In the wake of increasing demand for restricted Certificates of Sponsorship (RCoS) in the recent months, the monthly limit of 1650 (of annual cap of 20,700 for non-EEU skilled migrants) was hit for the first time in June 2015 since the cap was first introduced in 2011. The demand for RCoS was in excess of 3000 in the month of July 2015. As a result, MAC was commissioned in June 2015 by the UK Government to consider the economic rationale for increasing the minimum salary thresholds for Tier 2 migrants and its impact on reducing net migration to the UK with focus on ensuring that Tier 2 migrants are not undercutting the resident labour force.

The MAC has been asked to report in two stages:

the initial analysis stage of the report encompasses a review of salary thresholds, published on 13th August 2015 and, the in-depth stage of the report encompasses a wider review and is due to be completed by December 2015, it will provide advice on potential changes to Tier 2 route to address concerns about the increasing number of migrants in this route and whether the route should be relied upon to fill shortage occupations. MAC’s initial analysis does not find evidence of undercutting resident labour force. It concluded that if there was any undercutting, it was isolated and not widespread. It states “[h]owever, this conclusion is tentative and we will be conducting more in-depth analysis for our December report to test this further.

MAC also stated that
“As well as preventing undercutting, an increase in the minimum salary thresholds could also be justified if it puts upward pressure on wages in sectors which are currently relying on migrants to fill skills shortages. … An increase in the salary thresholds will likely contribute to the Government’s aim of reducing skilled immigration in the UK. Higher salary thresholds should reduce employer demand for skilled migrant labour and, all things being equal, reduce inflows of skilled migrants as well as their dependents under Tier 2.”

As part of its findings MAC concluded that aside from the government’s aim of reducing skilled migration if employers are unable to afford skilled Tier 2 labour, “this could lead to bottlenecks constraining the growth of individual firms….and, restricting Tier 2 inflows could limit UK productivity growth.”

However, MAC finds that “ there is a good case for increasing the overall minimum threshold of £20,800 for Tier 2 (General) as this was calculated in 2009 when the skill requirement was NQF3 and it is now NQF6.”

Overall, MAC has urged “caution in making any significant changes to the salary thresholds until the wider review of Tier 2 has been completed in December 2015”, and advices that salary thresholds should not be considered in isolation.

What changes to Tier 2 migrant route are afoot remains to be seen after the wider review at the end of the year. However, the likely changes to prepare for are increases, albeit not significant, in the overall minimum threshold for Tier 2 migrants.