Time to press pause or eject on impending non-EU migration changes?

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Recording the skills gap

Manufacturers continue to tell us they struggle to recruit, and this has been well documented in various research, including our most recent skills report.

Worryingly, three-quarters of manufacturers have struggled to recruit highly-skilled engineering professionals in the past 3 years, and few are confident that they will be able to recruit the engineers they need in the next 3 years.

This is what manufacturers told us before Brexit. As an industry we are heavily reliant on EU nationals. Indeed, around a quarter of companies say they specifically recruit EU (ex UK) nationals to find the skills their businesses’ needs.

Free Movement of People is something that is undoubtedly going to be hot topic within the Brexit negotiations, and there is much speculation around what a possible deal, or future of free movement will look like. But for now, we just don’t know.

What we do know, is that manufacturers are concerned about their ability to attract and retain skilled workers:

 

  • 27% of manufacturers expect difficulties in attracting EU workers
  • 29% expect difficulties around the loss of skilled EU workers
  • 9% expect difficulties of recruiting non-EU workers

Clearly, the government has priorities to work out a suitable deal on Europe, and our views on Free Movement are well understood in our recent Europe report.

Time to press pause, or eject?

But the government could also support UK manufacturers by pressing pause or eject on the impending changes to non-EU migration. At a time of great uncertainty, and concern about the ability to attract skilled people, now is not the time to be significantly restricting the talent pool.

Ejecting the immigration skills charge

First up, the government should scrap the proposed immigration skills charge. Something that we have called for since its announcement, and even more so since the government announced the economy-wide apprenticeship levy.

The immigration skills charge is due to come into effect in April 2017. Employers recruiting non-EU nationals will need to pay £1,000 per worker, per year – with some reductions for SMEs and charities. The amount that is raised will then be spent on…….apprenticeships. Confused? Us too, as the new economy-wide apprenticeship levy will pay for apprenticeships, so it’s not yet known what the money will now be spent on.

Pause and rewind minimum salary thresholds

The government should also rewind minimum salary thresholds as there is now concern that the new thresholds may not be as affordable as first thought. The proposed increases from £20,800 to £30,000 have limited impact on UK manufacturers who, in general, pay above this rate for highly-skilled engineers, but our own pay benchmarking, suggests that a couple of job roles at just about at this rate. What we don’t know however, is the true impact of the EU referendum result on plans to recruit, and ability to increase, or even maintain, pay in the future.

We know that around 60% of manufacturers have said they will review recruitment, and we also know that pay settlements have not seen a huge upturn, so minimum salary thresholds may begin to affect more manufacturers that previously.

Put plans for ICTs on standby

Finally, the government should put plans for changes to Intra-Company Transfers (ICTs) on standby.

To start, the government will increase the minimum salary for short term ICTs to £30,000. Possibly manageable. But – wait for it – they will then abolish the short term ICT by April 2017, allowing only long-term ICTs. Any worker, then recruited under a Tier 2 ICT, not on a graduate programme will be required to pay a minimum salary of £41,500 – a considerable increase from £24,800 previously.

One of the arguments for such an increase was that the ICT route was initially established for only senior leaders and managers. However, global companies have an expectation that they can move employees across sites across the globes, and such movement is not just senior managers. It is not unknown for junior managers and those entering into the company (not on a grad scheme) to experience time across the business all over the world. However, employers will soon be expected to pay quite the premium price to make that happen.

Fast forward to next year when costs to businesses are rife

Government needs to fast forward to next year and take stock of what is coming down the tracks for employers. The impending changes to non-EU migration are in a long line of costs, businesses are expected to absorb in the coming years (the levy, the national living wage and the costs of reporting the gender pay gap, as well as the final few who will be auto-enrolling and businesses still carrying the burden of changes to holiday pay.)

But this isn’t just about businesses enduring extra costs. These reforms further restrict employers’ ability to access the skilled workers they need. And if the UK is to remain a competitive place to do business, this is a risk the government should not be taking.

 

 

Author

Head of Education & Skills Policy

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