisions of the Immigration Act 2016 came into force, amending the offence of employing an illegal worker.

The Act broadens the criminal offence and employers can now be held liable if they have actual knowledge or reasonable cause to believe an employee is disqualified from employment because of their immigration status.

The offence extends to professional bodies (whether corporate or not) which will be treated as knowing a fact about an employee's immigration status if someone responsible for employment of the employee knows / has reasonable cause to believe that fact.

The maximum term of imprisonment for conviction has also been increased from two to five years.

The £35,000 threshold

To be eligible to work in the UK under a Tier 2 visa, migrants from outside the EU are required to have a job offer with a salary of at least £20,800. However from April 2016, most skilled migrant workers from outside the EU will also have to satisfy a further higher earnings threshold in order to qualify for settlement in the UK. Under the new rules workers must earn either at least the appropriate rate for the job or a gross annual salary of at least £35,000 a year (whichever is the higher) in order to apply for indefinite leave to remain after living in the UK for five years. The new rules apply to anyone who applies for settlement on or after 6 April 2016 and so will affect those who entered the UK on or after 6 April 2011.

Exemptions apply for PhD-level jobs, and those working in jobs that appear on the Shortage Occupation List, which consist largely of jobs falling within the engineering and health sectors. Migrants earning a lower salary may still apply for settlement via other routes, if applicable. For example on the basis of long residence, this could apply if they have been living in the UK for 10 continuous years.

Effect on manufacturer

Following Brexit, it is not yet clear how workers from the EU will be affected. However one possibility would be for the current immigration regime that applies to workers from outside the EU to be extended to include those from inside the EU. If this occurs then it is possible that the salary threshold for settlement on skilled workers could also be extended to skilled workers from the EU. However, even without Britain having voted to leave the EU, the changes already introduced are likely to have an impact on the manufacturing skills gap.

UK research shows that up until March 2016 there were approximately 3.4 million migrant workers, with 2.5 million of these being workers from the EU. Manufacturing companies have more EU workers as a proportion of their workforce than any other sector, with more than 10% of the 3 million workers overall being from the EU.

The £35,000 threshold for settlement could have a major impact on manufacturing industries which rely on skilled migrant workers as migrant workers could be less likely to seek work in the UK if they know they will not be able to settle permanently. This is likely to be a real concern for manufacturers unable to recruit sufficiently skilled staff or unable offer the requisite salary to retain staff. Whist mechanical and electrical engineers are exempt from the £35,000 threshold for settlement as these roles appear on the Shortage Occupation List, other industry workers will be affected and it is likely that the requirement will contribute to the manufacturing skills gap in the UK.

Immigration skills charge

The manufacturing skills gap is already prevalent in the food and drink, car, engineering and aerospace industries. For example, a recent report by the Food and Drink Federation indicates that by 2024 over a third of the food and drink manufacturing industry is due to retire. Approximately 130,000 new employees are needed to breach the gap.

One of the methods proposed to address the gap, is an Immigration Skills Charge to be introduced in 2017. This will be an annual fee of £1,000 payable by Sponsoring employers for each skilled worker recruited from outside the EU under a Tier 2 visa. It is designed to cut down on the number of businesses taking on migrant workers and incentivise training for British staff to fill those jobs.

The Skills Charge will not apply for PhD-level occupations, migrants switching from a Tier 4 student visa to a Tier 2 working visa, or the Intra Company Transfer Graduate Trainee category.

The aim of the charge is to increase revenue by an estimated £250 million for training opportunities, including apprenticeships. If this proves to be an accurate forecast then the changes introduced may help the UK manufacturing industry in the longer term and help create a more highly skilled domestic workforce.

However, in the meantime, the increasing costs to recruit the skills needed by manufacturer could be a hindrance to development.

Conclusion

If a post-Brexit decision is made for EU workers to also be subject to the same requirements as workers from outside the EU, its immediate impact will likely widen the skills gaps in the manufacturing sector. It will also increase the pressure on manufacturers to invest in training and provide opportunities to upskill existing workers and new recruits from the UK. Whether, in the longer term, this will be sufficient to satisfy demand remains to be seen. If a manufacturing employer is looking to recruit any workers from the EU for permanent positions or long term projects, then it could be worth giving some consideration now to whether any additional costs that could potentially be imposed (ie similar to those that apply to workers from outside the EU) could be absorbed.

At Bond Dickinson, our corporate immigration specialists work within our leading employment team. We have experience in advising on Tier 2 Sponsorship Licence applications and assisting employers with their prevention of illegal working duties in order to maintain their Sponsor status.

For more information, please see our previous articles: