The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of
the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the
governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no
responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official
terms.

Migration Advisory Committee:

Review of Tier 2*
Maria del Castillo
Deputy Head of Migration Advisory Committee
Secretariat and
Head of Economics and Research

January 2017

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*https://www.gov.uk/government/publications/migration-advisory-committee-mac-review-tier-2-migration
 The Migration Advisory Committee
(Independent) non-departmental public body set up in 2007
Provides evidence-based advice to Government on
immigration issues
Immigration experts and economists
Supported by secretariat of economists, researchers and
policy officials
Has advised in the past on migration from the EU and through
the Points Based System, including limits on Tiers 1 and 2
(immigration of skilled migrants from outside EEA)
Recommends, does not decide
 MAC Commission
Government asked us to consider 5 issues:
How to prioritise Tier 2 and make it more selective

A skills levy, now called an Immigration Skills Charge (ISC)

Tightening of the intra-company transfer route

Automatic sun-setting, such that an occupation or job is removed from the Shortage
Occupation List (SOL) after a fixed period

Automatic work rights for dependents

Our aims:
Balance the Governments objective to reduce volumes with the impact on the UK economy
(including productivity and competitiveness);
Prioritise and target the skills that migrants bring to the UK;
Address potential disincentives to upskill the domestic labour market. 3
 Tier 2 Context
Figure 1.1 Tier 2 Landscape: Main applicant and dependant volumes;
Main work route for skilled Non-EEA 2014

nationals with a definite job offer Out of Country In-Country

(Immigration) (Extensions; Switchers)

Routes include Tier 2 General (including 90,700 60,900

Restricted Labour Market Test (RLMT)

Tier 2 (General) Tier 2 (General)
and Shortage Occupation (SOL) routes) (SOL; RLMT) (SOL; RLMT)

and Intra-Company Transfers (ICTs) 29,700* 42,700

The skill requirement for Tier 2 is NQF6+ ICTs ICTs

(Short term; Long (Short term; Long
with exceptions for certain creative and term; Graduate;
Skill Transfer)
term; Graduate;
Skill Transfer)

shortage occupations 60,500 17,000

Annual limit of 20,700 out of country Tier * Subject to the Tier 2 cap: (20,700 main applicants)

Notes: Both the Ministers of Religion and Sportsperson route categories have been excluded

2 (General) from the detailed breakdown, but included in the overall total. As a result, the total may be
greater than the sum of its parts.
Source: Home Office Immigration Statistics (2014) 4
 Tier 2 General
The MAC was asked to advise on (i) restricting Tier 2 (General) recruitment, compared to current rules,
to genuine skills shortages and highly specialist experts only.

Recommendations:

Against picking winners (e.g. list of job titles that are highly specialist)

Price the best mechanism to prioritise, earning are the most objective indicator of value.

At the time of the review, the minimum earnings threshold for Tier 2 migrants was 20,800 (set
when skill level for entry for was NQF3). Now the requirement is NQF6+ - minimum pay threshold
should rise to 30,000 (25th percentile of the salary distribution for NQF6+)

Phased increase for some public sector occupations (e.g. Nurses)

Increasing the cap to include in-country switchers (over 5,500 Tier 2 applications were made from
Tier 4 switchers in 12 months to August 2015)

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 Immigration Skills Charge
The MAC was asked to advise on (ii) applying a skills levy to businesses recruiting from outside the
EEA, the proceeds from which would fund apprenticeships in the UK.

Recommendations:

In favour of an annual Immigration Skills Charge (ISC) paid up front as it will:

1. Incentivise employers to reduce reliance on migrants

2. Help offset some of the negative externalities (e.g. In transport health and education)

3. Help rectify the lack of investment in UK human capital

A 1,000 annual levy which could raise over 250m p.a.

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 Tier 2 ICT Route
The MAC was asked to advise on (iii) the scope to tighten the Tier 2 ICT provisions and the impact this
would have on business and the economy. The MAC was asked to review any aspects of the rules and
operations of the ICT route, including its usage by companies to service business process outsourcing
contracts with third parties. In addition, the MAC was asked to consider the case for applying the
immigration health surcharge to ICTs.

Context:

ICT route covered 4 categories

(i) Short term: for established employees staying in the UK for up to 12 months

(ii) Long-term: for established employees staying in the UK for 1-5 years

(iii) Graduate trainees: graduates staying in the UK for up to 12 months

(iv) Skills transfers: for overseas employees transferred to the UK for up to 12 months.

The job must not be able to be done by a new UK or EEA recruit, but employers are not required to
complete RLMT 7

~70% of all Tier 2 entry visas issued in 2014 were for ICT (increasing over time)
 Tier 2 ICT Route, Context

Breakdown of occupations within the Tier 2 (ICT) route, Year ending August 2015

Short-Term Long-Term

2135 'IT business analysts, archtcts and

systms designers' 20%
26%
2134 'IT project and programme mngrs' 30%

2136 'Programmers and software

development professionals' 49%
1% 11%
2139 'IT and telecommunications
professionals' 3%
2133 'IT specialist mngrs'
3%

10%
2137 'Web design and development
professionals' 15% 22%
6%
Other Occupations 4%

0%

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 Tier 2 ICT Route
Top 10 biggest users of Tier 2 (Intra-Company Transfer) Certificates of Top 10 Nationalities using Tier 2 (Intra-Company Transfer) route, both
Sponsorship (out-of-country), Year ending August 2015 in and out of country, based on used Certificates of Sponsorship
Skills
Organisation Name Short-term Long-term TOTAL
transfer
Tata Consultancy Services 6 5,014 455 5,475 Skills Short Long
Graduate Total
0% 92% 8% 100% transfer term term
Cognizant Technology 213 1,343 978 2,534
India
Solutions UK Ltd
8% 53% 39% 100% 14 1,342 18,399 10,924 30,680 72%
Accenture (UK) Ltd 1 1,449 410 1,860 USA
0% 78% 22% 100%
Infosys Ltd - 1,548 637 2,185 21 216 1,336 2,913 44,86 10%
0% 71% 29% 100% Japan
5 26 221 1,836 2,088 4%
Wipro Technologies 175 1,027 471 1,673
China
10% 61% 28% 100% 22 49 281 619 971 2%
IBM UK Ltd 38 611 432 1,081 Australia
4% 57% 40% 100%
6 32 161 554 753 2%
HCL Great Britain Ltd 2 714 342 1,058 Canada
1 28 179 307 515 1%
0% 67% 32% 100% South Africa
Tech Mahindra Ltd 40 689 385 1,114 6 37 108 215 367 1%
4% 62% 35% 100% Russia
40 265 126 431
2 10 112 225 349 1%
Capgemini plc
South Korea
9% 61% 29% 100% 1 25 29 240 295 1%
HSBC Holdings plc 32 351 23 406 Philippines
8% 86% 6% 100% 0 17 171 94 282 1%
Total (top 10) 547 13,011 4,259 17,817
Total (top 10) 78 1,782 20,997 17,927 40,786 93%
3% 73% 24% 100%
Total (overall) 2,002 20,912 12,906 35,936
11% 58% 36% 100% Total (overall) 121 2,033 21,905 19,786 43,849

Notes: Home Office Management Information, Total CoS used, year ending August 2015 Notes: CoS used, year ending August 2015, Home Office Management Information

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 Tier 2 ICT Route
Tier 2 (ICT) CoS assigned by route and whether on client contract, year to Aug 2015
On client contract Not on client contract Total % on client contract
Graduate 7 125 132 5
Skills Transfer 925 1,284 2,209 42
Short Term 17,313 6,239 23,552 74
Long Term 10,037 11,312 21,349 47
Total 28,282 18,960 47,242 60
Source: Home Office Management Information, year ending August 2015. Both in-country and out-of-country. The client contract split is for CoS assigned therefore not comparable to CoS used in previous tables.
Salary distributions for Tier 2 migrants compared to all highly skilled UK workers
.00001 .00002 .00003 .00004 .00005

UK NQF6+
UK NQF6+ New Hires
Tier 2 (General)
Short Term ICT
Long Term ICT
Density
0

0 50000 100000 150000

Annual Salary 10
Notes: MAC analysis using ASHE and Home Office MI data, covering a one year period, ending March 2015. Total UK average is based on ASHE data
for indiviuals in occupations skilled to NQF6+. UK average for new hires is based on ASHE data for individuals skilled to NQF6+ who have
been in their current role for under 12 months.
 Tier 2 ICT Route
Review Findings:

Two uses of ICT route emerged:

Conventional use: small number of highly skilled specialists brought into impart
skills or gain experience. Delivers significant benefits to the UK encouraging
trade and investment.

Third-party contracting: widespread use of migrants to service third-party

contracts, predominantly in the IT sector (93%of all third party contracting within T2
ICT). Clients benefit from lower IT costs. But ready supply of migrant labour
reduces incentives of firms to invest in human capital of UK workers.

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 Tier 2 ICT Route
Recommendations:

All ICTs should pay the Immigration Health Surcharge (200 p.a.)

Prior experience with the firm should increase from one year to two

Sponsor should submit more detailed description of the role in the Certificate of Sponsorship
application to ensure the role is sufficiently specialist

HO/HMRC to look into system of allowances and national insurance contributions

Third party contracting only:

Should become a separate route under Tie 2

Minimum salary threshold should increase to 41,500 (comparable to senior managers and
specialists)

Further review into skills shortages within IT sector. After which may want to consider

- A cap based on the percentage of each organisations skilled (to NQF6+) workforce that are Tier 2
migrants
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- Applying an RLMT to third-party contracting
 Governments Response
A number of the MACs recommendations were taken on board by the Government:

In November 2016, salary requirements for Tier 2 (General) were raised to 25,000
(certain health and education professionals will be exempt until July 2019). The
minimum salary for short-term ICTs increased to 30,000.

From April 2017, further increases to the minimum salary requirements for skilled
workers and introducing the 1,000 per worker per year Immigration Skills Charge to
fund training for UK residents.

The Government did not adopt the MACs recommendation to create a separate category
for third-party contractors nor require that ICTs should have worked for their company
for two years.

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Thank you!

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