In the Government’s latest move to reduce net migration and revive the domestic labour market, as of 6 April 2017, employers will now have to pay an ‘Immigration Skills Charge’ to bring skilled foreign workers to the UK on a Tier 2 visa.
Under the new charge, all organisations that hold a Home Office-issued sponsor licence will be made to pay an additional £1,000 per year for every Tier 2 non-EU national they hire. Small employers and charities will be charged a reduced fee of £364 per worker.
Announcing the new skills charge in March 2016, the Home Office stated it was designed to “incentivise training of UK workers”, and to “reduce Britain’s reliance on migrant workers and upskill British workers”.
The Government hopes the Immigration Skills Charge will help to bring down current levels of migrant workers by out-pricing employers from the global labour market and increasing the commercial attractiveness of the UK workforce.
With the latest figures showing net migration is currently at 273,000, there is still some way to go for the Government to meet its target of 100,000.
The rising cost of hiring skilled foreign nationals
Importantly for employers, the Immigration Skills Charge is being levied as an addition to the already-burdensome cost of recruiting and sponsoring workers from outside the EU.
These include for example:
- Tier 2 visa application fee – £575
- Certificate of Sponsorship fee – for medium-large employers – £199 per migrant
- Sponsor licence fee for a large Tier 2 sponsor – £1,475
- Sponsor licence fee for a small Tier 2 sponsor – £536
- Immigration Health Surcharge – £200 per annum
- Other costs including relocation package etc
When totalled over the course of a sponsorship, the cost to employers of hiring skilled workers under Tier 2 becomes substantial, and in some cases, prohibitive.
While a concession has been made for small businesses and charities, the impact on employing migrant workers is intended to be felt across the board.
Faced with the mounting costs of Tier 2 sponsorship, small to medium sized businesses may have little choice than to explore alternative visa entry routes to meet their recruitment needs, or even reduce or remove reliance on migrant workers to avoid the financial burden of hiring from overseas. At scale, this could impact UK prospects of economic growth.
For larger organisations however, a recent survey by the CIPD showed a quarter of employers surveyed intend to absorb the increased cost of hiring foreign workers. By opting not to adjust their recruitment strategies, it becomes a case of employers simply footing the bill for the Government’s longer-term domestic skills and training strategies.
Reviving the domestic labour market at the expense of UK employers?
The charge comes into force at a difficult time for UK immigration.
Against a backdrop of Brexit, the same survey by the CIPD earlier this year found 27 per cent of employers believe the EU nationals they employ are considering leaving their jobs and possibly the country in 2017. The survey concluded that sectors which rely on the 3 million-strong EU workforce are already experiencing skills and labour shortages.
Which is where the UK labour market is expected to step up and step in.
There remain however question marks around the degree to which the UK labour market is able – or willing – in its current form to satisfy current and future demand for workers.
For sectors relying on foreign nationals to plug domestic skills and labour gaps, such as construction, hospitality, health and social care, adding further financial burden to the existing cost and effort in retaining a sponsor licence is unlikely to be welcomed.
Faced with an exodus of EU nationals, critical skills shortages in the UK domestic market, and increasingly costly access to the global labour market, UK employers are facing an uncertain future in meet their recruitment needs.