Will new immigration plan price out some businesses from recruiting overseas?

Home secretary James Cleverly’s proposed five-point plan could make overseas recruitment significantly more expensive. Some businesses may even find themselves priced-out from international talent pools. Here, we provide a brief overview of the key changes that are likely to affect businesses and explain why fast action is crucial for businesses hoping to recruit from overseas.

Speaking in the House of Commons last week, home secretary James Cleverly outlined a new plan to “deliver the biggest ever reduction in net migration” to the UK. 

“I am taking decisive action to halt the drastic rise in our work visa routes and crack down on those who seek to take advantage of our hospitality,” he said.

This action, which is encapsulated in a new, five-point plan on immigration, includes a range of measures designed to reduce the number of eligible visa applicants and increase the costs associated with applying for, obtaining, and renewing a visa.

While these changes are primarily designed to reduce net migration, which reached 745,000 last year, they also present several challenges for businesses that rely on international talent pools for recruitment, particularly in terms of costs.

What does the five-point plan mean for businesses?

One key change proposed in the five-point plan is the rise in the minimum salary threshold for overseas workers. Under the changes, businesses will only be able to sponsor skilled workers for positions that pay at least £38,700, a nearly 50% increase on the original £26,200 threshold.

This change, according to Mr Cleverly, is designed to encourage businesses to invest in the national workforce, while also ensuring that overseas workers have the means to support themselves while living in the UK.

Furthermore, the reforms will remove the 20% going rate salary discount for workers in certain industries that face ongoing shortages. According to Mr Cleverly, the Migration Advisory Committee will revise the current list of jobs subject to discounts and create a new Immigration Salary List. While retaining a general threshold discount, the new list will remove certain jobs previously subject to salary discounts, although we have yet to hear which jobs will be removed.

Nevertheless, this change has concerned trade bodies in several industries, particularly those in healthcare and hospitality, where staff shortages continue to be a problem.

Certain costs associated with immigration applications will also increase. The immigration health surcharge, which is paid annually as part of an application and covers use of the National Health Service (NHS), is nearly doubling from £624 to £1,035 per year, which will place significantly greater cost burdens on both applicants and their sponsors.

How should businesses respond to the immigration changes?

Labour shortages continue to be a serious problem for many industries, including hospitality, healthcare, and logistics. The proposed changes will provide further challenges by making overseas recruitment significantly more expensive, and perhaps even prohibitively so, for some businesses.

Although Mr Cleverly has reiterated the Government’s pledge to build the national workforce through the Back to Work Plan, businesses that rely on overseas workers will, understandably, be concerned that the new changes may soon price them out of a key talent pool.

It is therefore vital that businesses wishing to sponsor an application or recruit from overseas do all they can to expedite the process and hire the new recruits before the five-point plan comes into effect, possibly next Spring.

In the long-term, however, many businesses may need to revaluate their needs and, where possible, outline a recruitment strategy that builds on the national workforce, rather than relying on workforces overseas.