International recruitment and immigration charges: tips for employers

Employers will be able to reduce costs when recruiting international talent if they can “frontload” next year’s recruitment before April, says Sophie Barrett-Brown.

For employers who need to look internationally to fill skills gaps, hikes in government fees and minimum salary thresholds are coming down the line fast.

With a raft of changes to immigration rules due from April 2017, employers with international recruitment needs may want to consider doing as much as possible in the New Year.

If June’s referendum vote to leave the EU is beginning to feel like a distant memory, the Conservatives’ 2010 manifesto pledge to reduce net migration to the tens of thousands (it’s currently over 300,000) probably seems like ancient history.

Neither have yet borne much fruit, but change is coming.

As our departure from the EU looms, the post-Brexit status of the three million EU migrants already based in the UK, and of other EU citizens employers may wish to recruit in future, remains uncertain.

At the same time, the Government continues to introduce stricter measures for migrants from outside the European Economic Area (EEA) as part of its efforts to reduce net migration.

As fees rise, new charges are introduced and financial criteria for sponsorship increase, it is clear that “outpricing” British employers is a key tactic in its strategy to reduce their reliance on skilled foreign workers.

What to expect

On 24 November 2016, many of the changes in the Government’s most recent statement of changes to the Immigration Rules took effect.

The raft of measures relating to the employment of skilled foreign nationals from outside the EEA is the first phase of a two-stage plan announced by the Government in March.

Phase one changes

• An increase of £4,200 in the minimum salary threshold for experienced workers under Tier 2 (general) from £20,800 to £25,000 (with some minor exceptions including for new entrants).
• An increase of £5,200 in the minimum salary threshold for Tier 2 (ICT – short-term staff) from £24,800 to £30,000.
• The closure of the Tier 2 (ICT – skills transfer) route to new applicants.
• The Tier 2 (ICT) exemption from the Immigration Health Surcharge of £200 per applicant (and dependants) per year was also scheduled to end this autumn, although the commencement date for the provision has yet to be announced. As the entire surcharge is payable upfront, a Tier 2 (ICT) migrant with a five-year Certificate of Sponsorship (CoS) and accompanied by the typical family of three dependants would need to pay £4,000 at the time of application.

Expected phase two changes from 6 April 2017

• Introduction of an Immigration Skills Charge of £1,000 (or £364 for certain small employers and charities) per CoS per year. For example, a Tier 2 migrant sponsored with the maximum initial CoS period of five years will attract an additional cost of £5,000.
• The Tier 2 (ICT – short-term staff) sub-category will be closed. This will also have financial implications for employers since it will push sponsored workers into the “long-term staff” sub-category, for which the minimum salary threshold is £41,500 (whereas the current short-term staff threshold is £24,800).
• The salary threshold for Tier 2 (general) experienced workers will further increase by £5,000 to £30,000.

Combined, these changes create a much tougher environment for employers that need to access the global labour market to fill skills gaps, and significantly increase the resourcing challenges they face.

However, it is not all bad news. The Government is making some positive changes to support its, perhaps competing, objective to still attract “the brightest and the best”.

For example, the salary threshold for Tier 2 (ICT) high earners will be reduced from £155,300 to £120,000, enabling more migrants under this category to work in the UK for the extended period of five to nine years.

Secondly, Tier 2 (ICT) applicants who earn at least £73,900 per year will no longer have to meet the requirement of one year’s prior experience at a business overseas to qualify under this category.

What can employers do?

Despite the balancing changes further up the salary scale, the scheduled increases in charges and salary thresholds for workers at or below the £30,000 mark could make hiring overseas workers either impossible or prohibitively expensive.

Totalling up the charges for an intra-company transferee with a spouse and two children, the new Immigration Skills Charge, additional Immigration Health Surcharge and application filing fees could bring total costs (excluding legal fees, relocation costs and the like) to almost £15,000 for a five-year sponsorship.

Not all of these charges can be mitigated. But if you are planning to hire during 2017, and can reasonably apply before April, you could retain access to a wider international talent pool and save money by avoiding additional costs.