Virginia, US

Following the recommendation of the Migration Advisory Committee’s (MAC), the government announced in March of this year that from April 2017 it would be implementing an Immigration Skills Charge (ISC) of £1,000 per year, per Tier 2 migrant sponsored by most companies in the UK. Small or charitable companies will also have to pay but at a lower rate of £364 per sponsored worker per year. A five-year skilled migrant visa will, therefore, attract an additional £5,000 / £1,820 charge.

The introduction of the levy is aimed at reducing a perceived business reliance on foreign workers, whilst proceeds will be used to ‘upskill resident workers’. The MAC initially calculated a levy of £1,000 per year, per Tier 2 migrant, could generate revenue of up to £250m, although the final figure is likely to be lower given the introduction of the reduced rate for smaller businesses.

So how far could £250m go? Whilst, not an insignificant figure, many have questioned whether it will be enough to upskill a significant enough number of local workers, whilst removing the need for businesses to recruit non-EEA (European Economic Area) migrant labour. Notwithstanding, it’s a big enough figure to pique the interests of businesses who like the idea of externalising some of the cost of training their workforce in the UK.

Although details on how the funds will be distributed have yet to be finalised, the MAC's Tier 2 review does provide some clues on how the mechanism could end up looking. In its report, the MAC references the skill levy-grant systems already in operation by two non-departmental public bodies with statutory powers: the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB).

Under the ECITB scheme, any establishment wholly or mainly engaged in the engineering construction industry is considered a ‘leviable establishment’.  The CITB levy applies to CITB registered employers who have an annual wage bill over £80,000. Under both schemes levy funds are collected and reinvested, thereby ensuring the industries have a trained, skilled workforce enabling them to continue to grow. Under the CITB scheme employers are then eligible for funding following registration and the submission of a return in which funding is claimed for staff they have declared as in receipt of an ‘eligible apprenticeship or other training’. Levy funds are then shared among micro to large employers to support training.

If a similar system is rolled out by the Home Office it will be important that the ‘appropriate level of training’ is clearly defined from the outset, and that the method by which allocations are determined is both fair and consistent. This will be particularly challenging given the broad range of industries and businesses currently sponsoring overseas workers and the variety of roles being performed. Given this, will employers directly benefit in terms of new skilled workers within their specific sectors (thereby reducing their ‘reliance’ on non-EEA workers), or will UK Plc be the main beneficiary in the form of more doctors, nurses, and teachers among other highly skilled acute shortage occupations? 
The immigration debate remains centre stage and is certain to continue for the foreseeable future. The levy, whilst not popular with UK sponsors, has the potential to reduce migration from outside the EEA and fund the development of workers the UK desperately needs. Whether the benefits will be felt will, however, depend on the mechanics of the allocation system, which remains a work in progress…
If you have questions about the Immigration Skills Charge please contact George.