It's getting a lot more expensive to hire from abroad

The prospect of Brexit is driving skilled workers from the UK - why are we penalising firms who need to replace these skills to compete?

by Sophie Barrett-Brown
Last Updated: 07 Dec 2016

As post-EU referendum uncertainty begins to drive many European workers away from the UK, replacing them is set to become a lot more expensive for employers. But some swift forward planning now on the part of businesses intending to hire during 2017 could save thousands of pounds by beating impending changes to fees and other costs.

The true impact of Brexit on the supply of skilled workers is as yet unknown. Uncertainty continues to surround government policy on EU workers already in the UK, and any post-Brexit EU migration proposals remain under wraps and subject to negotiations with the EU. But it seems clear that access to the global labour market for UK businesses is not going to get any easier.

The Government continues to stick to its ill-fated pledge to reduced net migration to the tens of thousands. It is indicative of the current climate that amongst announcements at the last Conservative Party Conference aimed at compelling UK businesses to hire at home was one which would have required firms to publically disclose the number of foreign workers they employ. The course may have been swiftly reversed, but the message was clear.

Since the vote to leave the EU, evidence is already emerging that existing EU workers in the UK see their futures elsewhere. A recent FT survey found one in five indicating they intended to leave the UK within two years and a further one in three were considering this option. We’re also hearing of cases where senior level roles are being offered to talented European citizens, but declined because of the current climate in the UK.

Against this backdrop, and with the Office for Budget Responsibility estimating a reduction in net EU migration of 80,000 per year after Brexit, it is inevitable that some employers will need to look outside the EU to fill skills shortages they’re experiencing at home. But alongside the uncertainty provoked by Brexit, the government continues to raise hurdles for firms who source the skills they need from outside the EU, through higher barriers to hiring and with increases in fees and associated costs. There will be further steep rises in thresholds and fees in April 2017, so businesses that can define and act on their 2017 hiring needs before April stand to reduce hiring costs and maximise the talent pool available to them.

Changes to be aware of include:

  • An Immigration Skills Charge of £1,000 per sponsored worker per year from April 2017, adding a cost of £5,000 per assignee holding a 5 year Certificate of Sponsorship. 
  • Extension of the Immigration Health Surcharge to Tier 2 intra-company transfer (ICT) workers and their dependants, adding an additional £200 per year per person – £4,000 for a worker with a spouse and two children sponsored for five years.
  • The current Tier 2 (ICT) – Short Term Staff route, covering assignments of up to 12 months, will close in April 2017. So to avoid the much higher maximum salary thresholds and ‘cooling off’ period under the main route (Long Term Staff), businesses need to act soon to access the short term route.
  • The salary threshold for sponsoring employees under Tier 2 (General) rises to £30,000 in April 2017 – a sharp increase from the £20,800 threshold in April 2016, which will effectively limit the talent pool that can be accessed for many roles on lower salaries.

These policies may not be a surprise, given the government’s politically unsurprising wish to control immigration. But to remain competitive in a global market, businesses must be allowed to nimbly and affordably source talent from international labour pools. Skilled migrants are critical to the future success of many businesses, and therefore have a huge part to play in the future success of the British economy. Regardless of the many and varied future policy uncertainties, however, one thing businesses can do is focus as much 2017 recruitment activity as possible in the first months of the new year, and therefore avoid increases in fees and salary thresholds that will make their task harder after April.

Sophie Barrett-Brown is head of the UK Practice at Laura Devine Solicitors

Image source: J Arron Farr/Flickr

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