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The Future of Tier 2

Posted on 18 March 2016

The Future of Tier 2

In June 2015, the government asked the Migration Advisory Committee ("the MAC") to review Tier 2 of the UK immigration system, with the aim of limiting the number of non-EEA nationals seeking employment-sponsored visas, thereby reducing net migration. On 19 January 2016, the MAC published its recommended changes to the Tier 2 visa category which, if implemented by the Home Office, may have significant impacts on your business.

The key proposed changes are as follows:

Increasing the minimum salary threshold

The MAC have recommended that the minimum salary threshold for Tier 2 (General) and Tier 2 (Intra Company Transfer) Short Term Staff visa be increased from the current £20,800 and £24,800 respectively to £30,000 per annum.  For applicants deemed 'new entrants' to the labour market under Tier 2 (General) and those under the Tier 2 (ICT) Graduate Transfer route, it is suggested that the minimum salary should be set at £23,000 per annum.

The MAC have not recommended implementing regional variations in salaries and believe the minimum salaries suggested reflect wages in lower paying regions. 

Introducing an Immigration Skills Charge

In addition to the increased salary levels, the MAC have also recommended that an Immigration Skills Charge (ISC) be applied to all Tier 2 routes except for Tier 2 (ICT) Skills Transfer and  Tier 2 (ICT) Graduate Trainee routes. The purpose of the ISC would be to pose as a disincentive to businesses employing migrant workers and instead invest in training settled workers in the UK.

The proposed ISC fee is £1,000 per year per Tier 2 migrant, which would be payable up-front when assigning a Certificate of Sponsorship.  Therefore, if a five-year CoS were to be assigned, the ISC would be £5,000, resulting in a significant increase in costs to an employer.

Changes to the Tier 2 (ICT) route

  1. Eligibility for a Tier 2 (ICT) visa

The Tier 2 (ICT) category is designed for multi-national companies with a business presence in the UK to transfer highly skilled and specialist staff from their overseas entities to the UK on a temporary basis to either impart their skills or gain experience, thereby delivering significant benefits to the UK and encouraging foreign trade and investment.

The current concern is to ensure the Tier 2 (ICT) route does not displace resident UK workers and that companies only transfer senior managers and specialists.  Consequently, the MAC has recommended that the period of time an employee must have worked for the overseas entity of the UK company prior to becoming eligible for a Tier 2 (ICT) Short Term or Long Term visa is raised from 12 months to two years. 

The MAC further recommends that the CoS issued to Tier 2 (ICT) transferees should include more detailed descriptions of the roles the ICT migrant will undertake in the UK.  Additionally, it is proposed that the CoS should also include a business rationale for why the transferee is required in the UK and list the specific skills the transferee holds. 

  1. Immigration Health Surcharge and National Insurance

Tier 2 (ICT) migrants are currently exempt from the Immigration Health Surcharge (IHS), but the MAC recommends ICTs are  also caught by this requirement in order to access NHS services while in the UK. Furthermore, the current exemption for ICTs to make National Insurance contributions may also be removed.  The MAC recommends the Home Office and HMRC work together to ensure current tax provisions for allowances and National Insurance contributions are reconsidered to ensure the best interests of the UK are protected and undercutting is prevented.

  1. New immigration route for ICTs working on third party contracts

The MAC has recommended that a new immigration route be created for those who are required to come to the UK to work on third party contracts.  All current conventional ICT requirements would apply to this new route, however the MAC recommends the minimum salary threshold be set at £41,500 per annum to ensure that only sufficiently specialised employees are able to use this visa category. 

The MAC consider that the requirement to conduct the Resident Labour Market Test and imposing a limit on the proportion of Tier 2 migrants in each organisation would restrict the use of this visa category.

Changes to the Tier 2 (General) route

The MAC have recommended abolishing the exemption to the Resident Labour Market Test (RMLT) currently afforded to those who are able to switch into the Tier 2 visa category in the UK, such as those switching from Tier 4 student visas upon the completion of their degrees to Tier 2, should be subject to the RMLT.

In relation to the RLMT, the MAC has raised concerns regarding the fairness of the current points system for valid restricted CoS applications. The MAC's concern is that new entrants, who would typically be earning towards the lower end of the Tier 2 salary spectrum and would not score highly in the restricted CoS process, would be disadvantaged as their future earning potential would not be taken into consideration. Therefore, the MAC have recommended that when applying for a restricted CoS, a hypothetical £7,000 should be added to the salary of graduates recruited onto a graduate scheme.

The government previously proposed limiting Tier 2 (General) roles to those that appear on the shortage occupation list. The MAC have not recommended limiting Tier 2 (General) roles in this way, but instead have recommended that the government reduce skilled migration by raising salary thresholds.

Tier 2 dependents right to work in the UK

The MAC were asked by the government to consider whether those in the UK as dependants of Tier 2 migrants should retain a right to work in the UK for any employer.  The MAC have not suggested any changes to the current right to work in the UK afforded to Tier 2 dependants. 

It remains to be seen if the government will implement the recommendations made by the MAC.  However, given the current government's commitment to reducing net migration, the proposals will be considered favourably.  The effect this will have on businesses, however, would be to increase up-front costs, time in-put and administration when sponsoring an employee under Tier 2.  This may ultimately have the effect of restricting businesses in the UK from attracting or retaining international talent.

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