MAC releases review of Tier 2, recommends increase in salary threshold and charge of £1,000 per year per worker
The independent Migration Advisory Committee (MAC) has today released its review of Tier 2 of the points-based system (PBS).
Image credit: UK GovernmentThe full 292-page MAC report is available here and a 24-page summary version is here.
A press release accompanying the report notes that the MAC recommends that the Government should use higher salary thresholds to prioritise higher value, skilled migrants within the Tier 2 visa route.
The MAC proposes raising the overall minimum salary threshold from the current £20,800 to £30,000. The Committee added that it recognises that some migrant workers, mostly in the public sector, are paid under the threshold and suggests a phased increase in the salary thresholds. In addition, the MAC recommends offering a lower threshold of £23,000 for new graduates.
The MAC also strongly recommends the introduction of an Immigration Skills Charge (ISC), whereby companies would face a suggested charge of £1,000 per year for each Tier 2 migrant employed in the UK.
The report gave the following overview of the MAC's full recommendations:
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Salary Thresholds
• Raise the overall minimum salary threshold to reflect the change in skill requirement to NQF6+. The threshold should be based on the salary distribution for all employees working within occupations skilled to NQF6+, set at the 25th percentile (£30,000) for both Tier 2 (General) and short-term Tier 2 (Intra-Company transfers). For new entrants within Tier 2 (General) and the Graduate Trainee route within Tier 2 (Intra-company Transfer) route, a lower threshold should be set at the 10th percentile (£23,000).
• There is no need for regional variation in the salary thresholds as the 25th percentile is more representative of a worker in a low paying region.
• The public sector may require time to move up to the new salary thresholds but should not be offered a permanent exemption from the higher thresholds. The thresholds for the public sector should gradually increase over time to reach the £30,000 threshold.
• The Government may wish to consider the special case of start-ups and creative occupations where they are likely to be disproportionately affected by the increase in salary thresholds.
Immigration Skills Charge
• We recognise that it is a matter for HM Treasury to determine both the level of the Immigration Skills Charge and how the revenue is spent. However, it is our view that:
o The Immigration Skills Charge should be an upfront cost, payable at the time of the Certificate of Sponsorship (CoS) application.
o The charge should be regressive so that those employers hiring more highly paid (and by inference more highly skilled) migrants are penalised less in proportion to the salary paid. An amount of £1,000 per year is large enough to raise a reasonable amount of revenue and to have a significant impact on employer behaviour.
o The charge should be applied across all Tier 2 routes – namely (Tier 2 General) and Tier 2 (Intra-company Transfer) routes. The only exemptions would be the 'Graduate Trainee' and 'Skills Transfer' routes within the Tier 2 (Intra-company Transfer) route.
o The revenue should be spent to raise human capital (not limited to apprenticeships).
Restrictions to Tier 2 (General)
• Tier 2 (General) should not be restricted to a list of genuine skills shortages and highly specialist experts.
• Graduates recruited onto a graduate scheme could be given additional points when the 20,700 limit is reached to reflect the potential for future high growth in earnings. For example, by adding £7,000 (the difference between new entrants and experienced workers thresholds) when prioritising.
• All in-country switchers should be subject to the Resident Labour Market Test (RLMT) and included in an expanded annual Tier 2 limit.
• There should not be a blanket sunsetting clause applied to the shortage occupation list (SOL). Regular reviews of the SOL should be an effective mechanism for testing whether occupations are still in shortage. Industry will be required to submit more comprehensive evidence on what they are doing to resolve the shortage lest in order to be retained on the SOL.
Restrictions to Tier 2 (IntraCompany Transfers)
All Tier 2 (Intra-company Transfers)
• The required amount of prior experience with the employer should increase from 12 months to two years, except for the graduate trainee route and skills transfers route where the current requirements (6 months' experience) should be maintained.
• CoS application forms should include a description for why the intra-company transferee is required, and the specific skills they have.
• The Home Office and HMRC should look into the issue of allowances and payment of national insurance contributions as this may be allowing undercutting.
• All intra-company transferees should be required to pay the Immigration Healthcare surcharge.
Third-party contracting
• A separate route should be created for third-party contracting.
• The salary threshold for short-term third-party contracting should be increased to £41,500 (the currently threshold for all long-term intra-company transfers, and also a proxy for senior managers and specialists).
• There should be a thorough review of skills shortages within the IT sector, after which the Government may wish to revisit this issue.
Restrictions to Tier 2 Dependants
• No restrictions should be applied to dependants' right to work.
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The Institute of Directors expressed concern at the report and urged the Government to dismiss the MAC's proposals.
Simon Walker, Director General of the Institute of Directors, said: "The MAC's proposals will hurt thousands of individual firms, which will find it harder to bring in the skilled workers in areas like IT, where we have shortages. Coming on top of the new apprenticeship levy, and the national living wage, the new tax on recruiting from overseas will pile further costs on businesses.
"The salary thresholds are particularly short-sighted, as they would block valuable employees like engineers, while not catching high-earning bankers or lawyers. It is likely to be the public sector which suffers most, as the thresholds make it harder to recruit much-needed nurses and teachers from abroad."
Walker said implementing the proposals would send a message around that the world that the UK is no longer open to international talent.
BBC News noted that ministers are concerned about the rising number of Tier 2 migrants and are concerned about companies' reliance on them to fill shortages in the labour market.
According to the Guardian, the Home Secretary is expected to endorse the recommendations but has not yet made a final decision. A Home Office spokesman told the Guardian: “We are grateful to the migration advisory committee for its report. We are considering its findings and will respond in due course.”