Sheffield Chamber of Commerce: Impact of Recent Immigration Changes on Increased Salary Requirements
On 4 April 2024, the UK government implemented new immigration rules, which include raising minimum salary requirements, as part of an ambitious five-point plan aimed at decreasing net migration. These changes will undoubtedly impact recruitment for UK-based roles across a number of industries that are already experiencing labour shortages.It is widely known that there is a significant difference in the GDP and median salaries between the North and South of the UK. As the median salary in the North is considerably lower than that of the South, the changes in immigration policy will make it increasingly difficult for Northern employers to hire from overseas.
Indeed’s Career Guide August 2023 highlighted the top 10 highest paying local authorities in the UK and of the median full-time gross weekly salaries in each location, only three of these were in the North of England.
The Home Secretary’s new immigration plan - what are the challenges for Northern employers?
The most notable change in the Home Secretary’s plan is the substantial increase in the salary thresholds for a Skilled Worker visa. An applicant must meet the higher of the general minimum threshold or the ‘going rate’ for their occupation.
The general minimum salary threshold has increased from £26,200 to £38,700 per annum – a 44% increase. In addition, the Appendix Skilled Occupations, which lays out all eligible Standard
Occupational Classification (SOC) codes and corresponding ‘going rates’ was replaced by a new version (the Immigration Salary List) as of 4 April. All thresholds and going rates will be based on the latest Office for National Statistics (ONS) pay data: Annual Survey of Hours and Earnings 2023 and/or the latest available national pay scales. Most crucially, the going rate for each SOC code has increased from the 25th percentile to the median. It is likely this increase will have a greater impact on a business.
As mentioned above, the Shortage Occupation List (SOL) will be replaced with a new Immigration Salary List (ISL) incorporating 23 occupations, a significant reduction to the current Shortage Occupation List. The ISL will also remove the 20% discount to the going rate for shortage occupation roles.
The Migration Advisory Committee (MAC), an independent body which advises the government on migration issues, conducted an initial rapid review to make its recommendations for this list. Due to the short timeframe given, the initial rapid review was intended to be an interim measure, prior to a full review later in the year.
The MAC confirmed that, in conducting its fuller review of the ISL, it will first seek clarification from the government as to what it considers the purpose of the new ISL - is it simply to assist the recruitment of occupations in shortage (as was the target of the current SOL) or is it to more broadly assist sectors that meet more strategic public value criteria? The full review will also include a Call for Evidence from employers, stakeholder roundtables, and a renewed assessment of labour market conditions and quantitative data against the new salary thresholds.
Impact on Northern employers
The changes in April 2024 are intended to decrease net migration. The implementation of stricter immigration regulations for the Skilled Worker route with the higher salary thresholds, alongside the removal of the Shortage Occupation List, means the North of the UK could face a disproportionate impact.
Based on The South Yorkshire Quarterly Economic Survey in Q4 of 2023, workforce growth was up 24% (from +18% in Q4 2022), showing that the North’s lower living costs, positive quality of life and career opportunities are attracting employees to work and live in the North.
However, 85% of Northern firms that tried to recruit experienced difficulties, up from 81% in Q3. It stands to reason that a reduction in net migration may further affect recruitment. According to Embracing Future Potential, which supports job seekers and employers, the main job types in the North are in manufacturing, healthcare, education, technology and digital, and retail and hospitality – the majority of which have previously benefitted from reduced salary requirements on the SOL. Post-April 2024, the new ISL will no longer give these sectors the benefit of a reduced salary requirement, further adding to recruitment difficulties.
To highlight the impact, the median salary in London is £41,017, compared to £27,856 in the North-East, with none of the key employing sectors appearing in the ISL.
What can Northern employers do to overcome these challenges?
Not all options for overseas recruitment are lost for Northern employers, with a number of available exemptions for consideration. For current migrants on a Skilled Worker visa, the old minimum salary thresholds will continue to apply for applications made before 4 April 2030, provided their initial Skilled Worker visa application was made before 4 April 2024 and they have had continuous permission as a Skilled Worker until the point of the application.
The Home Office will, however, expect the pay of such migrant workers to progress at the same rate as that of resident workers when they next apply for a change of employment, extension of stay, or settlement. As a result, migrant workers will be required to receive at least £29,000 in pay or the new going rate for their SOC code, unless another discount applies.
Another important concession concerns individuals applying for work visas under the Health and Care Visa route. These applicants will be exempt from the £38,700 salary threshold, as will education workers in national pay-scale occupations.
Finally, holders of PhD qualifications, those qualified in a STEM subject, new entrants, or migrants with occupations on the ISL will also continue to benefit from a reduced salary requirement. New entrant workers will now need to meet the higher of a minimum salary of £30,960 or 70% of the ‘going rate’ for their occupation (or SOC) code.
As the name suggests, the new entrant provisions apply to those at the beginning of their careers, such as students or young people under the age of 26. New entrants can be sponsored as Skilled Workers for up to four years (including any time spent as a Skilled Worker/Tier 2 or Graduate) with a 30% discount on the going rate or a flat-rate minimum salary of £30,960, the higher of which must be paid. This may help with the hiring of talent from the local universities, colleges and schools.
Strategic planning-What can Northern employers do now?
It will be vital for Northern employers to contribute to the MAC call for evidence, where employers will be consulted later this year on roles that they can no longer recruit for, based on the new salaries.
In the meantime, Northern employers may wish to explore hiring employees who can benefit from one of the salary discounts, such as the new entrant provisions.
They can also avail of the young foreign talent in the region emerging from the universities. Post course completion, individuals who held a UK student visa may be eligible to obtain a Graduate Visa granting them permission to stay in the UK for at least two years without the need for sponsorship.
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