New rules on non-EU skilled workers push up SMEs’ wage bills

New rules on non-EU skilled workers push up SMEs’ wage bills

After six years, employees from beyond the European Union must earn at least £35,000 if they are to be allowed to remain in the UK

The European Union referendum may finally have been settled, but the arguments over foreign workers coming to the UK continue to rage – and not just those from the EU. 

New Close Brothers research reveals many small and medium-sized enterprises (SMEs) are deeply worried about the impact of tough new rules on skilled workers from non-EU countries, which could leave them with skills shortages or substantially higher wage bills.

Almost one in five (18.8%) of SMEs are already being impacted by new rules requiring non-EU workers to be paid higher salaries if they are to stay in the UK, new data from the Close Brothers Business Barometer reveals. A further one in four (25.4%) warn they are not yet sure whether the crackdown will affect them.

The new rules, which came into effect on 6 April, apply to skilled workers from outside the EU who come to the UK to take up a job. Employers taking on such staff already have to apply for a certificate of sponsorship on their behalf – the fees for these can be as much as £1,476 – and pay them at least £20,800 a year, in order to ensure they qualify for ‘Tier 2’ visas. Now, however, they will have to consider paying them significantly more once a minimum period has elapsed, or find replacements.

This is because the Tier 2 visa rules only allow people to work for six years. After five years, they must apply for ‘indefinite leave to remain’ in the UK, but most people doing so will have to be earning at least £35,000 a year to qualify. Skilled workers with Tier 2 visas earning less than this amount will have to leave the UK once their paperwork expires.

This isn’t just an issue for the future. The new rules apply to anyone on a Tier 2 visa granted after 6 April 2011 – so many companies will have staff who will be affected over the next few months. Where such staff aren’t currently earning more than £35,000, their employers will need to decide whether to pay them more, or whether incur the costs of recruiting and training replacements. This may not be easy – most workers with Tier 2 visas are doing jobs for which local staff are hard to find; this was the point of the scheme in the first place.

Employers also need to be aware that the rules may also soon change on recruitment of skilled workers in the first place. The Government is currently considering proposals to raise the minimum salary that qualifies for the Tier 2 scheme from £20,800 to £30,000 – and to charge a £1,000 levy on each worker taken on under the scheme.

The rules are causing concern amongst advisers to SMEs, who fear many employers will struggle to cope with the new system. That’s the message from SMEs too: the Close Brothers Business Barometer shows that almost three-quarters (71%) of those impacted by the new rules are facing higher costs because of the adjustments they’re having to make to salaries. More than a quarter (27%) warn they are suffering skills shortages.

Going forward, employers must now consider their positions carefully.  Can the skills you need really not be found amongst workers in the UK or the wider EU, even if you use the five-year Tier 2 period to train staff not affected by the rules? If not, you will have no choice by to pay the higher salaries required by the new rules.

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