Changes to Immigration Policy to Reduce Net Migration and the impact on the Tech Sector
26th January, 2024
Recently announced changes to immigration policy are likely to have a significant impact on tech sector businesses. In this blog, we look at some of the most frequently asked questions.
How does the Tech sector utilise immigration?
TechNation reported that some 4.7 million people worked in the UK Digital economy in 2022, with the numbers increasing year on year. However, the sector has long struggled to fill skills gaps and recruit skilled workers, particularly into niche technical roles. This has led many businesses to look to the UK’s immigration regime to address talent shortages by recruiting from overseas.
Figures from the Home Office reported by the Migration Observatory indicate that for the year ending June 2023, 5% of all Skilled Worker visas were in the IT industry. For the same period, tech sector roles took two of the “top ten” spots for the most sponsored occupations, with “Programmers and Software Developers” coming in at number 5 and IT business analysts at number 8. RSM reports that, whilst non-UK nationals remain a relatively small proportion of the UK technology workforce, immigration into technology roles has trended consistently upwards in line with the growth in the UK’s technology economy, with over 54,000 international workers working in the UK tech sector in 2022.
Currently 4 specific technology related occupations appear on the UK’s Shortage Occupation List, meaning that applicants falling within these occupations are deemed to be in short supply within the UK labour market. These are occupations falling with Standard Occupational Classification Codes 2135: IT Business analysts, architects and systems designers, 2136: Programmers and Software Development Professionals, 2137: Web Design and Development Professionals and 2139 Information technology and communications professionals not elsewhere classified – but only cyber security specialists.
Why is the Government making changes to the Skilled Worker immigration route?
Net migration for the year ending June 2023 was 672,000. In the year ending September 2023, the number of Skilled Worker visa applications stood at around 66,000, with some 51,000 dependants. On 4 December 2023, the Home Secretary announced a “5 Point Plan” to “slash migration” and “curb abuse” of the immigration system. Together, these measures are expected to cut net migration by about 300,000.
What changes are being made to the Skilled Worker visa?
From April 2024, the minimum general salary threshold for eligibility under the Skilled Worker route will increase from £26,200 per annum to £38,700 per annum.
The Government has also confirmed that occupation-related pay rates or “going rates” will increase from being based on the 25th percentile of the salary band for each occupation to the 50th percentile figure.
What changes are being made to the Shortage Occupation List?
The Shortage Occupation List is a list of occupations deemed to be in short supply in the UK labour market. Currently applicants in these occupations benefit from a reduced base salary threshold and reduced occupation-related pay levels for sponsorship along with reduced visa application fees.
The Government intends to abolish the Shortage Occupation List and replace it with the Immigration Salary List. The Migration Advisory Committee (MAC) will review the occupations that should be on the list, producing their initial report by April 2024.
Currently, Shortage Occupation List occupations benefit from a 20% reduction on the occupation-based salary rates. The Government will end this with effect from April 2024. We anticipate that some form of salary discount will continue to apply (but not at this level).
It is highly likely that the MAC’s recommendations as to which occupations remain on the Immigration Salary List will reflect their last report in October 2023, not least because the MAC has now confirmed that the time constraints for reporting back to Government will not permit further stakeholder engagement on the matter. Their earlier report recommended that all tech sector occupations be removed from the list – as such, it is highly likely that this will be the direction of travel when the MAC makes its recommendations on 23 February 2024. It is expected that the Government will adopt the MAC’s recommendations in full. As such, there is a good chance that post-April, no tech sector roles will remain on the Immigration Salary List.
What about changes for other Skilled Workers who benefit from salary discounts?
PhD holders, STEM PhD holders, or ‘new entrants’ (typically those under the age of 26 or changing to a Skilled Worker visa from a graduate/student visa) are currently able to benefit from a reduced base salary threshold and reduced occupation-related pay levels for sponsorship. It is unclear how the minimum salary threshold will be adjusted (if at all) for those in these categories.
What does this mean for individuals who are already sponsored?
The policy changes will not be applied retrospectively. Individuals who are already “in the route” before these changes come into effect are exempt from the new threshold salary levels when they change sponsor, extend or settle.
However, it is not clear exactly how “in the route” will be interpreted. For example does this mean individuals will be exempt from the increases where they have been assigned a Certificate of Sponsorship, or where they have received their visa?
The Government statement confirms that it is expected that Skilled Worker’s pay will continue to progress at the same rate as resident workers. As such, they will be subject to any increases to the 25th percentile the occupation-based salary rate.
It is unclear what transitional arrangements will be put in place, if any, for those existing sponsored workers who have previously benefitted from salary discounts.
What will be the impact of these changes on business?
It is anticipated by the Government that these measures will reduce the number of Skilled Worker applications overall by some 13%.
It is highly likely that the increase to the minimum salary levels will mean some businesses will no longer be able to consider sponsorship for some technology roles. For example, according to Indeed, the current average salary for a web developer stands at £32,877 p.a., well below the new threshold level. In contrast, other occupations where the salary typically sits above the new threshold will not be impacted.
In addition, the increases will have a disproportionate impact on employers looking to sponsor Skilled Workers outside of London and the South East, where salary levels are generally higher. It is anticipated that employers in the North of England and Scotland will be hardest hit by these new requirements.
Removing the tech roles from the Shortage Occupation List will mean there is no scope to benefit from a salary reduction on this basis, meaning businesses unable to meet the general salary threshold will be at the mercy of any other salary discounts which might be available, if any. In addition, applicants will no longer benefit from reduced visa application fees, making the process more expensive for those who do qualify.
All of these changes will inevitably mean that it may be more difficult for tech sector businesses to recruit international talent, particularly at the junior end or for those businesses based outside of London. However, it is worth reiterating that the changes will not make it impossible for them to do so, particularly where recruits are highly skilled individuals with a salary to match. As such, businesses should not be immediately put off by the changes, but will, instead, need to carefully consider the impact they have on them.
When do these changes take effect?
The Government published a further statement on 30 January 2024 confirming these changes would take effect from 4 April 2024.
What are the rules for sponsoring employees now?
None of the above changes have yet been implemented. The current base salary for sponsorship of Skilled Workers remains at £26,200 p.a. until the rules change.
What changes will be made to Graduate Visas?
The Graduate visa route allows international students to apply for a 2/3 year visa to remain in the UK after completing their studies at degree level or above. This is a popular route with over 100,000 applications last year. It is particularly attractive to tech sector businesses looking to hire newly graduated international students with a view to “getting to know them” before committing to sponsoring them.
The MAC has been asked to conduct a review of this route early this year, but no specific changes have been announced as yet. It is highly unlikely that the outcome of this review will be the abolition of the graduate route, but we may see constraints around when and how it can be used. Key stakeholders have already started lobbying the Government and the MAC to try and protect this post-study work route, and, if given the opportunity, we would encourage tech sector businesses to do the same.
What other changes do employers need to be alert to?
Organisations need to be aware of the significant additional changes that are also taking effect over the next couple of months:
- Student visa holders are no longer permitted to bring dependants – in force 1 January 2024
- Illegal Working penalty fine increases – Fines are tripling to £60,000 per illegal worker – 13 February 2024
- Increase to Immigration Health Surcharge – from £624 per person per year of the visa to £1035 per person per year of the visa – 6 February 2024
What should businesses do to prepare for the changes?
- Review your recruitment strategy and consider bringing forward recruitment plans for new hires before the rules change, so that you can take advantage of the current rules in place (including e.g. the current lower salary threshold). This is time critical so take immediate action.
- Review your existing workforce and consider bringing forward sponsorship of existing staff who are likely to require sponsorship in the short/medium term, including those currently on graduate visas, student visas and dependant visas, so that their applications are not subject to the new rules. This is also time critical so take immediate action.
- Review your recruitment strategy along with any current vacancies to determine the impact these changes will have.
- Review the impact on any internships/graduate programmes.
- Review what impact the increase in minimum salary levels will have on your business and your ability to recruit international talent and fill key vacancies by comparing your benchmarked/average salaries for vacant roles against the new minimum salary thresholds.
- Review any regional impact of these changes on your business and how this might impact on your ability to recruit.
- Consider whether there is scope to increase salary levels within the business to mitigate the impact of these changes. Take advice on any potential discrimination risks.
- Communicate with employees to provide reassurance and information (where appropriate).
- Review and update policies and procedures to ensure compliance.
- Refresh compliance training for managers.
Do get in touch with one of our expert Immigration Lawyers, should you have further questions, or if you’d like to know how these changes might impact you.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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