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Is the UK government serious about tackling allegations of IT suppliers' abuse of intra company transfers?
The UK government has signalled that it intends to reduce the number of workers from outside Europe in the UK when it asked the Migration Accounts Committee (MAC) to look at proposals intended to do this, but how serious is the government?
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Governments usually make noises about tackling immigration around election time, but with the recent Tory majority in the bag this could be more than posturing.
In June 2015 the UK government asked the (MAC) to examine proposals to reduce the number of workers coming into the UK from outside Europe, with a proposed increase in the minimum salary paid to staff brought to the UK by overseas suppliers – which could make it a less attractive option – will be fast-tracked by the government.
If approved, the government’s proposed changes will raise minimum salary thresholds, reform the skills shortage list and add a charge for ICT visas for investment in developing homegrown UK skills. Although the MAC will advise the government on most proposals by the end of the year, the government has asked it to fast-track the issue of raising salary thresholds in time for the immigration rule changes later this year.
The fact that this has been instigated so early in the government’s term suggests this might be more than just posturing. The fact that the Conservative government no longer relies on the Liberal Democrats might also be reason to expect a harder line on immigration.
High proportion of IT ICTs
Offshore IT services firms use intra company transfers (ICTs), which are tier two visas for skilled workers, to bring staff into the UK to work on IT services contracts. The low salaries of these staff – most from India – enable the service providers to offer services at a lower cost than onshore competitors and often in-house IT. But any business model that undercuts the local workforce is inevitable controversial.
According to freedom of information requests from website BackTheMac – a lobbying group that campaigns against purported abuse of ICT rules – there were 35,565 ICT employees in the UK from India – mainly IT staff – out of a total of about 60,000 ICTs in December 2014.
IT workers account for a large proportion of the ICT numbers. In December 2013, for example, at the top of the profession alone there were over 12,000 IT software professionals, nearly 6,000 programmers and software development professionals and just under 5,000 IT business analysts, architects and systems designers.
In the US, with the election build-up underway, immigration is at the centre of politics. Infosys and Tata Consultancy Services (TCS) are being investigated by the US government over their practice of bringing staff to the US on temporary visas.
Scepticism over government intent
The US Labor Department will attempt to ascertain whether the Indian companies used temporary visas to replace US staff. The Indian staff were working at electric utility Southern California Edison.
But Mark Lewis, an outsourcing lawyer at Berwin Leighton Paisner, said there was nothing like the same type of political pressure in the UK.
“Unlike the US in the long run-up to the 2016 presidential election, there is no need for the government to be posturing, even with its promise to restrict migration from outside the EU and to protect local workers,” he said. “The MAC is an independent body and its conclusions can’t be prejudged. So we need to take the government’s move as serious and considered, rather than as posturing. But obviously this reference to the MAC is – at least potentially – part of a wider policy of tightening immigration rules and controls on foreign workers entering the UK.”
One campaigner against ICT abuse is less confident about the government’s intent. “Before they think about caps or restrictions, they should ensure that migrant workers are paid a taxable salary rate excluding any business expenses, and as we know if they wanted to they could do that now. I suspect they may come up with some cobbled-together measure which still keeps in place the current situation where expenses are allowed in some form so any impact will be minimised.”
Need for overseas experts
Kerry Hallard, CEO at the National Outsourcing Association, said that, while it welcomed the government’s proposal to increase homegrown skills, the administration needed to tread carefully when changing immigration rules that could affect UK competitiveness.
"The government wants to invest in developing homegrown skills here in the UK and that's admirable, but progress will take years. In the meantime, the UK shouldn't simply shut out talent that's available around the rest of the world. To do so would damage our economy which British workers rely on, harming the very people these proposed changes are meant to help,” she said.
Read more about ICTs
- UK government seeks advice on proposals to reduce the number of workers from outside Europe in the UK, which could change the way Indian IT suppliers operate in the UK.
- Tata Consultancy Services’ use of intra company transfers (ICTs) is in the spotlight in a UK court battle.
- The number of overseas workers entering the UK on intra company transfers (ICTs) has increased since the government introduced its cap on immigration.
- Indian IT services supplier Infosys has agreed to pay $35m to settle a visa dispute with US authorities.
She added that digital skills need to be increased to support the UK in the future but, in the interim, businesses need to use overseas experts. "The UK has a very real opportunity to become the global strategic hub for outsourcing; the industry's growth would significantly boost our economy and mean further employment for UK nationals. To achieve this vision, workers with fully developed digital skillsets are vital.
"Our country has experienced significant skills shortages in a few key areas, particularly digital, for a while now. The UK government has been slow to address this, especially when compared to other nations, India and China being prime examples. Until there are enough UK nationals with those skills, we need to be willing to accept assistance from digital experts overseas."
Risk of businesses relocating
The UK banking industry offshores thousands of jobs and user of the services of offshore suppliers. According to one banking IT professional in the sector, the banks prefer offshore staff to remain offshore.
“My recent experience in the banks suggests they are trying to get towards lower cost resource models anyway – so, if you can pay a lower salary, you don't want to dilute that by locating lower cost people in high cost locations," he said.
"Modern communications allow people to work globally, so the need to put teams within yelling distance is less than it used to be. So I think some of the banks are ahead of the government on this one. They are trying to achieve the lower salary and lower cost location model working so bringing offshore resource into the UK doesn't make financial sense any more.”
He warned that the government could make the UK less attractive for big business. “ I think the government will have to be careful as the big banks and other global IT firms can pick and choose which countries they operate from and how many jobs they place in a given city or country. If the government pushes back on offshore staff working in the UK I don't think that will preserve more IT jobs for UK citizens as the big firms will just place the jobs in a more 'friendly' (that is, cheaper) country.
"So I think the government is saying something it hopes appeals to the general population but I'm not so sure they have predicted the outcome very well. I have also been impressed in recent years by the quality of IT staff from lower-cost countries, particularly Poland and India – and that should worry the government. We need to encourage young people in the UK to 'create' IT not just 'consume' it.”