New Salary Threshold Impacts on the UK Tech Sector

In 2022, the UK became a “tech superpower” when it became only the third country in the world to have its technology sector valued at one trillion dollars, alongside the US and China.

The technology sector is a significant UK employer competing for the very best talent from around the world.

Yet, it is not immune to the slowdown in the global economy and could be further impacted by the upcoming immigration changes aimed at reducing net migration.

The new Statement of Changes (SOC), published on 14 March, confirms that salary thresholds for sponsoring Skilled Workers will increase. Key changes published in the SOC include:

1. Increased salary thresholds as of 4 April 2024 for new applicants:

• the ‘general salary threshold’ of the Skilled Worker immigration category will increase from £26,200 to £38,700; and
• ‘Going rates’ (which are assessed on the earnings of the specific occupation) will also be calculated having regard to the median level of earnings across occupations based on official data rather than the current level which is equivalent to the 25th percentile of earnings.

2. Immigration Salary List

The Shortage Occupation List (SOL) will be disbanded and replaced by an Immigration Salary List (ISL). Roles on this list will no longer benefit from the 20% discount to the ‘going rate’ minimum salary (although the 20% on the general threshold will continue to apply).

As a result of the above key changes, numerous Standard Occupational Codes for the tech industry will be subject to significant salary increases to be eligible for sponsorship, which will likely result in regions outside of London being at a particular disadvantage and some tech applicants unable to meet the higher salary thresholds.

Changes to the Salary Threshold

From 4 April 2024, new applicants into the Skilled Worker route will be subject to the going rate increasing from the 25th percentile to the median for each occupation code, based on the updated ASHE data from 2023 instead of 2021.

This will mean a considerable increase for many occupation codes. For example, a 45% increase for roles under current occupation code 2136 - Programmers and software development professionals, which will be renumbered to 2134– Programmers and software development professionals.

Those holding Skilled Worker permission or who have a CoS issued by 4 April 2024 will not be subject to the new salary provisions but will instead need to be paid the going rates at the 25th percentile for each job occupation code.

However, they will be based on the latest ASHE 2023 data instead of 2021, so there will still be some salary increases to be expected at the point of extension or switch.

The occupation codes used for Skilled Worker applications will be updated from the current SOC 2010 to SOC 2020. Many of the existing codes have been renumbered and/or renamed as noted in the table below.

Below is an analysis of how the median salary threshold is impacting the required salary for sponsorship in some tech sector roles. The following table shows the relevant Eligible SOC 2020 occupation codes and related going rates based on median ASHE data:

The going rates in the above table are per year and based on a 37.5-hour working week. They must be pro-rated for other working patterns, based on the weekly working hours stated by the applicant’s sponsor.

Changes to the Shortage Occupation List

The government also announced that the SOL would be abolished and replaced with the ISL.

In light of this announcement, the Home Office commissioned the MAC to conduct a Rapid Review, which was published on 23 February and the recommendations of which were largely accepted. They will conduct a wider Call for Evidence later in the year. The New Appendix Immigration Salary list includes 23 occupations (three are specifically for Scotland).

The MAC has encouraged the government to set out the purpose of the ISL and to make it clearer that the entries on the list are those where the Government considers it sensible to offer a discounted salary threshold, rather than being a list of all occupations experiencing labour shortages.

Included occupations have a 20% discount to the applicable general salary threshold, but, unlike the soon-to-be-replaced SOL, there will be no discount on having to pay the going rate for the role meaning that overall salaries will need to increase.

For example, for occupations on the ISL where the COS is assigned from 4 April 2024, a general threshold of either £30,960 or the median occupation-specific threshold will apply, whichever is higher. But Skilled Workers whose initial application was granted under the current rules only need to be paid the higher of £23,200 or the going rate (set at the 25th percentile) for those in a role that was previously on the SOL but no longer on ISL, provided they are being sponsored to continue working in the same job for the same sponsor. This does not apply if these individuals are switching sponsors.

The ISL is much more restrictive than the Shortage Occupation List, which will result in fewer employers being able to take advantage of the lower salary threshold. As a result, employers will have to pay more money to hire an overseas worker for occupations that no longer qualify for a discount.

Most importantly, the below tech sector SOC codes which are on the current SOL are not included in the ISL as their occupation-specific threshold (see table above) is above the new category threshold of £38,700 and therefore would not receive any salary discount if they were included in the ISL.

• 2135 - IT business analysts, architects and systems designers;
• 2136 - Programmers and software development professionals;
• 2137 - Web design and development professionals; and
• 2139 - Information technology and telecommunications professionals not elsewhere classified (only cyber security specialists)

Therefore, the current 20% discount to the ‘going rate’ minimum salary will no longer be available to tech-based employers using these SOC codes. This means that jobs in the above SOC codes may not meet the salary threshold and prospective employers may not be able to offer overseas workers sponsorship.

New Entrant Rate

Despite the bulk of changes to immigration and policy, the new entrant discount available for individuals aged 26 and under has been announced by the government to continue for the time being.

The new entrant discount provides a 30% discount on the occupation-specific threshold and a 20% discount on the general salary threshold, the higher of which must be paid.

As a reminder, new entrants are individuals who are usually in the early stages of their career and, if they can meet defined criteria, can be paid a reduced salary for a maximum of four years as a Skilled Worker. Tech-related applicants must meet one of the following:

1. Applicant is under the age of 26 on the date of application.
2. Applicant is sponsored for a post-doctoral position in certain limited occupations.
3. Applicant is working towards a recognised professional qualification in a UK-regulated profession.
4. Applicant is working towards full registration or chartered status with a relevant professional body for the job for which they are sponsored.
5. Applicant is switching from Tier 1 (Graduate Entrepreneur).
6. Applicant’s most recent permission was under Tier 4 (General) or the student route and meets the conditions for switching.
7. Applicant’s most recent permission was under the Graduate route.

Many employers in the tech industry usually rely on the new entrant rules when hiring graduates to meet the salary threshold. Considering the aforementioned increased salary thresholds, the new entrant discount would seem even more attractive than before.

Following the release of the Statement of Changes, it is also confirmed that the four-year cap on new entrants remains, including any time spent as a Skilled Worker, Tier 2 (General) and/or Graduate. In practice, this means that when switching from a Graduate visa to the Skilled Worker route, if the applicant switches at the end of their two-year Graduate visa, they can only be sponsored for two years when relying on the new entrant provision.

Such individuals are still eligible to apply for an extension as a Skilled Worker but would need to be paid 100% of the going rate for the occupation at the extension stage. Most employers may find that owing to annual salary increments and career progression, this may result in their sponsored employees reaching a higher salary amount after four years through natural salary progression.

Looking Ahead

Whilst the traditional Skilled Worker route is attractive for employers in the technology industry due to its simplicity, these increased salary thresholds mean that some roles will likely no longer qualify for sponsorship due to employers being unable to pay the required salary.

In this scenario, other visa options could be practically attractive for roles where the Skilled Worker salary threshold cannot be met.

There are various visa routes available that are based on an individual’s attributes such as Family routes, Graduate visas, Ancestry, Youth Mobility, High Potential Individual, Innovator Founder and Global Talent (to name a few). These will not be an option for everyone, but a consultation with a professional may help to explore all available options.

Need to Know More?

For more information regarding the upcoming salary threshold increases, please reach out to Manager Kinka Tonchev at [email protected] and Associate Aisha Shahid at [email protected].

This blog was published on 21 March 2024, and due to the circumstances, there are frequent changes. To keep up to date with all the latest updates on global immigration, please subscribe to our alerts and follow us on LinkedIn, X, Facebook and Instagram.