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The future of the workforce-how new laws in immigration impact SMEs

The future of the workforce: how new laws in immigration impact SMEs

Apr 06, 2020
Last Updated on May 22, 2024

From January 1st next year, free movement of labour from the EU stops and with it so does the benefit of having access to a Continent-wide pool of skilled and unskilled labour. The flow of European baristas, chefs, labourers, technicians, nurses, cleaners, bankers and carers that have become commonplace in the UK, stops.

Instead, according to the political sloganeering, Britain will welcome the ‘brightest and the best’ from around the world with a new points-based immigration regime designed to attract only highly skilled migrants. The caveat is that these workers are only welcome if they speak good English, are highly educated and have a job offer with a Home Office approved sponsor of at least £25,600pa.

Home Secretary, Priti Patel, explained that the new system allowed the government to ‘take back control of borders and deliver on the people’s priorities’ to ‘bring overall migration numbers down’.

“We will attract the brightest and the best from around the globe, boosting the economy and our communities, and unleashing this country’s full potential,” she said.

So how are these changes likely to affect SMEs and who will be the winners and losers? The answer largely lies in the type of business you run. If you rely on those classed as low skilled, you could be in for some challenges.

One of the main criticisms of the new approach to immigration is that it contains very little provision for the type of workers that many small businesses rely on. Indeed, some economists and business leaders are concerned that the economy will suffer when free movement ends because, except for permissions for 10,000 seasonal agricultural workers, the flow of low skilled labour into the UK will dry up.

The Government argues that labour shortages will be overcome by automation, productivity increases and by employing British workers. However, employment levels in the country are at an all-time high. Of course, the situation may well change over the coming months due to the corona virus health emergency. Jobs are likely to go, particularly in hospitality and other front-facing industries and no one can yet predict how workforces will alter and what the future manpower demands will be for the UK’s beleaguered SMEs.

For SMEs who employ skilled workers, the new rules appear more favourable. The current system of visas for non-EU skilled workers is the catchily-titled Tier 2 work visa immigration route. Under this system, qualifying workers must still meet certain criteria and numbers are capped. In the system which comes into force next year, the number of visa’s available to those who meet the measures required is theoretically limitless. So, if you are an IT business struggling to employ native workers in roles that qualify, you can recruit from anywhere in the world.

There are, however, some hoops to jump through that many SMEs are unaware of. In order to exploit the global population of skilled workers, employers need to be on a Home Office list of approved sponsors. The rule also applies to those currently employing skilled workers from Europe who do not need visas now but will need them from next year. Currently only around three percent of UK firms are on this roster and so legally entitled to employ skilled migrants.

Immigration experts argue that not enough firms are aware of this requirement and are advising companies currently employing EU citizens or wishing to hire from abroad next year to register now or face legal sanctions if they employ migrants without the appropriate authorisation. Indeed, of all the nation’s employers, which number around 1m, only 30,000 qualify.

Critics explain that in the large publicity campaign about the new points-based system there was hardly a mention of the need to register.

For SMEs to future-proof their personnel functions those without a sponsor license are advised to apply for one as soon as possible as it is expected that the Home Office will be overwhelmed with a surge of applications as employers gear up to cope with the new system.

Another consideration for SMEs to bear in mind is that currently, businesses must pay fees of between £300 and £1000 for each skilled overseas worker they employ. This is set to remain, and applicants will also still be required to pay an immigration health surcharge, which was increased from £400 to £624 in the recent Budget.

One final change that may affect some research and highly technical SMEs is the proposed introduction of a limitless number of new Global Talent Visas. These are designed to attract the world’s best scientists, researchers and technicians to the UK and also come into force next year.

At present, talented individuals from outside the EU who want to work in the UK can apply for one of 2,000 Tier 1 (Exceptional Talent) visas available annually. Traditionally applications for these have been undersubscribed. Figures show that last year only 600 were issued.  Take-up for 2018 was similarly poor, with only 824 visas issued, leaving over 1,000 vacancies.

A report issued by the independent Migration Advisory Committee (MAC) in January, was critical of this system and stated that ‘it does not work well’. MAC determined that ‘the skills bar for entry is set far too high, targeted at those at the very top of their field and is too risk averse’.  It recommended that the visa route be modified or replaced with one that is ‘more open’ and based on best practice from other countries, without ‘repeating the mistakes of earlier UK points-based systems for those without a job offer’.

MAC suggested that the new Global Talent Visas should be focused more on people with high potential, rather than those with established exceptional talent.

“No system for picking winners will be perfect and there will inevitably be some admitted on this route where promise does not deliver,” it concluded.

The changes outlined above represent a mixed bag for employers in the future, as illustrated by the response to the new immigration system from the Confederation of British Industry.

In a statement, Carolyn Fairbairn, CBI Director-General, said: “Several aspects of the new system will be welcomed by business, particularly abolishing the cap on skilled visas, introducing a new post-study work visa for overseas students, and reducing the minimum salary threshold from £30,000.

“Nonetheless, in some sectors firms will be left wondering how they will recruit the people needed to run their businesses. With already low unemployment, firms in care, construction, hospitality, food and drink could be most affected.

She called for regular reviews of those occupations classified on the shortage occupations list and an assurance that there will be flexibility in the system, which will be increasingly important after the changes the corona virus health crisis is certain to bring.

She concluded: “Above all, the government must work with employers and employees – especially smaller firms – to ensure they have the time to adapt to new policies and practices.”

With such the uncertain future facing thousands of SMEs, it is vital now more than ever that all options remain open to allow employers the flexibility to survive.

Click here to read the article on the Elite Business Magazine.

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