UK set to see the introduction of an immigration skills charge

by Ray Clancy on January 20, 2016

The UK needs to introduce an immigration skills charge for skilled works from outside the European Union and also raise pay thresholds for Tier 2 visas, a new report suggests.

The recommendations from the Government’s Migration Advisory Committee (MAC) are aimed at addressing concerns about the rising number of migrants on these kind of visas and a reliance on them to fill shortages in the labour market.

Expat-WorkerIn its review of the visa stream, the Committee found that using price would be the most effective way to prioritise and target the specialist and scarce skills that non-EU migrants bring to the UK as well as to address the potential disincentives to up-skill the domestic labour market.

As part of its recommendations, the MAC suggests increasing the existing minimum salary threshold for all tier 2 migrants from the current £20,800 to £30,000 and £23,000 for graduates. It says that this level of pay is a better representation of the higher qualifications now required to be eligible for this route.

The MAC’s analysis showed tier 2 migrants are generally paid more than their UK counterparts, supporting the view that migrants in this route bring scarce skills that are of high value to the UK. However, the analysis found that within some occupations, mainly in the public sector, migrants are often paid significantly less than similar UK workers, sometimes due to financial pressures.

The review report says that an immigration skills charge (ISC) would incentivise employers to reduce their reliance on migrant workers and encourage them to invest in training UK employees. This charge, around £1,000 a year for each tier 2 employee, should be in addition to raising salary thresholds.

It calculates that this could provide £250 million a year for skills funding and have a significant impact on employer behaviour.

It also recommends an overhaul of the Tier 2 (Intra-company Transfer) route where a small number of highly specialised staff are brought into the UK, which is supposed to allow for highly skilled staff from abroad to impart their skills or gain experience, but has been used to bring in migrants to service third-party contracts, predominantly within the IT sector, where the benefits are less clear cut.

Third party contracting cuts companies’ IT costs but does not sufficiently contribute to the stock of IT skills within the UK, so the MAC has recommended that third party contracting should become a separate route under Tier 2.

“Skilled migrant workers make important contributions to boosting productivity and public finances, but this should be balanced against their potential impact on the welfare of existing UK residents,” said Sir David Metcalf, chair of the MAC. “Raising the cost of employing skilled migrants via higher pay thresholds, and the introduction of an immigration skills charge, should lead to a greater investment in UK employees and reduce the use of migrant labour.”

The report also says that there should be no automatic sun setting of jobs on the Shortage Occupation List (SOL), but employers should provide sufficient evidence when an occupation has been on the list for a number of years. It does not recommend that Tier 2 (General) is restricted only to occupations on an expanded shortage occupation list.

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