Recent research by IPPR suggests that 38% of EU workers currently employed in UK Financial Services (FS) firms would not be considered eligible under the UK’s new immigration system. The analysis also found that the rules disproportionately impact the immigration of EU women.
Triggered by Brexit, the UK’s immigration system is going through its biggest reforms in over four decades. On 28 January 2020, the Migration Advisory Committee’s (MAC) report recommended a marginal reduction in minimum salary thresholds for Tier 2 (skilled workers), and whilst not in favour of an Australian style points based system, MAC suggested a limited points-based route for the very highly skilled and the potential pilot of a regional visas route. The Government responded on the same day, to say that it was committed to delivering a new points-based system for the UK and the Home Secretary officially outlined a unified system for EU and non-EU nationals on 19 February.
The 2021 system will significantly change the UK’s immigration landscape for FS employers. While large scale change takes time and will be costly to implement, there is some good news of note, such as:
- Lower minimum salary thresholds with some flexibility built into the system via ‘tradeable’ characteristics, which will allow those with lower salaries to pick up points elsewhere, for example through having qualifications or accepting roles where there is high demand
- The removal of the 20,700 Tier 2 general visas a year cap
- The removal of the Resident Labour Market Test (RLMT) requirement, which means less administrative burden on employers and a faster process
- An expansion of skill levels to RQF 3 and above, which will cover a wider range of roles than have previously been in scope, including IT technicians, marketing associate professionals, office managers
- Streamlined applications via light touch sponsorship and increased digitisation of the process
- The reintroduction of a graduate route to allow students to apply for a two year stay after they have completed their studies
However, there is no immediate alternative for employers to the cost heavy Tier 2 visa, which will become the Skilled Worker route. In addition, a proposed transitional route to run to 2025 appears to be off the table for now at least, as is the idea that there could be flexibility for Tier 2 applicants to switch from visitor status within the UK. The new policy makes it clear that those who come to the UK as a visitor will need to leave the country before making an application to another route.
Costs to rise dramatically for UK FS businesses under the new ‘single global system’
The new unified system means that EU nationals arriving to work in the UK from 2021 will generally have to qualify under the Skilled Worker route. Given there is currently no immigration cost or additional process when hiring an EU national, the new financial and administrative impact will be significant. For EU nationals entering the UK workforce from 2021, the cost to UK firms rises from zero to around £8,400 for a five-year sponsored visa (for the main applicant only) or £9,500 if proposed increases to the Immigration Health Surcharge take effect.
There is no mention in the proposals so far of any intention to remove or reduce these charges – on the contrary the intention is to ‘levy the charge as now’. To understand the scale of that impact on operational costs, EU nationals make up 16% of the 28% non-UK workforce in financial services, and 28% of the 42% non-UK workforce in FinTech.
The Government intends to open new visa routes from Autumn 2020, so that applicants can start to apply ahead of January 2021. Many employers that previously didn’t need to hold a sponsor licence will now need to apply for one if they are to continue employing EU arrivals and non-EU nationals from 2021.
Keeping up with new ways of working
The modern workforce is constantly evolving, and reviewing and updating our immigration system is positive if it creates a less restrictive and more flexible model. By 2030, EY has predicted that half of the world’s talent will be made up of gig workers, so it is key that any new migration system is modelled on this, and incorporates the mix of permanent workers, contingent workers, mobile workers and automation into the solution.
Looking forward; the next steps
There is a raft of change ahead, which is expected to start travelling through Parliament via an Immigration Bill imminently, but we are currently still in a ‘wait and see’ phase. A recent EY poll of HR senior management from over 200 firms with business interests and/or presence in the UK market showed that the removal of the RLMT is a most pressing concern. Another area to keep an eye on is the Government’s consideration of a broader unsponsored route (less restrictive than the Global Talent route), but this will take time. For now, all eyes are turned to the trade negotiations, where more favourable rules for trade partner nationals through mobility frameworks within free trade agreements could be agreed, but as of yet, anything could still happen.