Global supply risks

UK Trails the US in Visa Policies – Proposed Migrant Tax Could Impact Thousands

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Within the same month of the US Congress formally notifying IT companies worldwide of its decision double the visa fee for H-1B and L1 visas, the UK government is expected to follow suit with a proposed annual surcharge of £1,000 per non-European Union workers.

Establishments in the UK, which hire a large number of non-European Union workers, might face an addition of a £1,000 (US$1,415.3) annual surcharge per foreign employee. This proposed up-front charge of £1,000 for each skilled non-EU migrant will apply per year, so a three-year visa would carry a surcharge of £3,000 (US$4,245.9) for each employee. This fee increase is expected to have maximum impact on Indian IT companies, who apply for thousands of visas each year and Australians who come on the two-year ‘youth mobility’ scheme.

This is the latest set of recommendations by UK’s Migration Advisory Committee (MAC), whose primary objective is to help the government achieve its target of drastically lowering the number of migrations into the UK. The MAC’s recommendation is based on the principle that although skilled migrants make positive contributions to the UK economy, those shouldn’t come at the expense of hurting UK workers. They claim that by increasing the cost of overseas hires, the new surcharge would encourage UK employers to invest in training UK workers instead.

Many businesses and stakeholders oppose this recommendation by MAC. They highlight the lack of evidence to support their claim that migrant workers harm UK workers and note that many UK companies are facing a growing skills gap and that this recommendation would make it even more difficult for them to find and afford the skills they need. Australia’s Department of Foreign Affairs and Trade stated that restricting the Tier 2 visa would have adverse effects on the economies of both Australia and the UK.

The overall impact of the fee hike is likely to be seen after April 1, which is the tentative date given for implementing the proposed hike. Though IT services companies will take the hardest hit, this visa fee hike will also affect buy-side companies. Buyers of any IT-BPO services will need to make sure that necessary permits are in line with the visa norms and regulations specified by the UK Government. Worldwide export-driven IT outsourcing firms are likely to raise client fees and process more work from their centers to cushion the impact of an increase in fees. As a result of this, contracts renewals or new applications should consider this new visa fee, so that service providers do not pass on a major chunk of their costs to clients. Legal teams must take precautionary measures in order to avoid the impact of the higher visa costs.