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UK: Tier 2 MAC Recommendations Announced

Newland Chase walks FEM through the recommendations of the Migration Advisory Committee and summarises the main proposals as well as identifies potential areas of risk and impact on the businesses.

On 19th January 2016, the Migration Advisory Committee (MAC) published their recommendations further to a review of Tier 2 of the Points Based System.  We summarise the main proposals below together with the potential impact they could have on businesses in the UK. It is important to be aware that at this stage these points are only recommendations being made to the government and will not necessarily be implemented. 

Minimum Salary Thresholds
The MAC has recommended that the government raise the overall minimum salary thresholds. These salary increases will affect employees in both the Tier 2 General and Tier 2 ICT categories. For the Tier 2 General category, the recommended minimum salary threshold would be £30,000 per annum for experienced workers (a proposed increase of £9,200) and £23,000 for new entrants. For Tier 2 ICT migrants, those under the Short Term Staff subcategory would have to meet the minimum salary threshold of £30,000 – an increase of £5,200 from £24,800.  The recommendation for those under the Long Term Staff subcategory is that the minimum salary threshold should remain the same, at £41,500 per annum.

In light of the increased salary thresholds, the MAC recognises that the public sector may find difficulty in implementing the new rates of pay within a short period of time.  At the same time, it has recommended against a permanent exemption for the public sector from the higher thresholds, instead advocating staggered increases to the minimum thresholds over time in order for pay in the sector to reach the £30,000 minimum threshold.
The above proposed increases to the minimum salary thresholds are likely to have the greatest impact on smaller businesses, start-ups and the creative, architectural, public and IT sectors, who may need the skills that migrants can offer but are unable to pay the inflated rate against other possible cost increases, such as the Immigration Health Surcharge and Immigration Skills Charge (the latter discussed below).
The Immigration Skills Charge
The Immigration Skills Charge (ISC) is a new cost that the MAC recommends is introduced by the government for all those applying under Tier 2, except for the Tier 2 (ICT – Skills Transfer) and (Graduate Trainee) subcategories. The MAC has recommended that the ISC be ‘levied’ at a rate of £1,000 per assignee, per year.  In practical terms, this translates as an additional £5,000 for an employer who wishes to sponsor a migrant for a period of 5 years. 
Shortage Skills and Specialist Skills For Tier 2
Previously, the MAC was asked to review whether Tier 2 hires should be restricted to occupations which are on an expanded list of genuine skills shortages and highly specialist experts.  In its report, it has recommended against this,  stating that this method “would be extremely challenging to implement given the difficulty in reliably determining which occupations are most in shortage and/or involve highly specialist experts”.  Rather, the MAC believes that the Government can achieve limiting of the Tier 2 intake using ‘price’ as a determinative factor of a migrant’s value to the company, i.e. salary thresholds, rather than on the basis of skills shortages. On the point of a list of shortages, the MAC recommends that the current Shortage Occupation List should be reviewed more regularly to consider whether occupations are still in shortage.  Where a particular occupation is no longer considered as a shortage, evidence ought to be submitted to confirm steps taken to alleviate the shortage in the UK Labour Market.  In essence, where there are no steps taken to alleviate the shortage, the occupation will no longer be classified as shortage.
Resident Labour Market Test for Switchers
It has been recommended that all those applying in-country to switch into Tier 2 General should be subject to the Resident Labour Market Test (RLMT).  This will mainly affect those in the UK under the Tier 4 visa category whose prospective employers are presently exempt from the requirement to advertise their roles for 28 days.
The MAC has stated that it does not consider that such a recommendation, if taken in full, would place graduates in a disadvantaged position as compared to new hires from overseas. Whilst its recommendation is not erroneous, we wonder whether the MAC has negated one of the key pull factors for students coming to the UK: the opportunity to work in the UK with relatively minimal bureaucracy following their studies.
Expanded Annual Limit for In-Country applications for Tier 2
Whilst the annual Tier 2 limit is set at 20,700, this will soon be reviewed. Additionally, the MAC believes that a new quota for migrant workers in-country should also be set in order for them to fairly compete with all Tier 2 migrants, mainly those from outside the UK. As such, the MAC’s recommendation is for an expanded limit on the allocation to incorporate both in and out of country Tier 2 migrants. We foresee significant difficulty with this and the limit set will most likely affect the slightly lesser paid Tier 2 migrants.  As we have seen last year, it is the salary on offer that largely determines whether an employer is likely to be successful with their request for a Tier 2 General certificate.  An expanded allocation would potentially affect the tens of thousands of highly skilled workers wishing to switch into Tier 2.
Changes to  Tier 2 ICT
The MAC has recommended that the amount of time an employee must work for the sponsor company overseas in order to be eligible under the ICT route should be increased from 12 months to 24 months.  This increase would not affect assignees transferring under the Graduate Trainee or Skills Transfer routes. The MAC has further recommended that intra company transferees be subject to the Immigration Health Surcharge (IHS), similar to those already in place for other Tier 2 and residence categories. It has also recommended that the Home Office and HMRC look into the issue of allowances and payment of national insurance contributions, with particular regard to the fact that the current system in place in relation to allowances and national insurance may be detrimental to the UK economy by allowing the undercutting of tax.
New Tier 2 (ICT) Route
A new route may be created under Tier 2 ICT category for transferees intending to fulfil a third-party service contract.  Intra company transfers are generally not designed for this and the MAC hopes that the new recommended route will be able to address this. The MAC has also observed that, particularly in relation those from the IT sector in India, salaries paid are generally lower for assignees entering the UK for third-party contracts, thereby affecting the competitive advantage to UK IT firms. With this in mind, the MAC recommends that the salary threshold for those entering under the new route should be set at £41,500 irrespective of the length of time they will be in the UK.
Maintaining the Right to Work for Tier 2 Dependants
The MAC has reported that the right to work for dependants does not appear to affect the overall number of Tier 2 migrants in the UK. It has also concluded that the employment of Tier 2 dependants poses minimal risks to the UK economy. It is for these reasons that the MAC will advise the government that restrictions should not be placed on dependants’ right to work in the UK. It is worth noting that the Government is not obliged to implement these recommendations, but we believe most of these recommendations will be incorporated in the absence of any strong arguments and supporting evidence to the contrary. We will keep you updated once the Government has reviewed these recommendations.

Written By Newland Chase (28 January 2016)