HR Matters - Immigration skills charge – what difference will it make?

Published: 25/05/2016

From April 2017 employers who sponsor a migrant worker for a Tier 2 visa will be required to pay an ‘immigration skills charge’ of £1,000 per migrant, per year.

A reduced rate of £364 will apply to small businesses and charities. There will be exemptions for PhD-level roles and for international graduates switching from a student visa to their first work visa, as well as for intra company transfer graduate trainees. There is no exemption for jobs on the shortage occupation list.

The charge is being introduced through the Immigration Bill 2015/2016. It will be payable in  addition to the Apprenticeship Levy, which comes into force at the same time.

The Home Office will collect the monies, although it is unclear exactly how. The Government wants to ensure that the employer, rather than the migrant, pays the charge. We anticipate that the full amount will be payable up front, rather than on an annual basis, probably when a Certificate of Sponsorship (CoS) is assigned to a migrant by an employer through their sponsor management system. It remains to be seen whether reimbursement will be available if the migrant fails to successfully apply for a visa, or if their sponsored employment ends earlier than planned.

We anticipate that the charge will be levied whenever an employer assigns a Tier 2 CoS. Although unconfirmed, we do not expect it to be payable for migrants who already have their visa, until this falls for renewal. This may lead employers who are sponsoring migrants between now and April 2017 to apply for an initial five year visa, rather than a three year visa, to avoid the charge. We also expect a surge in visa applications in March 2017, as employers encourage workers whose visas are due to expire shortly after the charge comes into force, to renew earlier than usual.

The Government says the charge “is designed to cut down on the number of businesses taking on migrant workers and incentivise training British staff to fill those jobs.” 1

It has been set at a level which makes it significantly more expensive to hire a migrant worker. This is in addition to the introduction of higher minimum salary thresholds. But higher salaries only benefit employees, whereas the skills charge will go to the Treasury. The hope is that employers may instead prefer to invest the money in training a British worker, but if they do not, the extra payment can go towards skills programmes.

However, the Government has not yet offered any guarantee that monies collected will be invested in skills training for settled workers. We await a response to the suggestion of the Migration Advisory Committee (MAC) in its report of 18 December 2015, that a levy and grant system should be introduced, with rebates for those employers who demonstrate investment in training. 2

There has already been a backlash from businesses who perceive the charge as a further tax. They argue that employers do not recruit migrants because they are unwilling to train local workers, but because they have an urgent need to meet, or because a particular individual offers something extra.

Concerns have also been raised regarding the cost to the public sector, which currently relies on migrants to fill nursing and some teaching posts. The Government will carry out a consultation before the charge is implemented and we may yet see some concessions, for example a gradual phasing in for NHS employers.

The Government has long been encouraging employers to anticipate and address skills shortages. Whilst the skills charge means it is now wielding a bigger stick, the jury is out on whether the charge will bring about the desired behavioural change in recruitment, or make a meaningful contribution towards up-skilling British workers.

Source:
1.https://www.gov.uk/government/news/governments-new-immigration-skills-charge-to-incentivise-training-of-british-workers
2.https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/493039/Tier_2_Report_Review_Version_for_Publishing_FINAL.pdf

The content of this article is for general information only. For further information regarding immigration skills charge, please contact Clare Hedges. Law covered as at May 2016.

This article is taken from our HR Matters Summer 2016 publication. Similar articles can be found in the latest edition.

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