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Tuesday, 23 November 2010

If the cap fits wear it

The number of "skilled" migrants from outside the EU will be capped at 43,000, 13% lower than 2009's figure and the highest figure recommended by the independent migration advisory committee last week, but staff transferred by their companies to the UK from another country will be exempt from the cap if their salary is over £40,000.  The Labour Party first argued that this would be ineffective and then claimed that it would make British industry uncompetitive, so what is really going on here?

First of all, most migrant workers who come to the UK come from within the EU, so these rules don't apply.  Then we have all of the high paid expats in the City.  The rules hardly apply to most of them because they are transferred in by their companies and earn more than £40,000 a year (most earn more than that a month when housing and other costs are taken into account).  So that leaves us with requirements for NHS staff, of which there are still a lot, not just from the subcontinent, but quite a few from the Middle East, particularly where we have bombed their countries flat, and then there is IT.

The £40,000 cap is interesting for IT staff, because there are many Indian IT workers who are transferred into the country by outsourcing companies such as Wipro to work here for up to 52 weeks a year.  These workers are relatively cheap, not because they are prepared to work for less money than other programmers, but because of extraordinary concessions by HMRC as encouraged uinder the last government.  First of all anybody coming to work in the UK for less than 52 weeks is exempt from National Insurance, although this is a completely different basis than taxation, which aoppluies to all workers based here even temporarily, and secondly there are the extraordiary concessions given by HMRC who are prepared to treat a large part of the worker's remuneration as non taxable remuneration of living expenses.

Now we all know about per diems and other expenses that the civil service gives to its employees when they work aeay from home and many firms do the same, but the outsourcing companies are taking the mickey.  generally the transferred in IT worker is paid a salary barely above the minimum wage, but with upto £2,000 a month in living expenses, which are paid free of tax.  If this wasn't enough, until now, the UK Borders Agency was willing to treat these expenses as part of the salary paid to the employee when considering whether to admit the employee under the previous, lower salary floor.

It will be interesting to see whether this continues under the new regime, or whether the government has wised up.  Of course one of the biggest direct losers would be government departments who had driven most of this outsourcing work having been told by the consulting firms that it could be farmed out at lower cost to offshore companies.  It is a shame that they didn't figure out that the only reaosn it would be ceaper was because another arm of government would be collecting less tax.

Further update:

The devil is in the detail. It turns out that firms are also being allowed to bring one of their staff in to work for the UK for a year if the job is an ICT one and the salary is over £24,000, which sounds like they still get to put the NI + expenses scam.

I have just come across this example of skilled non-EU labour. Sadly I don't think he would qualify for the minimum salary exemption:

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