Migration Advisory Committee releases report on Tier 2 salaries

13 Aug 15

UNITED KINGDOM

IMPACT – HIGH

The Migration Advisory Committee has published a report on Tier 2 salary thresholds and their impact on the U.K. labor market in advance of a larger study to be completed by the end of the year.

The committee, a nongovernmental body of economists and migration experts, was asked to advise the U.K. government on whether salary thresholds for Tier 2 categories should be raised from their current levels of £20,800 (General), £24,800 (Short-term ICT) and £41,500 (Long-term ICT), and whether occupation-specific salary thresholds should also be hiked.

The report’s initial finding is that Tier 2 salary thresholds do not appear to undercut the U.K. labor market, based on a comparison of Tier 2 salaries against domestic salaries.

“Our analysis suggests that if there is undercutting within Tier 2 it is isolated rather than widespread practice,” the report said. However, the group cautioned that this finding is “preliminary and tentative” and it will be conducting more research in the coming months.

The committee made several findings on the impact that raising the thresholds to various salary levels would have on business and workers. It also reported on the competing policy interests of reducing non-EU skilled migration, putting upward pressure on wages, and managing business costs. The report, however, did not make any recommendations.

On raising the Tier 2 (General) salary threshold, the committee said that if the same principles used to set the current salary threshold at £20,800 were applied today, based on skill requirements, the Tier 2 salary threshold would be raised to between £31,000 and £39,000. However, the report noted that “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 certain sectors.” It added that under the current prioritization system, Tier 2 (General) restricted CoS salaries already fall within that range.

An increase in the threshold to £25,000 would impact approximately 7 percent of all Tier 2 applicants, with a larger impact on in-country Tier 2 (General) applicants and a negligible impact on ICTs. However, a bigger jump in the Tier 2 threshold to £40,000 would affect 44 percent of all Tier 2 applicants, with the largest impact hitting 65 percent of Tier 2 (General) in-country applicants and 55 percent of  short-term ICTs. In order to have an impact on long-term ICTs, the threshold would have to be increased to £50,000, which would affect 27 percent of the category.

New entrants to the labor market would feel the biggest impact of a higher Tier 2 salary threshold: The report concluded that a £40,000 threshold would affect 77 percent of new entrants through Tier 2 (General) and 57 percent of new entrants through the short-term ICT category. Business stakeholders have expressed concern that an increase would impact graduate schemes and international students.

An increase to the occupation-specific salary thresholds would have a significant impact across Tier 2 categories. If set at the median salary level for each occupation, 40 percent of all Tier 2 applications would be affected. A threshold set at a higher level at the 75th  percentile of occupation-specific salaries would affect 60 percent of all Tier 2 applicants.

BAL Analysis: The initial findings of the MAC indicate that salary levels for skilled Tier 2 workers should not be raised because, overall, they are in line or higher than local labor market salaries and confirm that hikes to Tier 2 salary thresholds would have a significant impact on skilled migrants.

This alert has been provided by the BAL Global Practice group in the United Kingdom. For additional information, please contact uk@balglobal.com.

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