After six consecutive months of demand from employers exceeding the Tier 2 visa cap, causing thousands of visa refusals for skilled workers, the Home Office has announced that it will relax the rules from 6 July 2018. From that date, doctors, nurses and some other medical practitioners will no longer be counted towards the overall cap, ensuring that the NHS can hire the medical staff it urgently needs and that hundreds more visas will be available to other employers.

With the Windrush scandal, a multitude of 'hostile environment' cases and the need to design a new immigration system fit for Brexit, there has been plenty for new Home Secretary Sajid Javid to get to grips with. One of those immediate action points was to review the operation of the Tier 2 cap, which in the last few months has caused a recruitment crisis for employers trying to hire skilled foreign workers.

How does the cap work?

The annual Tier 2 General cap is set at 20,700 for each visa year running from April to April. That total is split into monthly limits, frontloaded to the first half of the year, with 2,200 available in April, then 2,000 each month from May until September, 1,500 from October until February, and finally 1,000 in March.

Not all Tier 2 recruitment is caught by the cap. For example, intra-company transfers (Tier 2 ICT), most Tier 2 General applications filed in the UK and high-earner recruitment where salary is at least £159,600, are exempt. For 'restricted' Tier 2 General cases where the cap applies, usually where the application will be filed outside the UK, sponsors must make an application to the Home Office to request permission to hire.

A small number of PhD-level roles, jobs that appear on the shortage occupation list (including nurses) and graduates hired through a milkround receive priority and are effectively guaranteed approval. Remaining requests are prioritised by proposed salary level – the higher the salary the more points are awarded. The type and location of the job, the sector that the employer operates in and employer size are irrelevant.

Salary and refusal trends

The minimum salary level to qualify once the cap has been hit fluctuates each month, depending on demand for that month. Since December 2017, it has been at least £50,000 each month, rising to £60,000 in March when there was a lower allocation.

About 40% of all Tier 2 visas approvals – thought to be about 8,000 each year - go to NHS staff, so the announcement that doctors, nurses and other health professionals will no longer count towards the cap is welcome. The "restricted" part of that allocation should now be available to other professionals like engineering, IT and finance specialists. Over the period from December 2017 to April 2018 the overall monthly refusal rate against the cap was almost 50%. As nurses appear on the shortage occupation and so have been guaranteed approval regardless of salary level, this has had an exaggerated impact on other roles. For example, about two-thirds of applications by IT professionals were rejected in the same period to April.

This welcome change should mean that employers will have a greater chance of success against the cap from next month, but we expect that demand will remain high and so for some months may still exceed the quota. In that case salary will remain the deciding factor in most cases, although the salary level to qualify should be pushed downwards to make it more manageable, especially for SMEs and start-ups. A common theme since the end of last year has been that employers across all sectors have conducted extensive recruitment searches over many months, including the resident labour market test (advertising), before being denied by the cap and being told that they can only sponsor a visa if they pay about twice the UK’s average salary.

Sponsoring employers should continue to warn affected candidates and hiring managers that the cap may still impact hiring timelines and the salary level they hire at. It is also important that prospective employees whose recruitment is caught by the cap understand the risk of resigning from their current employment before approval is granted.

Alternative options

Future demand for Tier 2 visas is likely to remain high partly due to Brexit-related departures of EU workers, the skills gap and because unsuccessful employers can apply again in subsequent months, for up to six months from when the vacancy was first advertised. Employers that have not yet made requests against the cap, or that gave up part-way through recruitment due to salary concerns, may now be encouraged to start the process after this announcement.

Where recruitment budgets permit, the temptation for employers that are unsuccessful against the cap is to increase salary level in subsequent requests to improve prospects of success, provided that the new salary is still within the advertised range. Sponsors do need to be careful with that approach as the Home office can dispute whether the vacancy is still genuine. It can also have unintended consequences in relation to grievances, equal pay or discrimination claims by other colleagues who may end up being paid less for the same job.

In all cases, before considering Tier 2 sponsorship or if the cap prevents recruitment, employers should check whether the non-EU candidate has a different visa route available. This includes where their partner/spouse is a British/EU citizen, or a non-EU citizen with their own UK visa, enabling the candidate to obtain a dependant visa. An employee on that type of visa can work in the UK almost without any restriction. There are also personal Tier 1 visas for those with “exceptional talent” or those making substantial investments into the UK.

If the candidate is already working for the UK business as part of an international group, check whether that person worked for a linked international office before coming to the UK. That can sometimes be the case for employees currently on Tier 5 or dependant partner visas, who can be caught by the cap when converting to Tier 2 General. If they did work for an overseas office before arriving in the UK, they may qualify for a Tier 2 ICT visa, because the required 12 months of overseas service can include a period of service before they came to the UK.

This change to the Tier 2 cap rules has been a long time coming but is welcome nonetheless. Employers will need to recognise that pressure on the visa system may well continue – not least because the Home Office will keep the cap under review and could reverse the change in due course – but for now it should ease some of their recruitment challenges.