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Impact of Tier 2 Review

As posted in our earlier article “Call for Evidence Minimum Salary Threshold Tier 2” the Government’s newly formed immigration taskforce has commissioned that the Migration Advisory Committee (MAC) provide guidance on:

• Raising the minimum salary threshold for all Tier 2 categories by the Autumn;
• A wide review of the Tier 2 routes by mid-December 2015

The Government has set a clear mandate to examine the Tier 2 Points Based System route, with the view that the MAC will provide suggestions on how to significantly reduce the number of foreign workers coming to the UK.

The MAC’s Tier 2 review was launched on Friday 3rd July 2015 and it includes a number of proposals, such as:

• Increasing the salary thresholds to a level that better aligns with the salaries of highly-specialised and/or highly-skilled experts;
• Restricting Tier 2 (General) recruitment to genuine skills shortages and highly specialist experts only;
• Tightening the Tier 2 ICT route along similar lines and including a potential cap on numbers;
• Applying the Immigration Health Surcharge (IHS) to the ICT route;
• Restricting the ability of Tier 2 dependants to work in the UK; and
• Introducing a ‘skills levy’ to businesses recruiting from outside the EEA, the proceeds from which would be used to fund apprenticeships in the UK.

If such proposals by the Government were to come into effect they would have a significant and damaging impact on UK businesses’ ability to recruit new workers under the Tier 2 General route, and to bring in workers under the Tier 2 Intra-Company Transfer route.

Increasing the salary thresholds to a level that better aligns with the salaries of highly-specialised and/or highly-skilled experts

It is no surprise that new entrants are expected to receive a lower salary rate than an experienced/ highly skilled expert, with the Governments proposal to increase the salary thresholds it will likely make it difficult for companies to recruit juniors under the Tier 2 category, when they could instead employ a more experienced workers for the role.

Additionally, if the salary threshold were to be increased the cost of running UK Graduate Schemes would increase, and many sponsors that operate on an international basis may consider moving their Graduate Schemes overseas, a reduced number of UK based Graduate Schemes would have a severe impact on all graduates, including UK graduates.

The impact of increasing the salary threshold will have a severe impact on businesses, especially small to medium enterprises that have smaller budgets as opposed to multi-nationals who could finance the increase in fees. By imposing a salary threshold increase it could lead to market inflation for such roles as businesses increase the overall market rate; leading to wage inflation and a lack of competitiveness for such roles.

With the Oil and Gas sector as an example, many companies with entities in the UK take part in International Graduate Schemes that are aimed to be filled by percentage of UK and non-EEA graduates. If companies were unable to hire Tier 2 migrants as entry level graduates because of a salary threshold increase this could have a corresponding negative impact upon the number of overseas positions available for UK graduates, as companies will fill overseas graduate roles with Non-UK graduates in order to maintain a culturally diverse workforce of graduates.

Tier 2 General – Skills Shortages and High Specialist Experts Only

The Government has asked the MAC to review plans for restricting the recruitment of Tier 2 General workers allowing recruitment through Tier 2 General only if there is a genuine skills shortage or need for a highly specialist experts. The MAC will also be considering if the Resident Labour Market Test can be removed and replaced with a renewed Shortage Occupation List that is intended to maintain the current flexibility of including high value roles, key public service workers and those individuals with specialist skills.

By limiting the Tier 2 General route to selected occupations and highly specialist experts, this will limit UK businesses’ ability to seek specialist skills that cannot be sourced from the UK or EEA, and businesses will become reliant on the Government to acknowledge skills shortages in their operating sector.

Limiting the Tier 2 Intra-Company-Transfers

The MAC has been asked to propose new ways of drastically limiting the use of the Tier 2 ICT route, which is currently one of the most used visa routes for entering the UK.

Proposed ways to limit the route include: limiting the category to genuine skills shortages and high specialised experts only, imposing a cap on numbers and restricting the ability of Tier 2 ICT dependants to work in the UK.

The Tier 2 ICT route allows companies to move staff from an overseas entity to the UK entity for projects, knowledge boosters, and long term roles (up to 3 or 5 years). The ICT route is a valuable route for companies that want to spread expertise and experience throughout the business. The route allows a company to develop and train a current employee with new skills, as opposed to hiring a new worker to obtain the desired skills.

Skills Levy

The MAC has been asked to provide guidance on a possible skills levy on businesses using Tier 2 visa, with the funds to be used to train UK workers through apprenticeships in the UK. The reasoning behind this is that a skills levy would provide additional funding to create more opportunities in the UK for home grown talent. The levy would add an incentive for employers to recruit and train UK workers as funding would be available to support apprenticeships.

Those entering under apprenticeship scheme are generally seen to be newbies entering that sector, and tend to not have the same level of expertise and industry knowledge that a number of Tier 2 visa holders hold when applying for a role in the UK.

This could prove very detrimental, in some cases even catastrophic to small business.

Immigration Health Surcharge (IHS) to the ICT Route

Workers employed under the Tier 2 ICT route are currently exempt from the Immigration Health Surcharge, however the Government could potentially be broadening the Immigration Health Surcharge to cover such workers.

Such proposed IHS fees are likely to match the current £200 per year per applicant in place for other, longer term categories. As a result, a route that is typically known to be cost effective could lead to businesses needing to allocate funds more carefully. As a lot of firms now planning claw-backs for the IHS fees, following the Government’s recent decision to class the fee as a benefit in kind, Tier 2 ICT workers could be more inclined to take an opportunity elsewhere, to avoid a compulsory heath surcharge payment.

If you wish to provide your own response to the proposed changes, the MAC are taking suggestions. Email your response by Friday 25 September 2015 to or write into the MAC at:

Migration Advisory Committee,
3rd Floor, Seacole Building,
2 Marsham Street,

Please also note that the MAC may quote evidence received and attribute it to the individual or organisation in the final report, unless you explicitly ask not to do so.

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