United Kingdom – Government Communicates Plans Regarding MAC Review of Visa System

United Kingdom – Government Communicates Plans

This GMS Flash Alert reports on the U.K. government’s response to the Migration Advisory Committee’s report “Review of Tier 2: Balancing migrant selectivity, investment in skills and impacts on U.K. productivity and competitiveness,” which was published in January 2016.

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Last week the U.K. government announced its response1 to the Migration Advisory Committee’s (“MAC”) report “Review of Tier 2: Balancing migrant selectivity, investment in skills and impacts on U.K. productivity and competitiveness,” which was published in January of this year2.  The response addressed a number of issues, such as: 

  • increasing minimum salary thresholds across the Tier 2 visa category;
  • the closing of some Tier 2 (Intra-Company Transfer - ICT) routes;
  • widening the Immigration Health Surcharge to the Tier 2 (ICT) visa category; and
  • the introduction of the Immigration Skills Charge.

Some of the changes will be brought in from autumn 2016 (usually October), the remaining changes will be brought in from April 2017.  

This GMS Flash Alert briefly explains the key elements of the U.K. government’s response. 

WHY THIS MATTERS

While there are some useful concessions in the U.K. government’s response (please see below), the changes, generally, appear designed to oblige U.K. businesses to consider taking steps to reduce their reliance on non-European Economic Area (EEA) migrants to fill vacancies in their U.K. operations.

This could make it more expensive, and more onerous from a sponsor compliance perspective, for U.K businesses to recruit non-EEA nationals in the hope that these businesses will look at the local labour market first to fill any vacancies.

While this is a laudable goal, the changes may mean that businesses would have to evaluate their short- and long-term recruitment and assignment policies so that they are still able to get the right employees into the right positions at the right time.  Overall, these changes could have a detrimental effect on the ability of U.K. businesses to compete in a global market.

Background

Tier 2 is the main visa route for employers to bring employees into the U.K. to work.  Tier 2 immigration applies to non-EEA skilled workers with job offers in the United Kingdom.  Last year the U.K. government asked the MAC to overhaul the Tier 2 visa category to achieve a reduction in the demand for skilled migrant labour by restricting the Tier 2 route to genuine skills shortages and highly specialised experts. 

It has now evaluated the MAC’s recommendations and has published a list of changes, which will be implemented throughout 2016 and 2017.     

Changes Occurring in Autumn 2016

Tier 2 (General)

  • The minimum salary threshold will increase to £25,000 for Tier 2 (General) experienced hires, up from £20,800.  The minimum threshold of £20,800 will be maintained for new entrants.
  • Nurses, medical radiographers, paramedics, and some secondary school teachers will also be excluded from this new £25,000 minimum salary requirement until July 2019.
  • Nurses will remain on the Shortage Occupation List, but employers will need to continue to carry out a Resident Labour Market Test (RLMT) before recruiting any non-EEA nurses.
  • The government will give extra weighting within the Tier 2 (General) monthly limit to businesses sponsoring overseas graduates, and will allow graduates to switch roles within a company once they have secured a permanent position at the end of their training programme.

Tier 2 (ICT)

  • The Tier 2 (ICT- Skills Transfer) category will close to new applications.
  • The minimum salary threshold for the Tier 2 (ICT - Short Term Staff) category will increase to £30,000, up from £24,800.
  • The minimum salary threshold for the Tier 2 (ICT – Graduate Trainee) category will decline from £24,800 to £23,000 and the number of places available to sponsors will increase from five to 20 per year.
  • All Tier 2 (ICT) migrants and their dependants will be required to pay the Immigration Health Surcharge at £200 per person per year of the visa.

All Tier 2 Categories

  • The transitional arrangements for workers sponsored at National Qualification Framework (NQF) levels 3 and 4 will be closed over the next two years.  Currently only those migrants with a job commensurate with NQF level 6 (degree level) can be sponsored.

Changes Occurring in April 2017

Tier 2 (General)

  • The minimum salary threshold will increase to £30,000 for Tier 2 (General) experienced hires.  The minimum threshold of £20,800 will be maintained for new entrants.
  • The RLMT requirement will be waived where an application is made in support of the relocation of a high-value business to the U.K. or, potentially, in support of an inward investment and extra weighing given within the Tier 2 (General) monthly limit.

Tier 2 (ICT)

  • The Tier 2 (ICT- Short Term Staff) category will close to new applications. 
  • All Tier 2 (ICT) applicants (except graduate trainees) will need to apply under a single route with a minimum salary threshold of £41,500.
  • The minimum salary threshold for high earners in the Tier 2 (ICT – Long Term Staff) category will fall from £155,300 to £120,000 for those migrants looking to stay in the U.K. for between five and nine years.
  • The one-year experience requirement for Tier 2 (ICT) migrants will be waived if the migrant is paid over £73,900.
  • Implementation of any further changes resulting from the U.K. government’s review of permitted allowances under the Tier 2 (ICT) visa route.  No further details are available at this stage.

All Tier 2 Categories

  • Introduction of the Immigration Skills Charge (ISC) which will be levied on Tier 2 sponsors at a rate of £1,000 per migrant per year.  A reduced rate of £364 per person per year will apply to small and charitable sponsors.  PhD roles and Tier 2 (ICT - Graduate Trainee) migrants, and Tier 4 students switching into Tier 2 (General), will be exempt from the ISC.

Other Outcomes of MAC Report

Recommendations that will not be implemented as a result of the MAC report are as follows:

  • The U.K. government will not implement the need for an RLMT for students (Tier 4 visa holders) switching to the Tier 2 (General) visa category from within the U.K. in recognition of maintaining the attraction for students of entering the U.K. job market after studying here.
  • The U.K. government will not implement a requirement for Tier 2 (ICT) applicants to have completed two years with the company overseas, but will maintain the 12-month qualifying period and will not restrict migrants requiring Tier 2 visas to service third party contracts to a separate category.

KPMG NOTE

Our Take on the Government’s Plans

The U.K. government’s changes to the Tier 2 visa category are aimed at incentivising U.K. businesses to recruit more workers from the resident labour market instead of relying on non-EEA migrant workers.  As the U.K. government cannot limit EEA migration, it instead appears to be undertaking efforts to make Tier 2 migration more expensive and more onerous for U.K. businesses.There are some very useful concessions in the new rules, such as the waiver of the requirement for Tier 2 (ICT) migrants to have been employed outside of the U.K. for a year as long as they are paid a relatively high salary, or the waiving of the RLMT if a Tier 2 (General) application is connected to U.K. investment.  However, by and large the changes could very well result in significantly increased costs for U.K. businesses wishing to sponsor non-EEA migrants, and have a significant impact on business models that utilise the short-term ICT routes to support client contracts.

Considerations for Business

It may take U.K. businesses some time to digest the changes, and to consider what they will mean for the way they run their U.K. operations.  It is likely that some of the changes will have an effect on some business models.  The offering of international assignments to the U.K. to attract highly skilled employees may become too expensive, as may be the sending of highly skilled migrants to the U.K. for short-term project work.  The fact that the U.K. government is still looking into which allowances will be permitted to meet minimum salary thresholds for Tier 2 (ICT) migrants may be a further concern for U.K. employers.  

FOOTNOTES

1  For The Home Office, U.K. Visas and Immigration, “Migration Advisory Committee reviews of Tier 2” (26 March 2016), click here.

2  For prior coverage, see GMS Flash Alert 2016-018, 29 January 2016.

CONTACTS

For additional information or assistance, please contact your usual KPMG GMS or People Services professional* or one of the following professionals with the KPMG International member firm in the United Kingdom:

Punam Birly

tel. +44 (0) 20 7694 4950

Punam.Birly@kpmg.co.uk

 

Paul Jones

tel. +44 (0) 20 7311 1475

Paul.Jones2@kpmg.co.uk

 

Denise Osterwald

tel. +44 (0) 20 7694 3481

Denise.Osterwald@kpmg.co.uk

 

* Please note the KPMG International member firm in the United States does not provide immigration services. 

The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.

© 2016 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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