Access to Global Talent

Transcription

1 SPECIAL INTEREST PAPER Report prepared for the City of London Corporation by Consensus Published November 2011 Access to Global Talent the impact of migration limits on UK financial and professional business services City of London Economic Development PO Box 270, Guildhall, London, EC2P 2EJ

2 SPECIAL INTEREST PAPER Report prepared for the City of London Corporation by Consensus Published November 2011 Access to Global Talent the impact of migration limits on UK financial and professional business services City of London Economic Development PO Box 270, Guildhall, London, EC2P 2EJ

3 Access to Global Talent: The Impact of Migration Limits on UK Financial and Professional Business Services is published by the City of London. The author of this report is Consensus Research. This report is intended as a basis for discussion only. Whilst every effort has been made to ensure the accuracy and completeness of the material in this report, the author, Consensus Research and the City of London, give no warranty in that regard and accept no liability for any loss or damage incurred through the use of, or reliance upon, this report or the information contained herein. November 2011 City of London PO Box 270, Guildhall London EC2P 2EJ

4 Table of Contents Foreword Executive Summary Background and Methodology The Impact of the Migration Limits Recruiting and Retaining Global Talent The Outlook for London and the UK Appendix 1: New migration limits process Appendix 2: Global Talent Appendix 3: UKBA allocations of restricted certificates of sponsorship (CoS) April to October Appendix 4: Summary of Tier 2 General after April 6, Endnotes... 48

5 Foreword Stuart Fraser Chairman, Policy and Resources City of London The City of London the principal hub for UK and international financial and professional business services has always prided itself on its openness towards and expertise in international trade, inward investment and global finance, welcoming the benefits these deliver to our national economy. Indeed, in the current economic climate, it may be that now, more than ever, our ability to remain open to the global skills and talent necessary for these businesses is key to supporting the UK s economic recovery. The imperative to manage the UK s net migration figure is clear and HM Government's commitment to doing so is respected. However this must not limit our ability to attract skilled workers from the international pool of increasingly mobile and talented people. This is not just a financial services issue or one that is limited to London: an absolute, rigid or even reduced cap on migration is potentially damaging to areas drawing on international talent, such as IT and life sciences. This issue is therefore about economic growth throughout the UK rather than just the needs of City firms. This valuable report is published at a time when, once again, there will be further reviews of existing limits on skilled and highly-skilled workers entering the UK. The research not only highlights the impact that the points based system currently has on businesses, but also illustrates why future constraints should not be based on demand during a time of depressed economic activity. The findings also demonstrate the need for certainty around the reviews, with a predictable operating environment for business being essential in planning business activity and promoting economic growth. Against this backdrop of continuing uncertainty, some global firms are reported to be considering whether they could move key business areas out of the UK. International companies such as these are also likely to employ large numbers of British workers, with relocation having the potential for negative effects on employment levels, the UK s pool of skills and the raising of taxes. This report highlights serious business concerns relating to wages and other increased operating costs as a result of the limits and considers how these factors will impact on their ability to operate, both in London and elsewhere in the UK, where increased costs may have a higher proportionate effect. It also notes that not only has the experience of continual change left an endemic knowledge gap in businesses regarding how migration limits work, it has, critically, also left a negative perception of the UK as a business environment. 1

6 If immigration is to be capped, we must find a way for the UK s firms to attract the international talent they need. Un-capped Intra-Company Transfers remain one such method. Therefore, it is in all our interests that there is a fair, transparent and rational system which, in a competitive and mobile world market, can maintain the UK s openness to skilled people regardless of their origin. Stuart Fraser London November

7 1. Executive Summary Objectives Following the significant changes to migration policy and the introduction of the migration cap in April 2011, the City of London Corporation commissioned this research to assess the impact of those changes on the attractiveness of the City of London and of the United Kingdom, to businesses that rely on non-eu/non-eea skilled migrant workers. This study seeks to provide an understanding of the initial impact of the limits to Tier 1 and Tier 2 migration on businesses since their implementation in April The research reports on experiences of businesses, from April to October The key objectives of this research were to: Assess the impact of the new Tier 1 and Tier 2 non-eu economic migration limits, implemented in April 2011, on a representative section of London businesses. The research focused on the experience of businesses in the first six month recruitment period in which businesses were operating under the new rules. Investigate the changes in business recruitment and operations, if any, during this period. The research was designed to investigate whether the new migration limits have had any impact on the perceived attractiveness of the UK and London for businesses, and whether there had been any impact on the perceived attractiveness of the UK and London for overseas skilled workers. Key findings This study is qualitative and the research findings are presented as illustrations of the experiences of the businesses interviewed. The analysis in this report is a combination of the views of participants and highlights the central themes that emerged from the interviews. The research findings in this report do not necessarily represent the views of all the participants and differing perspectives are highlighted where they exist. This report is intended as a mid-year review of the impact of migration limits, covering the experience of the first six months of the migration limits, from a small but important group of UK based businesses, rather than an exhaustive assessment. While businesses had negative perceptions about the introduction of the migration limits based on their experience under the interim period, the reality has been that there were only a few reported problems with securing visas under the migration limits, with most businesses able to secure the visas required from April to October This may in part be attributed to the addition by some businesses of resources 3

8 to manage migration, including external expertise, and increased familiarity with the UKBA processes and the migration limits policies. The businesses interviewed provided feedback on both Tier 1 and Tier 2. The discussions focused on the Tier 2 General Route, although Tier 1, in particular the Post-Study Work route, was also discussed. The Tier 2 General Route was under-subscribed at the October 2011 midpoint in year one. This has contributed to businesses reporting few if any problems. Uncertainty over the number of visas available each month under the migration limits has eased. The UKBA now provides online information on the allocations of restricted certificates of sponsorship (COS), and this is updated monthly. A key concern of businesses is that this under-subscription of Tier 2 General may be viewed by Government as an invitation to reduce the cap even further. Businesses stated that for Government to assign a migration cap based on a period of slow economic growth and applied while austerity measures were being implemented, would arguably lead to a self-fulfilling prophecy, and that migration limits should not be set at the point of least economic demand. While businesses have been largely successful in securing visas, the migration limits have had both immediate and pending impacts on UK-based businesses: Immediate financial impact Businesses have faced direct additional costs in adhering and adapting to changing migration policy. Under the new system, businesses now have increased responsibilities in ensuring that visa applications and their processes are compliant. Businesses are dedicating more resources, and in some cases creating new positions, to manage Tier 1 and Tier 2 applications. Businesses are using specialist migration consultants to manage visa applications for non-eu/non-eea employees. The main drivers for this are the need for specialist knowledge of the PBS and the desire to meet compliance requirements. Longer- term impact on planning and operations The introduction of migration limits in April 2011 forced businesses to review their existing recruitment processes and talent needs. However, the continued Government consultations around economic migrants and students (rights to settlement and post-study work), have created uncertainty as to what Government policy will be in April 2012 and in the longer term. Uncertainty has resulted in businesses postponing or delaying expansion and growth plans, as they are unable to forecast the direction Government will take on migration limits. 4

9 However, while these UK based businesses were not engaged in developing their future planning because of concerns around migration policy, their colleagues and competitors in other global locations have been able to progress with future planning. This has provided these other global locations with a planning advantage and prioritisation within organisations for resources. Most of the global businesses interviewed reported a blind recruitment approach, where the focus was on securing the best and the brightest talent, regardless of location. Impact on smaller and larger businesses Both smaller and larger businesses have been able to adapt to the migration limits; while the costs for both have increased, the proportional increase in resources utilisation has been greater for smaller businesses. Larger companies have been better equipped to absorb additional resource requirements and costs to secure the services of migration consultants. Impact on different businesses and sectors Businesses that provide legal services have expressed concerns around how migration limits will affect access to the UK trained non-eu/non-eea talent pool. In addition, those legal services that recruit talent two years in advance of employing also expressed concerns over how Government continued policy changes would affect their recruitment. Global businesses require the mobility of staff to service their global clients. However, global firms that require the movement of staff between international locations on short and seasonal assignments (less than six months), reported that the new PBS system and migration limits have inhibited their ability to move staff. Impact on regional operations outside London The minimum income thresholds under the PBS for Tier 1 and Tier 2, whilst easily achieved for those employees based in the South East and London, are more difficult to achieve in areas beyond the South East. Inability to bring in global talent for regional locations affects how businesses diffuse knowledge across their operations. The benefits in having highly skilled global employees locate in regional offices in the UK include but are not limited to the increased skills-transfer to locally based employees. 5

10 In addition, there is a recognised regional skills shortage that could be filled with global talent, were income requirements to be weighted to reflect regional wage differences. Impact on access to global talent Businesses also reported that it costs them significantly more to recruit from outside the UK or to move workers from other locations to the UK. All businesses reported that they continue to recruit and hire local talent where it meets their requirements. Impact on global collaboration The UK s migration limits may significantly impact on collaboration between companies that are based in non-eu/non-eea locations and within multinationals with global hubs, by restricting the mobility of talent across locations. Restricting the movement of talent to the UK could generate reciprocal policies from other countries and within companies with international divisions. If non-eu/non-ea based companies cannot send talent to the UK, they would have a strong case in refusing UK-based talent access to their locations. Impact on competitiveness Multi-national businesses face internal and external competition in searching for talent to help grow their businesses. If the talent cannot be located in the UK, there remains the option for skilled individuals and businesses to select other global locations. Businesses are driven by economic factors and if they are unable to secure the necessary talent in the UK, they will lose that talent and the associated clients. Businesses will become less competitive, and this will affect their ability to expand and grow their businesses in the UK. Some businesses have reported losing internal teams to other global locations and reducing their overall UK headcount of domestic and non-eu/non-eea talent. While this is not was not widely reported, it could be an early sign of a silent and potentially devastating trend for the recovering UK economy. Business perspectives Government has expressed a willingness to listen to businesses in order to ensure that migration limits and migration policy continue to facilitate the movement of the brightest and the best in the UK, and contribute to economic growth. 6

11 After reporting on the challenges and the impacts of the migration limits, businesses surveyed were asked for their perspectives following the first six months of the migration limits. Some offered the following observations and recommendations on migration policy: Stable and consistent policies The five tiers of the Points Based Systems replaced over 80 predecessor migration routes. Future changes to migration policy will make it more challenging for UK-based employers, who have just started to manage the existing five-tier system, to comprehend the system. Stability in migration policy is required for businesses to engage in medium to long-term planning. Those employers who recruit talent several years in advance, and those businesses with growth plans that were linked to non- EU/non-EEA markets, voiced this the most strongly. Intra Company Transfers (ICTs) are business critical ICTs are business critical and should remain outside of the quota system. ICTs granted leave in the UK on shorter assignments (less than 1 year) are subject to the same 1-year cooling off period as those ICTs who remain in the UK for longer assignments (over 1 year). The cooling off period for ICTs should be adjusted to reflect the duration of stay in the UK. Improve employer collaboration with Job Centre Plus (JCP) and the Resident Labour Market Test (RLMT) Improvements are required in establishing universal online job opening posting facilities with JCP offices, where employers (i.e. sponsors) work with the JCP ensure that openings are posted immediately. This will benefit the UK labour force and UK employers by offering a speedier match of skills to openings. In an internet age era where job openings are posted instantaneously and applications completed online, the four-week posting requirement warrants a review. If an improved online system were developed, the RLMT could be reduced by one or two weeks. Implement trusted sponsor status The UK border agency should rely on responsible sponsors to ensure non- EU/non-EEA skilled workers do not come into a UK company to replace resident workers. 7

12 Companies that show an exemplary record of compliance (through UKBA audits) as well as prove that they contribute to the growth of the UK economy could be pre-vetted and provided fast track applications. These companies would still be required to undergo the RLMT. Any changes should increase flexibility within the system While the right to settle in the UK is still under consultation, the settlement issue is generally viewed as a large obstacle in attracting global talent. Greater flexibility is requested around settlement and length of stay in the UK, where any changes to rights to settle should be balanced with greater flexibility around length of stay. English language requirements for these non-eu/non-eea workers could be adjusted to reflect real working environments. 8

13 2. Background and Methodology Introduction One of the United Kingdom (UK) Government s policy aims is to reduce net migration to tens of thousands ; placing limits on the number of economic migrants admitted to live and work in the UK is a contributing factor to achieving this policy 1. The point-based system (PBS) was introduced by Government in February 2008 as a means of regulating migration to the UK. The PBS categorises individuals from outside the European Union (EU) and the European Economic Area (EEA) seeking to work or study in the UK in five tiers 2. Table 2.1 provides a summary description of the migrants the five tiers are aimed at. Table 2.1: Summary of the Points Based System Tiers Tier 1: Highly skilled migrants Economic Migrants Tier 2: Skilled workers with a job offer Economic Migrants Tier 3: Low skilled workers (Currently suspended) Tier 4: Students Economic Migrants Tier 5: Temporary Workers and Youth Mobility - primarily for non-economic reasons. Economic Migrants Source: UKBA Impact Assessment Migration permanent limit (Tier 1 and Tier 2 of the points-based system): impact assessment, available The Tier 1 system was introduced in March 2008 to cater to highly skilled individuals who do not require a job offer to immigrate to the UK. Tier 2 was introduced in November 2008 to cater to skilled individuals who already hold a job offer in the UK. This report focuses on Tier 1 and Tier 2 and their sub-categories, such as Tier 1 Post- Study Work (PSW), Tier 2 General and Tier 2 Intra Company Transfers (ICTs). In November 2010, the Government announced plans to modify how Tier 1 and Tier 2 of the PBS were applied 3. The plans included introducing a limit of 20,700 work permits under Tier 2 (General) and 1,000 work permits for Tier 1 (General) that would take effect on 6 April Table 2.2 below show the Tier 2 monthly allocation of the certificates of sponsorship (Appendix 1 provides a summary of the new migration limits process). Table 2.2: Tier 2 Certificates of Sponsorship monthly allocation 2011 to 2012 April, 2011 May, 2011 to March, ,200 certificates 1,500 certificates each month for 11 months = 16,500 certificates 9

14 Employment related settlement connected to the tiers was also subject to a consultation that ran from June 2011 to September Following the migration limits introduced in April, the Government is considering amending migration policy on settlement. Context and objectives The key driver behind the migration cap and limits is the Government s concern with net migration to the United Kingdom and the impact of this migration on: UK unemployment, where Government concern is that non-eu/non- EEA nationals are taking jobs that could be performed by UK nationals, further contributing to UK unemployment 6. UK infrastructure, where the rising number of migrants may be placing increased pressure on social services, housing, and infrastructure 7. (see Appendix 2 for more information) Net migration is the net total of migrants during the period, that is, the total number of immigrants (those coming into the country) less the annual number of emigrants (those leaving the country), including both citizens and noncitizens 8. Government policy has focussed on one element of net migration, the non EU/EEA migrants coming into the UK. However, the number of new long-term migrants in 2010 increased approximately 1% from 2009, while the number of new emigrants in 2010 decreased approximately 10% from The decreased number of emigrants has resulted in increased net migration. In addition, the Government has no direct control over certain aspects of net migration, such the movement of British and EU/EEA nationals in and out of the UK. Changes in these flows would affect net migration (positively reducing net migration, or negatively increasing net migration), regardless of Government migration policy toward Tier 1 and Tier 2 of the PBS 9. There has been no definitive conclusion on the economic impact of the skilled migrants to the UK economy; Government has identified negative and positive contributions made by highly skilled migrants in the UK. According to the UKBA, the policy objectives and intended effects of the migration limits are: to reduce net migration and any adverse social impacts of migration; to augment the selectivity of the system so that the operation of the limit does not exclude the brightest and the best; to achieve the right balance in terms of those with the greatest potential benefit to the UK and the immediate need of employers to fill specific vacancies; 10

15 to ensure that the limit operates in a way that is fair and, so far as possible, offers certainty to businesses and other users of the system; to incentivise the skills system and encourage employers to give priority to the training and recruitment of resident workers to meet skill needs 10. (See Appendix 2 for more information) The City of London Corporation commissioned this research to assess the impact of these migration policy changes on the attractiveness of the City of London and of the United Kingdom, to businesses that rely on non-eu/non-eea skilled migrant workers. This study seeks to provide an understanding of the initial impact of the limits to Tier 1 and Tier 2 migration on businesses, April to October The key objectives of this research were to: Assess the impact of the new Tier 1 and Tier 2 migration limits, on a section of London businesses, focussing on the first six month recruitment period in which businesses were operating under the new migration policies. Investigate the changes in recruitment and operations, if any, during this period. Research participants Representatives of 21 UK based businesses (see Table 2.3) were interviewed for this study. A further 13 organisations were contacted but declined to participate during the interview period. The participating organisations together employ almost two million people globally, and approximately 136,000 in the United Kingdom. Table 2.3: Profile of companies participating in the study Industry / Sector Financial Services - Banking Number of interviews Global Employees UK Employees** 9 1,370, ,300 Legal services 6 11,205* 21,070 Financial Services - other 3 48,722 9,200 Professional Services 3 320,000 5,470 Total 21 1,750, ,040 Source: Research data, data supplied by participants * Employees reported focussed on lawyers and hence does not always report support staff ** UK employee count contains estimates of headcount in April-October The majority of businesses interviewed were in the financial services sector and twothirds had their global headquarters in the United Kingdom or North America (see Table 2.4). 11

16 Table 2.4: Profile of companies contacted in the study Headquarters Financial Services - Banking Legal services Financial Services - Other Professional Services United Kingdom North America Asia Europe Total Total Source: Research data, data supplied by participants Participants were in-house migration / mobility experts, or professionals involved in the recruitment of non-eu/non-eea skilled employees. Some participants had dual roles in migration matters, as they were involved in providing migration services to external clients and were employers of non-eu/non-eea skilled migrant workers. These participants provided information on both roles. Methodology The research explored the views of different London based businesses. Most of the businesses were multinationals in the financial or professional services sectors located in the City of London and 11of the 21 businesses had a wider regional UK presence. Interviews with participants were conducted either face-to-face or by telephone by the Consensus Research team over a two-month period, August 12 to October 14, The interviews followed a structured discussion guide, with interviews averaging about one hour in length. Interviews were carried out under the Market Research Society (MRS) Code of Conduct and the anonymity of all respondents has been maintained. Quotes from respondents have been provided with reference to their industry and scope (e.g. Global Bank). We would like to thank all those who took part in the study. The methodology used to collect the information was qualitative. There was also a facet of the approach designed to collect quantifiable data on numbers of applicants and recruitment of non-eu / non-eea employees pre- and postimplementation, but only a minority of participants (6 / 21) could provide this type of hard data. Most participants reported that they did not have the data requested or they did not attempt to collect this data in order to comply with Human Resource regulations and Employment Non Discrimination Law. However, it was noted that while many employers did not have this data, the UKBA would have the records of all the 12

17 employer sponsors and the non-eu/ non-eea skilled employees that they had sponsored and any changes in visa status. The main body of this report is presented in three chapters that outline key findings from the research: - Chapter 3 highlights the impact of migration limits on UK based businesses. - Chapter 4 looks at the research findings around recruitment and retention of a global workforce under the migration limits. - Chapter 5 provides the outlook for London and the UK following the changes to UK migration policy. 13

18 3. The Impact of the Migration Limits This chapter explores awareness of and the perceptions towards the migration limits, and the impact of the limits on businesses, including the direct and indirect costs to business of adapting to changing migration policy. Awareness of the PBS and migration limits Many of the businesses surveyed were well aware of the PBS and the migration limits; several businesses had submitted consultation responses on migration limits to the UKBA. However, there was consensus that it was difficult to stay fully informed of developments in UK migration policy because of all the changes that Government was implementing. This knowledge-gap was prevalent in all businesses and responses by businesses to this knowledge-gap have included investing in internal capacities around migration or securing the services of specialist external consultants, such as law firms specialising in immigration. The PBS has been subject to significant changes in April 2010, September 2010, and April As a result, businesses are applying more resources to manage migration matters for their non-eu/non-eea skilled workers. Every time the system changes, our responses to it have to change as well, so there has been quite a significant impact in the amount of resource and time, as an organisation, that we have had to put into migration. Participant, Global Bank While businesses reported increased direct costs in managing the applications under the new migration policy, they also experienced indirect costs associated with migration policy. A global bank noted that changes to Tier 1 resulted in a loss of accessible talent, and that they now spent more time and resources, finding and sponsoring talent of equivalent ability. The abolition of Tier 1 has meant individuals who would have had their own immigration provision now need to be sponsored under Tier 2. Previously the bright individuals that we were attracting would have already had permission to work in the UK; we now have to sponsor everyone. Participant, Global Bank Another participant noted that their capacity to fully understand and implement policy changes had slowed due to the changes; as a result, there were delays in providing their business with the correct advice on migration. 14

19 It is really hard to give out internal advice when there are so many changes, and if HR get confused then how does it translate to the business - not very well...we cannot build in long term policies because of all the updates and the constant changes. When government makes a policy change, like the one in April last year, we have to change everything about the way we think, the way we work, and this is hindering rather than helping us. Participant, Financial Services Perceptions of migration policy Participants reported that in light of continued Government consultations on migration policy, such as the 2011 consultation on employment related settlement 11, there were widespread negative pre-judgements towards migration policy. Businesses feel that any changes in Government policy on migration would be focussed on reducing net migration and whilst the consultation process itself is welcomed, the decisions of such exercises were perceived as pre-determined. With the migration limits on Tier 1 (Exceptional Talent 1,000 visas) and Tier 2 (General 20,700 visas) introduced in April 2011, there was a perception that these limits would cause problems for employers seeking to bring in skilled migrant workers. "The perception, when it was initially supposed to come into force, was that it will cause a problem - each month there was going to be a lottery system, companies didn t know whether they would be able to be successful with their applications as the roles that they applied for were generally associates (which are not on the shortlist of occupations). Participant, Global Legal Services This negative perception was based on experiences under the interim period, from July 2010 to April 2011, for the Tier 2 General route. General uncertainty around the final migration limits policy added to this negative perception towards policy 12. During the interim period, which itself was introduced quite quickly, businesses were not always able to secure the required visas for their workforce and some expected these experiences to be replicated when the final policy came into force. We were heavily affected by the interim period and didn t have any licenses that we could issue for an ICT [Intra Company Transfer], we appealed, but this was turned down. There was a period of time where we couldn t bring anybody across and we couldn t sponsor anybody. Participant, Global Bank The Government rationale behind the migration cap, despite being fully explained in Migration Advisory Committee (MAC) and UKBA publications, was not fully understood by many of the participants. 15

20 One participant reported that his understanding of the selection of the 20,700 Tier 2 General certificates was that it was:.. arbitrary, and may have been based on 2009 figures data was used because that is the data the Government had, and the migration numbers were higher than The 2008 data was further complicated by the introduction of the points based system, so 2009 was used as the best available data source Participant, Global Legal Services The MAC report, Limits on Migration, mentions that the calculation steps to derive options for limits on Tier 1 and Tier 2 start with the 2009 estimate of Long-term International Migration (LTIM) net migration into the UK for all nationalities 13. The use of 2009 data does not reflect the complete skills and talent required by global businesses in the UK. The global recession of resulted in significant downsizing across many UK based businesses. The use of a LTIM figure derived from this period in developing the migration limits provide for a limit that would be lower than one measured against pre-recession numbers. Pre-recession UK based businesses reported higher overall employment figures, including employment of both domestic and non-eu/non-eea skilled workers. Visa processing Stemming in part from the changes and perceived complexity of the new migration limits, participants reported that the overall time to process visa applications and to bring skilled non-eu/non-eea employees to the UK had increased since April "The most significant impact has been the additional bureaucracy in the new system; there are time delays in getting the employees permits. There is increased uncertainty due to the consultations and changes that have been implemented. Uncertainty makes planning difficult. The general moves to the PBS added clarity, but recent changes ( ) have complicated the process. Participant, Global Professional Services Participants reported that under the previous policy (the PBS without migration limits), the average visa processing duration was four weeks. This has now increased to an average of six to eight weeks. Applications are processed once a month and the UKBA must receive applications by the fifth day of the month. If an appropriate employment candidate from outside the EU or EEA is found on the sixth day of the month, the company must wait a month before they can make the application. 16

21 Getting rid of Tier 1 and having a cap of 20,700 is obviously going to impact the organisation and make us look closer at the resident labour market - and this is not necessarily a bad thing. However, it means that bringing someone on board becomes a very cumbersome process and we may not always get the right person. So if you have a hiring manager who needs someone on board immediately, we have to do the RLMT for 28 days, and then have to wait for approval etc. it all takes 6 8 weeks, and that is if you can get the application in before the monthly deadline. Sometimes the hiring managers may not want to wait for that long and instead of going for a foreign national they may go with someone who may not have been their first choice. Participant, Financial Services There are obvious costs to businesses associated with having to wait four more weeks to secure the talent they require for their operations: businesses may lose out on talent due to long waits, or instead of securing the brightest and the best, they may have to settle for less appropriate applicants in order to fill urgent openings. UKBA information on migration limits and the PBS The migration limits under the PBS combined with older migration routes have created a complex system that is difficult to navigate. Changes to migration policy have created exceptional visa situations that are not necessarily covered by UKBA information accessible to businesses. Information on these issues is not easily available from the UKBA. Participants reported that it is very difficult to obtain clarifications of some of the details of the policy changes, either on the UKBA website or on ringing the UKBA directly. One participant commented on their efforts to resolve complex issues by contacting the UKBA: There is no point. Anytime I have tried to contact them [the UKBA] in the past I have got someone who has no idea, they just don t know the specifics or they refer you to a more specialist line and you spend ages waiting on the phone. It is just not worth it. I may as well just use my adviser. Participant, Financial Services The UKBA visa-processing schedule has had an indirect cost on business. Changing migration policies combined with legacy migration routes into the UK have created complex cases that are not easily solvable and require greater information from the Government. The reality of migration limits Whilst the perception of the migration limits has been negative, the PBS itself is viewed as a positive contribution towards the management of UK migration. The addition of clear standards for the entry of workers into the country, and moving 17

22 away from a system based on arbitrary judgement, was widely welcomed by businesses. A few benefits of the new migration limits system were also identified by businesses. Under the old system (pre-april 2011), while businesses were required to provide fewer documents during the application process, the waiting time for a work permit was beyond control of the business. Businesses had to send visa application details to the UKBA and then wait for the work visa. Since April 2011 businesses have greater control managing the issuance of the employer Certificate of Sponsorship (CoS). Now we have control over when the CoS is issued, because we have our advisors apply for it, we have more control. This is a good point, we may have to provide more documentation, but at least we have more control with when the CoS is issued. Participant, Global Bank More importantly, since April 2011 businesses have reported an improvement in securing visas for their non-eu/non-eea skilled employees. While there were cases of delays, evidence of increased burdens to businesses under the new process, and a lack of information for non-standard issues, the reality is that most businesses surveyed were successful in securing the visas for the non-eu/non-eea employees they required. The success of businesses securing the required visas is confirmed by a review of the UKBA internet page on the allocations of CoS. The monthly migration quotas for the Tier 2 General category are currently under-subscribed. Table 3.1 below shows that April was the only month where CoS allocations exceeded 1,000 (see Appendix 3 for more details). Table 3.1: Certificates of Sponsorship granted - April to October 2011 CoS set aside from annual limit for allocation for the month Balance of COS carried over from previous month COS granted in the months allocation April May June July August September October 4,200 1,500 1,500 1,500 1,500 1,500 1,500 N/A 3,181 3,885 4,552 5,205 6,223 7, The fact that businesses are not using the visas available could be attributed to the economic conditions in the UK, where slower growth has resulted in reduced recruitment of non-eu/non-eea employees. This suggestion is aligned with the fact that between August and October, 425 CoS were reclaimed as not assigned within 3 months of allocation by the UKBA (see Appendix 3). 18

23 This suggests that businesses conducted a Resident Labour Market Test (RLMT), failed to secure the talent required in the local market, followed the new process, were assigned a CoS, but failed to secure the non-eu/non-eea talent within 3 months. Participants also reported the negative perceptions associated with migration limits and visa applications as having an impact on CoS allocations. The negative press around the limits coupled with the unfavourable experiences during the interim period may be dissuading companies from applying for visas thus further explaining the current under subscription. Many businesses were worried in the run-up to the ratification of the migration limits that the monthly quotas would be reached before they would have had the opportunity to apply for visas. People were a lot more scared and angry when it was first introduced. They were saying we ll never be able to apply for a Tier 2 because there is going to be such huge competition for it, the quotas are going to be filled in the first few days but actually that has not been the case at all and the quotas have not been met and have kept rolling over. It is not as much of a concern as we thought it would be. Participant, Global Legal Services While most businesses have been successful in securing the visas required, the quotas for Tier 2 General have been under-subscribed because overall recruitment has slowed down, in line with the UK economy. Costs of adapting to migration policy for businesses A result of the new limits has been an increased cost burden on businesses seeking to bring in skilled migrant workers from outside the EU/ EEA. This includes: The cost of external advice, which is required to keep up with the policy changes. The cost of over-hauling internal processes, including general human resource (HR) processes to ensure compliance. The cost of the prolonged visa-processing period. A widely cited impact of the new migration limits is that the cost to employers of managing migrant worker visa applications has increased. The new process does ask more of employers when compared to the older system (see Appendix 1). Our workload has increased under the new system. The onus is now on the employer not UKBA to assess the documentation and verify it, placing additional responsibility. We work with [migration] advisors, who are assisting us but it has become more expensive to use advisory services under the PBS. Our workload has increased; there is more documentation to provide under this system. Participant, Global Bank 19

24 Whereas in the past, companies may have used in-house employees to process and secure work permits, the changing Government regulations coupled with the lack of detailed and up-to-date information have now made this an increasingly difficult task. One participant, with over 10 years experience in Human Resources and immigration matters noted that: Changes in the last five years mean I can t navigate the system without having a legal advisor supporting me in my opinions. As a small company [in the UK], we would not entertain the idea of running work permit related matters without the guidance of a lawyer. Processing people coming from China into London can be problematic, but as a bank we have deep pockets. Participant, Global Bank Larger businesses, which have higher numbers of non-eu/ non-eea skilled migrant workers, have mostly managed to build up existing internal or external capacities at additional cost in order to adapt to new migration policies. However, smaller businesses have been affected more than larger businesses as they often do not have the equivalent levels of in-house migration expertise. They have had to invest comparatively more in establishing or securing this expertise. Most participants agreed that the PBS and the changes to migration limits have created a spin-off migration industry where employers are investing in migration related services to manage visa applications and to meet compliance requirements. The complexity is painful, they are always changing, and we are always behind the curve. There is nowhere on the UKBA website that I can find the information [that I need]. The accommodation we can include in the certificates of sponsorships to meet the minimum payments thresholds; that is all changed, is it on the UKBA website? No. Can I find it written anywhere? No. So the only people who have this information are the migration advisers because we as companies cannot stay on top of it. Participant, Financial Services There have been increased costs for businesses under the new migration limits, with smaller companies having to invest a larger proportion of resources to manage the migration of their non-eu/non-eea skilled workers. 20

25 Stability in migration policy Businesses reported that continual changes in migration policy were having a cost impact, both directly and indirectly, managing migration within companies. We need stability [Government should] set a number and stick to it. Every year we don t quite know where we sit and it s very frustrating. Participant, Financial Services Businesses need to be able to plan in terms of their locations, staffing and training, but the continual changes combined with Government consultations, add to the uncertainty, making planning difficult to do. Uncertainty affects business, and the annual [migration limits] cap brings uncertainty. Businesses plan far in advance, and we need to in order to be successful. So, any element of uncertainty makes that planning more difficult. Participant, Global Legal Services Businesses involved in the knowledge and services industries are dependent on their talent for growth. The availability of and access to talent is critical to facilitating business growth. Almost all the businesses associated certainty about access to talent and talent mobility with planning and growth. Uncertainty of the system has a direct cost impact on the business. Entry delays of staff has a knock-on effect on the business, and the company growth agenda e.g. applications due by a certain date only - missing out on that date, requires waiting into the next month. This is a bigger challenge for larger companies with high numbers of visa/permit requirements. Participant, Professional Services Implications for businesses Migration has now become more important, moving higher up the strategic agenda. Business decisions around employee mobility and non-eu/non-eea talent has moved from being the domain of human resources and human capital management into the Boardroom due to the direct and indirect business costs associated with complying with migration regulations and securing work visas. The business costs associated with the new system come largely from the frequency of changes made to the regulations, but another major concern for businesses is the perceived lack of clarity and up-to-date information about the regulations. 21

26 Participants did not necessarily disagree with the PBS: their qualms lay with the lack of information on which they need to base their business strategy and calculations. Companies now face longer administrative processes and new levels of uncertainty because of on-going changes to migration policy. Although the majority of companies interviewed had a 100% success rate with their visa applications, they reserve optimism over the migration limits, because no quantifiable data of the impact of the migration reforms has been made available. In addition, businesses are aware that the limits were introduced at an atypically slow time for recruitment and talent needs. Therefore, the current under-subscription in the migration limits is a greater reflection of the challenging economic climate and the slow growth experienced businesses rather than the migration limits forcing businesses to scale back their need for non-eu/non-eea skilled workers. The economy appears to be regulating the labour flows of non-eu/non-eea skilled workers into the UK. 22

27 4. Recruiting and Retaining Global Talent This chapter explains the key drivers behind the search by businesses for global talent, explores recruitment and salary pressures around migration, and provides a review of the Resident Labour Market Test (RLMT) under the new migration limits. The chapter notes that some global businesses are responding to UK migration policy changes by considering moving their recruitment and location of key talent pools outside the UK in order to remain globally competitive. The global workforce Many UK and London based businesses operate in an increasingly global trading environment, working with global clients and a skilled international migrant workforce. This workforce must be prepared to move easily between locations as businesses seek to respond to service their global clients and to meet competitive opportunities in the international arena. A global workforce in the UK is therefore important to global businesses. Government has also recognised that skilled non-eu/non-eea workers may make a positive net fiscal contribution to UK GDP in addition to knowledge transfers 14. For many global businesses, which have a range of options on where to site their operations, the flexible approach to skilled migration has been a key factor in their decision to locate in the UK. There is a risk that some multinational businesses will reconsider the scale of their presence in London and the UK, if they are no longer able to bring in those skilled workers they require. Any resulting departures of those firms from the UK would lead to a decline not just in the government s tax take but also in UK employment. The global recession of , and subsequent restructuring for many global businesses resulted in reduced headcount in London and the UK. Businesses in the study reported that over the past five years they had observed a decrease in overall headcount and in the numbers in the numbers of their global workforce located in London. A report published by the World Economic Forum (WEF) in 2011 researched global talent shortages following the recession and noted that despite high global unemployment rates, global talent shortages were increasing 15. Recognising that this talent scarcity would increase competition between countries and global businesses, this concluded that: Companies and countries will compete for the best and the brightest...competition for talent will come not only from the company down the street, but also from the employer on the other side of the world. It will be a seller s market, with talented individuals having many choices. Both countries and companies will need to brand themselves as locations of choice to attract this talent. World Economic Forum 16 23

28 The WEF report proposes seven responses to address this Global Talent Risk: introducing strategic workforce planning; easing migration; fostering talent circulation; increasing employability; developing a talent trellis ; encouraging temporary and virtual mobility; and extending the talent pool (see Appendix 2) 17. The report recognises that despite the economic downturn, it will be crucial for governments to attract a diminishing global talent pool through migration friendly policies. The economic downturn and rising unemployment rates have further soured attitudes toward migrants, with countries reducing quotas, setting tougher entry requirements, refusing to renew temporary work permits and even paying workers to go home. Innovative points-based migration systems and a migration-friendly branding by states and companies are necessary to attract the right talent globally. World Economic Forum 18 Government s introduction of migration limits is not a unique or irrational response; however, it will be important for the UK to balance any migration policies with the recognised decreased global talent pool and increased global competition for this talent. Why companies need a global workforce The main reason employers recruit from outside the EU is that they cannot find the desired skill set in the UK or EU. Therefore, non-eu/non-eea skilled workers provide important skills that contribute directly to UK-based businesses. Non-EU/non-EEA employees are recruited to provide important foreign market awareness and native language speaking skills that may not be available in the UK or the EU. Global businesses working with global clients recruit a global workforce because it is necessary. We have a very open recruitment process, this is important from a legal requirement; it is about the skills and the type of people you want to recruit. We want to draw in people with an international focus. It is purely on merit though; you cannot recruit in any other way. The resident labour market testing would suggest that the skills aren t here and that is the reason why you have to bring in people, because they are a critical resource that you can t get from the local market. Participant, Global Legal Services In addition, businesses often need foreign nationals in the UK because they help the businesses develop their client and partner networks across global markets. If a multinational based in London wants to attract clients or investors from a specific market, they are more likely to be successful if they have employees who speak the language and are familiar with the culture. 24