Blow to recruitment as skilled workers' cap reached for the first time

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For the first time since its introduction in 2011, the cap on Tier 2 migrants of the Points Based System has been reached in June 2015. The annual cap is 20,700, which is divided unevenly on a monthly basis.

The numbers

In June 2015 there were 1658 Certificates of Sponsorship available (1650 allocation and 8 rolled over from May). Under the cap system, if more applications are received than are available, applicants with more points will be allocated the certificates. Points are awarded for a number of factors, such as the role being on the Shortage Occupation List, but the most common source of points is the applicant's salary. Points for salary are awarded within certain bands; for example £32,000 – £45,999 (15 points), then £46,000 - £74,999 (20 points).

Until June 2015, as long as the applicant had the minimum number of points to apply under Tier 2 (32) then the certificate was granted, because the cap was never reached. However, as the number of applications exceeded the June 2015 allocation of 1658, the minimum number of points required increased to 50. This meant that applicants needed to earn at least £46,000 per annum to be granted a certificate – otherwise it was refused.

Effect on Businesses

This has caused immediate hardship and inconvenience for businesses of all sizes throughout the UK. Many applicants were due to start on graduate programmes in July or August. With starting salaries of less than £46,000, the majority of them have been refused. The businesses affected will need to decide whether to reapply in July and start the overseas graduates late or withdraw their offer. There have already been suggestions from some large employers of moving their graduate programmes overseas, meaning fewer opportunities for British graduates.

Smaller companies may find their ability to operate is directly affected by not being able to recruit non-EU employees.

Disproportionate Effect

Points being granted mostly on salary affects some vital sectors far more than others. Professions such as nursing and engineering, in which salaries are not as high as say, banking, will be less able to secure non-EU workers.

Geography will also be relevant, as businesses based in London, where salaries are higher, will be able to recruit easier than other regions.

The Immediate Future

The good news is there are a higher number of allocations for July (2049). This is because once the cap is reached, all applicants who receive less than the minimum points will be refused, even if that means the allocation for that month has not fully been used. As all applicants under £46,000 were refused in June, it has meant approximately 300 unused certificates will roll over to July.

The bad news is that, whilst it is not clear how many applicants were refused in June, it can be assumed that in addition to the growing number of applications received each month, these refused applicants will reapply, so that the cap will be reached again in July. What remains to be seen is the minimum salary band. If the number of applicants is significantly higher in July, then a minimum salary of £75,000 is foreseeable, meaning the Tier 2 system is for the highly paid only and will mostly exclude the young and entire sectors.

Ongoing Concerns

This is a problem which is unlikely to resolve itself. The Conservative government has announced that it plans to reduce the number of skilled workers coming to the UK. However the numbers needed continue to grow, fuelled by a strong economy and low unemployment. It seems therefore there is no government appetite for an increase in the cap. Even short-term this could potentially be damaging to British business with the risk of businesses simply moving overseas or being unable to operate.

There may be ways to resolve the crisis without having to increase the cap, such as taking graduates or intra-company transfers out of the numbers. However long-term this issue is not going to go away.

In the short-term the government needs to urgently address the inequality of the system and its disproportionate effect on sectors and applications outside London. Immediate suggestions are to narrow the salary bands, to weight sectors or regions, or to significantly increase the Shortage Occupation List. Practitioners and business are vaguely hopeful that June is a blip and the numbers will resolve themselves over the summer. However if the cap is now reached on a monthly basis this could quickly become a serious issue for businesses and the UK economy as a whole.

Watch this space!

This article was originally published on the CIPD website.