What work immigration changes from Britain’s new Labour government?

11 July 2024

James Cleverly’s legacy as Home Secretary has been costly for UK employers who rely on sponsoring skilled workers from abroad to supplement their workforce. Minimum going rates and salary thresholds for Skilled Worker visas were hiked up in April and a 20% discount for shortage occupation going rates removed. These changes came on top of hikes in visa fees and the Immigration Health Surcharge (up from £624 per year to £1,035, with the discounted rate for students, children and youth mobility visa holders increasing from £470 to £776 per year.)

The Conservatives had promised to go further, with annual, ever-tightening caps on immigration. Yet the Labour Party manifesto promised to reduce immigration too. So, will a Labour government make any difference to firms that now have to pay salaries above the median level to hire skilled workers from abroad?

Reductive arguments

It’s worth noting that it shouldn’t be too difficult to maintain a reduction in immigration which was already reducing from a post-pandemic peak which was largely fuelled by international students returning to in-person studies, Ukraine and Hong Kong humanitarian schemes and vacancies in the health and care sectors. Measures to reduce legal migration introduced by the outgoing government appear to have further reduced net migration by discouraging international students and insisting on salaries above the national average to sponsor a partner or employee. The Labour government doesn’t need to make any further changes for numbers to continue falling. Minor changes are unlikely to raise immigration to the unusually high numbers of 2022 or 2023.

Labour’s election manifesto section on “a fair and properly managed immigration system” appeared in the “kickstart economic growth” chapter, hopefully an acknowledgement that growth relies on HR departments being able to access non-resident hires.

With a determination not to rock the boat too much, there were not many concrete policies in the manifesto for employers to rely on. More may emerge in the King’s Speech outlining a programme of legislation on 17 July. Yet immediate immigration policies appear to focus on the costly asylum backlog, involving revoking the Rwanda scheme and the Illegal Migration Act that rendered many asylum claims inadmissible. Major changes to work and family migration are likely to involve reviews of the post-Brexit immigration system first, as promised in the Labour manifesto.

A review of work migration

The Labour manifesto contained an interesting commitment to “reform the points-based immigration system so that it is fair and properly managed, with appropriate restrictions on visas, and by linking immigration and skills policy” which suggests there will be a major review in the next few months.

In press briefings before the election was called, Labour figures had intimated that they would ask the Migration Advisory Committee (MAC) to reexamine James Cleverly’s arbitrary salary hikes for sponsoring partners/spouses and Skilled Workers. Hopefully this means a return to evidence-based immigration policy based on consultations carried out by the MAC, rather than knee-jerk politics.

Despite a promise to reduce immigration, the manifesto contains a commitment to empower the MAC to make informed decisions. Hopefully, submissions from sectors and stakeholders will be considered by the Committee if they have the opportunity for a full consultation, as was usually the case before the knee-jerk rapid reviews of the last Conservative government.

Skills shortages

The Shortage Occupation List had become a target for both the Conservative government and the Labour opposition as it allowed employers to pay sponsored staff filling skills shortages on the list 20% under the going rate. However, the MAC was very critical this year of the Conservative decision to remove the Shortage Occupation List and its discount on the going rate at the same time as increasing the Skilled Worker salary going rate minimums to the median wage of an occupation.

There are very few occupations left on the Immigration Salary List which replaced the Shortage Occupation List. Without a 20% discount on the new far higher going rates, there is no point in most occupations appearing on the new list.

In opposition, Labour framed a discount on the going rate as undercutting local wages, so now in government, the party is unlikely to bring such a discount back for occupations with chronic skills shortages. “The days of a sector languishing endlessly on immigration shortage lists with no action to train up workers will come to an end,” the Labour Party’s election manifesto insisted. “Labour will bring joined-up thinking, ensuring that migration to address skills shortages triggers a plan to upskill workers and improve working conditions in the UK.”

While a return to the Shortage Occupation List is looking unlikely (at least in its old form), it will be interesting what other solutions the MAC may recommend for sectors left in the lurch by its demise.

Devolution

Employers in different parts of the UK face different demographic pressures and lower wages outside London. This means that asking employers across the UK to pay salaries above the national average to sponsor staff from abroad is causing greater hardships for those not paying London wages while facing dwindling workforces.

Without generous public funds to spare, the Labour government is making regional devolution a priority to deliver growth across the UK.

A totally separate immigration system for Scotland, Wales or Northern Ireland is unlikely. The MAC has pushed back on calls for regional differentiation in recent years, and the UK hasn’t had different going rates to sponsor workers in different areas for over a decade now.

However, the new Immigration Salary List currently allows occupations to have shortage discounts in one or all of the different nations and the MAC is likely to be asked to examine local solutions for skills shortages holding back different parts of the UK and how immigration policy should pay a part.

Bad bosses

 “Bad bosses” has been a recent refrain for the Labour leader and colleagues who during the election campaign associated breaching employment regulations with relying on non-resident labour. Employers who “abuse the visa system” or breach employment law would be barred from hiring workers from abroad, the Labour manifesto warned.

This is unlikely to entail any massive changes as sponsor compliance obligations already include requirements to ensure the immigration system is not abused, comply with wider UK law (including employment and equality law) and not behave in a manner not conducive to the public good, with employers who breach these facing compliance action.

So perhaps this signals more enforcement. The Conservative government already increased civil penalties, dedicated more immigration enforcement staff to more compliance visits on employers with sponsor licences.  Between January and March 2024, the Home Office suspended 309 Skilled Worker sponsor licences and revoked 210: a much higher level than at any point since Brexit.

To keep their licences employers should ensure they follow the Home Office’s guidance on licence compliance and management and that they keep up to date with changes. Employers should have robust systems to remind them to report any changes to the Home Office. If in doubt, employers should seek legal advice and a regular audit of compliance systems never hurt.

When are we likely to see changes and how should businesses prepare?

Traditionally we are used to seeing most immigration measures implemented in March / April or sometimes October. The scale of the promised review would suggest it is unlikely major business immigration reforms would be implemented before next Spring.

As mentioned above, the MAC has usually called for evidence from stakeholders. I would advise any sectors feeling the pinch of skills shortages and wanting cheaper and more flexible immigration routes for hires to make submissions if possible.

In the meantime, firms smarting from recent salary increases can still use a few categories such as Scale-up visas and New Entrant and PhD discounts to sponsor non-resident talent on comparatively lower salaries, as well as employing talent on visas that do not rely on sponsorship by an employer and are thus free of salary thresholds, such as Global Talent visas, Youth Mobility Schemes and Graduate visas.