Indian IT suppliers hurt by need to pay UK based intra company transfers the going rate

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Back in March I blogged about some changes being made to the law regarding Intra Company Transfers (ICTs). These changes included an acknowledgement that certain offshore suppliers were not paying UK based staff as much as they should . A clampdown was also announced.

According to an article on Indian website, Indianexpress.com, it seems the changes, introduced in April, are having an impact on some Indian suppliers.

Infosys, Wipro and Mastek are mentioned in the article as companies that have taken a hit on staff costs after adjusting their practices to fall in line with the clampdown.

One offshore worker based in the UK told me: "When I came in September 2006, on my work permit my gross salary was written as £31,695. My gross salary paid till March 2008 is less than what was written on work permit."

The biggest complaint in the UK about the ICT scheme is that it is unfair because it is impossible for UK workers to compete with offshore staff coming to the UK because they are paid less.

In March the UK Boarder Agency seemed to acknowledge this practice. A statement then suggested companies have been using tax exemptions to multiply up net salaries to an artificial figure.

Here is an example given to me by an expert. "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."

Add this up thousands of times and it is a lot of cash.

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Unfortunately the going rate set by the UKBA is still 20-40% less than the average that a UK worker doing the same job would be paid.

We are still a long way off Indian IT workers getting a fair salary in the UK and UK workers no longer being undercut.

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This page contains a single entry by Karl Flinders published on November 1, 2010 3:31 PM.

Will using pictures to specify software requirements open up more offshore destinations? was the previous entry in this blog.

Serco has its wrists slapped by government for trying to pass the buck is the next entry in this blog.

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