Foreign workers in the UK could be in for a pay rise

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A campaigner against abuses of the Intra Company Transfer scheme has provided me with some comment about some of the changes the government recently introduced to prevent abuse.

He outlines that the government has acknowledged that some ICTs are being under paid.

Here it is:

"The UK Border Agency announced changes to the tier 1 and tier 2 visa rules last Thursday. The new rules will come into force in April, and include changes which will affect both the offshoring of IT work, and the use of intra company transfer visas (ICTs) to bring in IT workers from outside Europe to client sites (onshoring).

One of the more unusual clarifications in the new rules is that companies should actually pay the stated salary on the ICT's certificate of sponsorship. There have been many accusations made in the past that Indian IT workers brought in on ICT visas are underpaid by some companies and used to undercut UK IT workers. The UKBA appears to have uncovered such abuse.

The UKBA statement suggests companies have been using tax exemptions to multiply up net salaries to an artificial figure. The following is a rough example of how this might work: an ICT is paid net salary and allowances of £25k; this would be a gross salary of £31.5k if full income tax and employee national insurance were paid, and this is the artificially high figure put on the Certificate of Sponsorship; the ICT's employer has a dispensation from HMRC to exempt part of the ICTs salary from tax, and only pays £3k income tax and employee national insurance. Therefore the ICT's actual gross salary is £28k.

The UKBA are secretive about their dealings with sponsors, but, faced with the threat of losing their sponsorship licence, some companies may be forced to pay their ICTs more very soon.

There are only a few weeks left of this tax year, so some ICTs may be receiving a very welcome Easter bonus, and a big pay rise."

3 Comments

Interesting, if not exactly surprising.

It would appear that the official salary level for the ICTs is broadly comparable with the salary for a junior UK-based developer outside London and the Southeast (i.e. in the £25-30K range). Given the lack of experience/skills of some of the ICTs I've worked with, whose consultancy employers were clearly using UK government projects to train their staff more or less straight out of college, it would surely be better for the UK IT industry to hire a UK-based graduate/junior developer and train them up instead? At least they would pay full UK taxes and would hopefully continue to do so in future.

Mind you, with the consultancies charging the UK taxpayer up to £700 per day for an inexperienced/poorly skilled ICT import, you can see why they want to keep the real salary levels as opaque as possible...

Milton Friedman was quoted as saying the following on the US employer sponsored visa program:
"There is no doubt that the program is a benefit to their employers, enabling them to get workers at a lower wage, and to that extent, it is a subsidy"

The UK has taken it further by actually allowing the tax system to directly subsidise employers using workers on intra company transfer visas.

Intellect UK defended this in a submission to parliament:
http://www.publications.parliament.uk/pa/cm200809/cmselect/cmhaff/217/217we49.htm

"If companies add allowances to salary then individuals would lose favourable tax treatment, to compensate the individual assignee for this would cost between £5-£9K per person. Allowances are paid to these people rather than salary as they are in the UK for a transitory purpose and it is a legitimate tax efficient way of delivering their package under the HMRC temporary workplace guidelines. Tax relief under the temporary workplace guidelines is there to encourage the movement of skilled labour into the UK and make it a competitive country for commerce."

Infosys and Wipro have come clean and say that have now stopped making up the salaries that they put on ICT visas:
http://www.indianexpress.com/news/uk-immigration-norms-to-shoot-up-cost-of-ites-firms/705190

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This page contains a single entry by Karl Flinders published on March 24, 2010 9:37 AM.

Internal email reveals difficult times for Legal & General IT staff was the previous entry in this blog.

Another IT supplier strike threatens customer continuity is the next entry in this blog.

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