Businesses warn government over migration curbs

18th August, 2015

Several of the UK’s biggest businesses have warned against the government’s proposals to tighten rules surrounding the employment of foreign workers, warning that new restrictions could increase costs, threaten graduate programmes and encourage firms to move their operations abroad.

Asda, Lloyds Banking Group, Rolls-Royce and Siemens, were amongst a number of firms to submit formal submissions to the Migration Advisory Committee (MAC), an expert group which advises the government on the issue of immigration.

Following the general election, David Cameron and Home Secretary, Theresa May, asked the MAC to look at proposals to reduce UK migration from countries outside of the European Economic Area (EEA), as reported in a previous article: Will a clampdown on non-EU migrants hamper UK business growth?

Proposals included raising minimum salary requirements for skilled foreign workers on Tier 2 visas, which currently stands at £28,000 per year for new employees and £41,500 for long-term intra-company transfers.

However, having listened to businesses over the past two months, the MAC recently published a report advising the government to think twice before lifting the salary threshold.

It said: “There is little doubt that an immediate introduction of a salary threshold at this level would be strongly opposed by many employers and would cause serious problems in particular sectors.”

According to the report, Tata Consultancy Services (TCS) said that higher salary thresholds would likely force it to cut costs by providing “off-the-shelf” solutions for their clients, whereas PwC warned the MAC that increasing salary requirements would push firms to move operations to other countries, hurting not only employees but also UK-based supply chains.

Rolls-Royce anticipated the proposed changes to the threshold would reduce the affordability of graduate recruitment, to the extent that it would “ultimately abolish the entry-level rate”.

London First business group suggested that the changes would impact innovation and “hit start-up companies very hard”, saying: “If start-ups or small businesses choose to locate elsewhere because of the difficulty of recruiting talent in London, this will have a knock-on effect on London’s creative sector.”

Lloyds Banking Group also had significant concerns and wrote to the committee to highlight that costs for employers would rise. It said: “With the proposal of a skills levy a live issue, we consider a decision to increase salary levels at this stage to be premature.”

In his most recent budget address, George Osbourne proposed a “skills levy” on businesses employing foreign workers, however it remains unclear whether the levy would be introduced as a one-off cost or an annual tax.

Former professor at the London School of Economics and Chairman of the MAC, Sir David Metcalf, said that salary thresholds “should not be considered in isolation.”

“Salary thresholds are closely linked with other issues the government has asked the MAC to consider in its wider review, including proposals for an immigration skills charge on migrant workers.”

The MAC is expected to publish a wider review, taking into account the impact of a skills levy, in December.

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