The Migration Advisory Committee (MAC) has published its report containing recommendations to the UK Government on how to tighten the Tier 2 work visa route.

The MAC was commissioned by the Government last year to advise on how to restrict Tier 2, in order to address concerns about the rising number of migrants using that route and a perception that employers are overly reliant on foreign workers. The MAC provided its report to the Government last month, but it is only just being released to the public. The Committee’s report covers various issues including proposals on minimum salaries, imposing a new skills levy for Tier 2 sponsors, tightening up the intra-company transfer route and also on whether Tier 2 family members should retain the automatic right to work in the UK.

Recommendations

The MAC is independent of the UK Government but its recommendations are generally accepted by the Home Office. The full 250 page report can be found online, but the headline proposals are as follows:

  • The MAC concludes that rather than trying to compare the relative worth of different occupations in order to prioritise certain roles for visas, a better way to reduce the number of Tier 2 visa approvals is to increase minimum salary thresholds. Currently, the minimum annual salary for a Tier 2 General visa is £20,800. The MAC proposes to substantially increase this to £30,000, but with a phased implementation for the benefit of the public sector and start-up businesses. The MAC suggests that a lower threshold of £23,000 should apply to new entrant graduates.
  • The MAC “strongly supports” the introduction of an Immigration Skills Charge (ISC) – a skills levy on firms using Tier 2 migrant labour. The MAC wants to incentivise employers to reduce their reliance on foreign workers and to encourage investment in the training of British workers. The actual level of the ISC will be set by the Government but the MAC’s view is that only a high levy will influence current recruitment behaviour. It has suggested an upfront surcharge of £1,000 for each year of the Tier 2 visa applied for. So, if this is implemented, a three year visa would cost a business an additional £3,000 and a five year visa an additional £5,000.
  • The MAC has recommended an overhaul of the Tier 2 Intra Company Transfer (ICT) route. As an uncapped route, visa numbers have risen sharply in this category in the last few years. While recognising the benefit of the conventional ICT channel where a small number of highly specialised staff come to the UK to impart their skills or gain experience, the MAC considers that the ICT route has been increasingly dominated by companies using it for third-party contracting, highlighting by way of example its use by Indian information technology workers. The MAC proposes several changes to the ICT route:
    • As well as the ISC, all ICT applicants should be required to pay the Immigration Health Surcharge as a contribution towards the NHS (ICTs are currently exempt);
    • The required prior experience with an overseas employer should be raised from one year to two years and the UK sponsor should be required to provide a more detailed job description for the UK role on the certificate of sponsorship;
    • Third-party contracting, typically where a multinational business sends a worker from overseas to work on a project at a customer’s site, should have its own separate ICTroute. For all such visas, the minimum pay threshold should be £41,500 per year.
  • There should be no automatic sunsetting of jobs on the Shortage Occupation List (employers hiring for roles on the SOL are exempt from the Resident Labour Market Test and have priority against the UK’s immigration cap). The MAC should continue to review the list regularly.
  • Although Tier 2 dependants have greater work flexibility than Tier 2 employees who are tied to a role with a particular business, the MAC does not recommend restricting automatic work rights for Tier 2 partners or spouses. They found no evidence that dependants were displacing UK residents in the labour market.

The future

We will need to wait for the Government’s response to this report to see which of the recommendations it will implement. There has been no announcement on timing but we would expect the first changes to go live with effect from 6 April 2016 in line with the certificate of sponsorship allocation year. This is also the main date for the introduction of new UK immigration changes each year.

As the Chairman of the MAC, Professor Sir David Metcalf concluded in the report that it is difficult to predict what impact these changes might have on visa numbers as this will depend on how employers respond. He does highlight however that the higher salary thresholds proposed would have affected 18% of all applications within Tier 2 during the year to August 2015.

If the Government accepts the proposals and sets the ISC at the high level recommended by the MAC, the changes will have a significant impact on recruitment plans for many employers, especially start-up and growth businesses that may struggle to meet the combination of a £30k minimum salary and ISC levy. Employers face a serious skills shortage in many sectors and have already seen visa costs escalate considerably recently through an annual spike in visa fees and the introduction of NHS charges.

In the short term employers should consider accelerating any Tier 2 hires, especially intra-company transfers, prior to April 2016 before any changes are likely to take effect.