Immigration cap takes effect today - but why were Intra Company Transfers left out?

News Analysis

Immigration cap takes effect today - but why were Intra Company Transfers left out?

Karl Flinders

There has been a mixed response to the introduction of the government immigration cap and IT professionals have questioned why the limits were not applied to a scheme used by multinationals to bring staff into the UK.

The absence of Intra Company Transfers (ICTs) from the cap, which was announced in November and took effect on 6 April, has raised questions about whether there is an IT skills shortage in the UK because 80% of non-EU workers in the UK are on ICTs and a high proportion of these are IT workers, with a large chunk from India.

ICTs are workers brought to the UK by an overseas company with a UK presence.

The government introduced a minimum salary of £40,000 for ICTs coming to the UK for longer than a year, which it believes will reduce the number. It also set a minimum salary of £24,000 for workers coming for less than a year. But critics say many IT roles command salaries above £40,000 anyway, and the one-year limit is meaningless because overseas staff are often brought to the UK on short projects or trained in the UK and sent home to do jobs remotely.

Cutting costs to raise competitiveness

With thousands of experienced and recently qualified UK IT workers out of work, why has the government implemented no cap on ICTs, but rather put in a minimum pay threshold for ICTs?

Businesses are always striving to be more efficient and effective, and offshoring work can enable both. Offshore suppliers have a low-cost, flexible workforce, so if they were restricted in providing this there would be fewer advantages and benefits through offshoring.

Professor Ilan Oshri at the Rotterdam School of Management, who is also a Warwick Business School associate fellow, says offshoring is a business reality and without it UK businesses would struggle to compete, which would harm the UK in the long run.

He says lower-cost IT services are vital to UK businesses. "Many of these companies are competing with companies with much lower cost bases." One vehicle to reduce costs is offshoring. It means fewer jobs in the UK, but it improves competitiveness, which is important in the long run."

Scaling resources to suit demand

Oshri says cost is not the only advantage. "By offshoring, UK businesses have become far more nimble because they can scale up and down through suppliers' offshore talent."

He adds that ICTs are a vital ingredient in offshore projects. "Any outsourcing deal relies on staff from the supplier working closely with the client to transfer knowledge. This execution of deals is the reason why many offshore workers are in the UK."

Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says ICTs are vital to support the transition and transformation of deals. "Transition is a critical part of the offshoring process. For that reason offshore suppliers need to move staff to the UK."

He says they also need to have staff who have worked closely in the customer environment. "These will then return offshore at some point to lead delivery teams."

Lewis points out that if UK businesses are to take significant cost out of operations, offshoring is an attractive option. "You will need to have offshore workers onshore in the UK, but there is a debate about the size of this presence."

Additional skills and flexibility

Jeff Smith, group CIO at Torus Insurance, says the business can focus on its core offering and call on offshore resources when required.

"We use offshore suppliers to make the innovation we come up with a reality. If we maintained the software development resources to deliver as fast as offshore suppliers we would be a software company with 90,000 staff. There is no point us doing what other people can do."

Cognizant recently built a new portal for Torus. It took five months and used 50 to 60 developers at any one time. There were also about six business analysts and a couple of project managers. Smith says Torus would have spent ten times more money if it had done it in-house.

Peter Brudenall, partner UK law firm Lawrence Graham says the reason that UK businesses will continue to demand services from offshore suppliers is because of the flexibility they offer as well as the cost advantage.

He says companies can cut costs if they can bring in staff on a project basis rather than having to have them as part of the permanent workforce. Indian companies, for example, have workers who sit on the bench, he adds. This bench is populated by workers who are brought in to do particular projects.

"Indian companies have a lot of bench strength, with people ready to be deployed on short-term projects. One month they could be in the US and the next month the UK." This level of flexibility and low cost is not available onshore.

Following a deal with Indian tier-two supplier Zensar Technology, Graeme Cross, head of business systems and development at Morrison Utility Services, told Computer Weekly that the company chose to offshore its software development not only to lower cost, but also because it provides flexibility. It allows the company to flex up and down the number of developers it uses at any one time. He says it also gives the company access to skills its in-house team does not have, such as cloud and mobile development expertise.

By not hindering offshoring with immigration limits the government is ensuring big business benefits, but at the same time it is reducing opportunities for citizens because there are fewer UK jobs and limiting its own revenue generation due to there being fewer taxpayers. It is a fine balance.


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