Importing skills: at what cost to the future?

There are many benefits in using foreign IT workers, including lower wages and filling skills shortages in key areas, but there...

There are many benefits in using foreign IT workers, including lower wages and filling skills shortages in key areas, but there are drawbacks you must bear in mind.

The use of foreign IT workers by UK companies to plug skills gaps is currently a red-hot issue. Later this month, leading IT industry groups will meet government officials to discuss reforms to the work permit system.

The meeting will examine allegations that UK firms and offshore Indian companies are using loopholes in the government's fast-track visa scheme to recruit cut-rate Indian contractors while UK IT professionals are struggling to find work.

This leaves IT chiefs with some hard decisions to make. Given the shortage of skills in some areas of the IT profession in the UK, is drafting in foreign IT workers a valid and cost-effective option? Or could companies using foreign nationals find themselves in a legal minefield, facing accusations they are undermining UK workers?

The main reasons for using foreign contractors is to fill skills gaps - particularly for server and web-based technologies - and the relatively low cost of overseas workers.

Unemployment levels are standing at record levels in the IT workforce at about 46,000 for IT staff and 30,000 for self-employed contractors, so why are UK employers looking overseas?

At first glance, the rules for hiring foreign workers appear strict. The posts must be advertised comprehensively in the UK and if a foreign national is hired, they must be the best applicant, with qualifications as stated in the job description. Critically, the salary must also be the equivalent amount a UK employee would be paid for the same post.

"You have to pay the UK going rate, you cannot pay a foreign national £20,000 to do a £50,000 job," said Paul Ferguson, director of law firm Ferguson Snell, which specialises in work permits for non-UK employees.

But professions appearing on the Home Office's official shortage list allow employers to waive these obligations. Jobs in these industries do not need to be extensively advertised and work permits can be issued quickly.

However, according to the Home Office, there is no official shortage of IT skills. The latest figures from the Home Office put the number of IT workers brought in under the fast-track highly-skilled migrant programme at about 100 - clearly not a prime avenue for acquiring foreign IT skills.

What is a prime avenue is inter-company transfers, which allow companies to import foreign contractors from outsourcing and IT service companies. Although the Home Office can give no official figures, according to IT union Amicus MSF, there are nearly 50,000 foreign IT workers in the UK out of a total 900,000 in the IT industry.

With inter-company transfers, a foreign company with a UK subsidiary can bring in staff to work at that subsidiary on a fast-track basis. But this does not apply if the company is merely a recruitment agency. To qualify, said Ferguson, there must be a question of the company offering goods and services beyond just the employee, such as skills in implementing a system.

The employee must also be paid the same rate as their UK counterparts which, as Peter Skyte, national secretary of the IT Professionals Association, part of Amicus MSF, said, can be a grey area. Checking whether foreign nationals working for their employer's UK subsidiary are being paid at the UK equivalent rate can be a time-consuming process and may not be a high priority for some companies.

In such circumstances, even with the cost of accommodation and flights, using foreign nationals under transfer from outsourcing companies who accept lower wages than their UK equivalents can reduce the cost of such skills by about 20%.

So should UK IT directors take advantage of this saving? It may look tempting but there are clear risks - the most severe is being on the wrong side of the law, which can be expensive.

The Home Office warned that flouting regulations can lead to a fine of £5,000 for every illegal employee. IT organisations such as Amicus, the British Computer Society and the Institute for the Management of IT Systems are concerned the work permit scheme is being abused by inter-company transfers and are calling for vigilance by the Home Office.

The effect is to undermine the work permit process and undercut UK pay and conditions, said Skyte. He believes employers who flout work permit rules should be named and shamed.

"The fast-track inter-company work permit scheme is easy to manipulate and appears to be substantially abused to get around work permit regulations and import people paid below their UK equivalents," he said.

However, the Home Office does appear to getting more vigilant on this issue.

"Until now the system has been based on honour, and spot checks [going into companies and asking particular individuals what work they do and what they are paid] did not happen at all. They are just starting," said Ferguson.

The most far-reaching consequence of relying on foreign contractors is the impact on the UK economy. The danger is that to solve a short-term problem during a recession, foreign labour creates a vulnerable culture of dependency on non-UK skills.

What will happen, ask the critics, when foreign IT skills have driven out domestic IT skills just in time for the UK to come out of recession? The UK will then bang into another IT skills shortage, only to find that foreign skills are flocking away to even richer markets, such as Silicon Valley. In the meantime, IT managers have costs to cut and skills gaps to plug.

Summary

  • IT industry groups and unions accuse UK companies of using loopholes in the work permit scheme, sparking an illegal influx of overseas contractors
  • Inter-company transfers from outsourcing companies are one way around tight work permit rules 
  • Foreign IT workers can be 20% cheaper than their UK counterparts and plug skills gaps. The manufacturing, science and finance section of IT union Amicus estimates there are about 50,000 foreign IT workers in the UK
  • Under work permit rules, a post should be advertised comprehensively in the UK (except if it is on the Home Office-approved shortage list of professions), and any foreign national must be the best applicant for the job and receive the equivalent salary a UK employee would be paid for the same post
  • UK unemployment levels stand at a record 46,000 for IT staff and 30,000 for self-employed contractors.

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