According to a Migration Advisory Committee (MAC) report (January 19 2016), the IT sector uses 93% of the Tier 2 Intra-company Transfer route for third-party contracts. The MAC expressed concerns that the use of migrant workers for third-party contracts may undercut the salaries of resident workers who are just as experienced and capable of performing the same tasks as their migrant counterparts.

To address these concerns, the MAC made the following recommendations:

  • creation of a separate category, the Third-party Contracting route, specifically for migrants working on third-party contracts;
  • an increase in the minimum salary for short-term or long-term intra-company transfer migrants working on third-party contracts to £41,500 per year;
  • an increase in the minimum work experience required with the overseas entity before transfer from 12 months to 24 months; and
  • removal of the exemption currently given to Tier 2 Intra-company Transfer migrants from having to pay the immigration health surcharge.

The MAC advised that a more in-depth review is required to examine whether there is a skills shortage within the UK IT sector, and that such review should consider the following proposals:

  • imposing a new immigration skills surcharge of £2,000 a year for each sponsored migrant (or a charge based on the percentage of migrant workers that the business uses) – the intention being that the government will use the revenue generated for the training and 'up-skilling' of resident workers;
  • inviting the Home Office and Her Majesty's Revenue and Customs to undertake an analysis of the current tax allowances schemes for international assignees which may give an unfair advantage to migrant workers;
  • introducing a resident labour market test for migrants using the Tier 2 Intra-company Transfer route for third-party contracts; and
  • setting a quota on the number of certificates of sponsorship assigned to migrants who would use the Tier 2 Intra-company Transfer route for third-party contracting.

Most of the recommendations will require a detailed analysis of the obligations under The World Trade Organisation General Agreement on Trade in Services Treaty 1995, as the above suggestions will almost certainly have an impact.

The MAC seems prepared to permit the continued use of the Tier 2 Intra-company Transfer route for third-party contracts. However, it is clearly seeking additional evidence in order to consider further restrictions on the use of this category. If use of the Tier 2 Intra-company Transfer route is successfully limited, it may prompt UK employers to consider alternative solutions.

For further information on this topic please contact Ben Sheldrick at Magrath LLP by telephone (+44 20 7495 3003) or email (ben.sheldrick@magrath.co.uk). The Magrath LLP website can be accessed at www.magrath.co.uk.

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