UK’s new immigration policy will affect smaller firms & women

Written by Dr Seema Farazi, EY EMEIA PAS COVID-19 Response Leader and UK Immigration Leader  

We are only a few months away from the most significant reforms in UK immigration policy in almost half a century, with the implementation of the UK’s unified immigration system on 1 January 2021. The process started back in 2016 with the UK referendum paving the way for an end to free movement into and from the European Union (EU). On 27 January 2020, the UK government’s Migration Advisory Committee revealed their recommendations on the future system, with the Home Secretary having announced plans for a points-based system on 19 February, with a more detailed policy statement following on 13 July. These reforms are part of a long-term overhaul of the UK’s immigration landscape.

Looking ahead, the Immigration Bill, currently going through the House of Lords,  provides the mechanism by which free movement will end in the UK. Although the EU Settlement Scheme will remain open to applicants until 30 June 2021, all eyes are on 1 January 2021, when the new system starts for both EU nationals arriving to the UK, and UK nationals travelling to the EU for business or moving for work. With trade negotiations ongoing, we could also see alternative routes opening up with the UK’s future trading partners.

What does it all mean for UK employers?

If businesses are used to sponsoring Tier 2 workers (considered ‘skilled workers’, filling a specific job opportunity that is within a ‘shortage occupation’ or cannot be resourced within the UK), much of the change ushered in by January’s new ‘Skilled Worker’ visa will provide greater flexibility, enhanced speed to deployment, and increased accessibility to a broader range of roles. However, for organizations that are unfamiliar with the system – be they SMEs who have never used the sponsored work route previously or those who have relied solely on EU talent – the story is rather different.

Firstly, they will need to brace for higher costs. Currently, the cost of hiring an EU national in the UK in real immigration terms is negligible. From 1 January 2021, the cost rises to over £9,500 for a five-year visa under the ‘Skilled Worker’ route. This takes into account application fees, Immigration Skills charges and Immigration Health surcharges. The financial impact is therefore significant, particularly for smaller organizations – even for those who qualify for the reduced Immigration Skills Charge for ‘small or charitable’ sponsors (reducing that overall five-year cost by around £3,000).

Secondly, the administrative burden will increase through higher reliance on the UK’s immigration system. Moreover, there are now barriers to entry for EU nationals around skills and salary that no one is used to navigating, and even with the reduced skills level in the system, research has suggested that 38% of EU workers currently employed in UK financial services organizations would not be considered eligible under the UK’s new immigration system. This rises to 55% in energy, 58% in business services and 90% in transport.

The new threshold impacts women most

The same research also found that the rules would disproportionately impact the immigration of EU women, at a time when many businesses are looking to do better on diversity and inclusion (D&I) efforts. The data shows that 36% of men would be eligible for a skilled work visa compared to only 26% of women, due to a concentration of women in roles that do not meet the skills threshold. Research therefore finds that the new rules have the potential to restrict the immigration of women from the EU.

The opportunity to pivot innovation 

When considering administration and bureaucracy, the current COVID-19 experience can trigger some positive changes. We have seen incredible innovation delivered rapidly, particularly with government immigration policies showing what is possible and an ability to move at speed without compromising the architecture of the system.

Over 50 countries, including the UK, ripped up the red tape and granted automatic extensions for certain migrant workers and business travellers to protect them from becoming overstayers, while 20 countries moved to online processing, at least in the interim.

Furthermore, the UK granted automatic extensions for healthcare workers, tore up the rules on switching and facilitated indefinite leave for the bereaved families of health and social care workers. There is now an opportunity to pivot that type of innovation to the 2021 system.

Future workforce and talent planning

The UK’s immigration policy calls for detailed planning to ensure business continuity in 2021 and beyond.

Organizations need to be aware of their exposure to all of this in their UK business and EU operations, and CFOs must build the financial impact into future cost planning. It is also crucial to plan strategies against the assumption of third-country national status in order to optimise the channels available now and in the future for planned recruitment cycles.

In today’s transformative climate, organizations are presented with an opportunity to make the most of their global workforce, reduce carbon footprint and support D&I. There is growing currency around a global remote workforce and a reimagined view of labour mobility where work moves to people, rather than people to work. The concept of nomad visas, a hybrid between traditional visitor and work permit visas, is gaining momentum, with many countries offering a bespoke remote worker visa that bucks traditional visitor visa models and allows visitors to engage in productive remote work. Meanwhile, as the ‘right to work’ for UK remote-workers in the EU – and EU remote workers in the UK – will be different from 1 January 2021, organizations need to ensure they have adequately enabled and protected remote work arrangements where these are continuing into 2021. Businesses must take into account immigration rules in the destination country, individual and corporate taxes, as well as regulatory risks.

Finally, organizations must communicate risks and have appropriate risk strategies in place. This ranges from the Brexit challenge of re-educating their workforce around unfamiliar immigration restrictions, to the additional travel risks COVID-19 has thrown into the mix.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.