HR & Management

Yes. Raising salary thresholds for non-EEA workers can affect your business

6 min read

07 October 2015

Imagine you have five employees. All of them are doing exactly the same job and yet you are legally required to pay a higher salary to one of them. What sounds odd may soon become reality.

As part of the government’s ongoing battle to reduce net migration it has requested that the Migration Advisory Committee (MAC) carry out two linked consultations on skilled migration under the Tier 2 route from outside the EU. 

The first preliminary consultation has been completed, and the MAC was asked to review the economic rationale and the impact on net migration of setting new minimum Tier 2 salary thresholds for skilled workers from outside the EU.

The second consultation is open until 25 September 2015 and will review in more detail the findings relating to the first consultation as well as taking a deeper look into other ways in which Tier 2 Immigration Rules can be changed to further limit immigration in this category. Companies are encouraged to provide comment directly to the MAC prior to this date.

Presently the salary requirement for a Tier 2 General visa is £20,800 or the minimum salary for the specific Standard Occupational Classification (SOC) of the role, whichever is highest. For those coming on a Tier 2 Intra-Company Transfer basis the minimum salary requirement is higher depending on length of stay. The MAC has been asked to look separately at the impacts of raising the minimum Tier 2 salary requirements and the minimum salary requirements as set for each SOC code.

The first MAC consultation report has been released and provides scenarios in which the current minimum Tier 2 General salary of £20,800 could be raised to meet the average 10th or 50th percentile pay of all graduate-level or above occupations. Its findings suggest that changing minimum salary thresholds to the 10th percentile (£25,000) would affect 13.5 percent of all Tier 2 General applications, or 56.5 percent if raised to the 50th percentile (£40,000).

With regard to the salary thresholds set under each specific Standard Occupational Classification, the MAC was asked to look at:

  • Increasing the Tier 2 minimum salaries per occupation for experienced workers from the 25th percentile to the 50th or 75th percentiles, or other appropriate measure 
  • Increasing the Tier 2 minimum salaries per occupation for graduate/new entrant workers from the 10th percentile to the 25th or 50th percentiles, or other appropriate measure

The data below is a good guide of what this means in real terms:

Standard Occupational Classification (SOC)

Marketing and sales directors

10th percentile
(Current minimum graduate salary)
£33,300

25th percentile
(Current minimum experienced worker salary & proposed new minimum graduate salary)
£47,900

50th percentile
(Proposed minimum experienced worker salary)*
£72,000

75th percentile
(Proposed minimum experienced worker salary)*
£100,000

Management consultants and business analysts 

10th percentile

£23,000

25th percentile

£30,000

50th percentile

£39,300

75th percentile

£52,600

Business and financial project management professionals 

10th percentile

£24,100

25th percentile

£33,300

50th percentile

£43,500

75th percentile

£60,400

IT business analysts, architects and systems designers

10th percentile

£25,800

25th percentile

£33,000

50th percentile

£41,100

75th percentile

£54,600

* Rounded to nearest £100 – ONS Table 14.7a Annual pay – Gross (2013)

Read more about immigration issues:

The MAC did not make any recommendations in its first consultation report; however, the overall conclusion of the report, namely that increasing the salary thresholds would reduce migration, is likely to serve its purpose for David Cameron’s clampdown on immigration. Yet, what does this plan mean for businesses that rely on skilled workers from outside the EU?

If salaries go up for skilled workers this means some businesses will need to analyse whether or not they will be able to meet the new thresholds. It may create much larger issues on the employment front and create disparity between what you must pay a skilled non-EEA worker and what you may pay a British or EEA worker. For instance, many businesses have strong graduate recruitment programmes in place. If one of the strongest graduate candidates is a non-EEA national who requires sponsorship, you may find that you need to pay them more compared to your other UK and EEA graduate recruits. This would potentially open the flood gates for employment discrimination claims.

The MAC’s initial analysis has found little evidence to suggest there is widespread undercutting of UK resident workers by Tier 2 migrants occurring under the current salary thresholds. There are several recent reports, one of which is a report by Credit Suisse, which confirm that if the government’s priority is economic growth and low unemployment, then the focus on continuing to raise the various threshold levels to restrict skilled migration into the UK is simply wrong.

So the big question to ask is will the potential raising of salary thresholds make the UK more competitive or will it drive business away because it is too costly and too complex? Only time will tell.

Katrina Cooper is an immigration lawyer and counsel at law firm Faegre Baker Daniels.

Hans-Christian Mehrens, a summer intern at Faegre Baker Daniels, supported the research and writing of this article.