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Hiring foreign talent in the age of globalisation

Globalisation is the integration of national economies into one global economy. It is driven by the free movement of trade and capital but also by migration. But how does the removal of national boundaries for economic purposes fit with the need for individual countries to restrict immigration for security and political reasons?

April 2017

Globalisation vs Immigration

Surprisingly, as has largely been the case for the last five decades, only about three per cent of the global population live outside the country of their birth. In terms of economic migration, usually those countries with the highest employment and job creation levels will see the highest migration inflows. The US and UK are two good examples, although both countries have seen recent populist movements, based partly on the argument that the benefits of globalisation have been missed by parts of the 'local population'. Politics is often volatile in economic downturns, but the rise of robotisation, automation and other rapid technological changes have led some national governments to respond by adding extra restrictions to domestic immigration policy.

This can be seen in the US with recent Executive Orders prohibiting certain nationalities from travelling to the US and also possible threats to work visa routes as part of a new "America first" policy. There are reports of a review of the H1B visa route, a US visa pathway popular with Indian outsourcing companies among many others. These extra immigration controls are being imposed or considered notwithstanding evidence on the benefits of high skilled immigration. For example, a 2016 study by the National Foundation for American Policy found that at least 50% of US "unicorns" – privately held companies deemed to be worth $1 billion or more – have at least one immigrant founder, with each founder creating around 760 US jobs.

The same tensions flowing from globalisation exist in the UK. From late 2014 to February 2017, annual net migration was consistently above 300,000, three times the government's stated target. Over the last few years, the perception that immigration levels are too high has driven the UK government to restrict various work visa routes. It has closed the highly skilled migrant and the two year post study work routes and has frequently increased the minimum skill and salary levels for all Tier 2 work visas.

Visa routes for UK technology businesses

Tech City UK's recently published Tech Nation 2017 study reports that UK digital technology revenue has almost reached £100 billion (up 10% in five years), and that the digital tech economy supports 1.64 million jobs, with the growth rate of digital jobs between 2011 and 2015 more than double that of non-digital jobs. Despite this success, the universal feedback from UK digital technology businesses is that they struggle to find the skilled talent they need locally. There are several routes available to this sector:

  • Tier 1 Entrepreneur – this visa is usually most suitable for business founders or owners. In most cases it requires the entrepreneur to have access to at least £200,000 to invest into a new or existing UK business. In some limited circumstances, the minimum investment level is £50,000, usually where the source of that funding is from an FCA-regulated VC firm or a UK entrepreneurial seed funding competition endorsed by the Department of International Trade (DIT). As well as investing the funds, the entrepreneur must register as a UK director or as self-employed within 6 months and create at least two full-time equivalent jobs for settled workers (usually meaning European citizens or non-EEA citizens with UK permanent residency) lasting at least 12 months each. There are also additional English language and maintenance funds requirements.
  • Tier 1 Exceptional Talent – in the digital technology sector, this visa route is also known as the "Tech Nation" visa scheme. It is designed for non-EEA citizens who have been endorsed as an internationally recognised leader or that can demonstrate the potential to become a leader in the digital technology field. It is also available for internationally recognised skilled professionals within the digital technology sector. Like the Tier 1 Entrepreneur visa, it is a personal visa that is not tied to a sponsoring business and that leads to permanent residency after a minimum of 5 years' UK stay. The applicant needs prior endorsement from Tech City UK as the official designated body for the technology sector. Tech City UK can endorse up to 200 candidates each year, although due to unused allocations from other sectors, the limit for the current year running to 6 April 2017 is 250 visas. Take-up has increased significantly since the rules were relaxed in November 2015. Since then, 294 out of 422 applicants have received endorsement, but in the 12 month assessment period starting 6 April 2016, it is unlikely that the cap of 250 visas will be reached (around 190 visas granted to mid-March 2017).
  • Tier 2 – this is the most common work visa route for digital technology businesses including startups and scale-ups. A Tier 2 visa is a work visa tied to the sponsoring business. Before Tier 2 visas can be arranged, the sponsoring business must have a sponsor licence from the Home Office, which requires it to show it is a reputable organisation with robust HR and compliance processes. There are two main categories of Tier 2 visas – Tier 2 Intra Company Transfers (ICT) for assignments from linked overseas offices or Tier 2 General for all other hires. From April 2017, all new Tier 2 ICT applicants must receive a minimum salary of £41,500 per year (or the minimum for the role if higher). From that date, Tier 2 ICT employees will be able to stay nine years – rather than usual capped five year period – if salary is at least £120,000 (a reduction of around £35k from the previous threshold) and there will also be an exemption from the usual 12 months' overseas employment requirement if the proposed UK salary is at least £73,900 per year.
  • In most cases, before sponsoring a Tier 2 General visa the business must advertise the role to the resident workforce and give priority to any suitably qualified settled applicants (including British or EU citizens). There are exemptions from this for employees on high-earner salaries - currently £159,600 per year from April 2017 - or for graduate switches where the candidate is currently on a Tier 4 visa. There is also an exemption from advertising if the proposed role is on the Shortage Occupation List (SOL). Since the end of 2015, the SOL includes several occupations from the digital technology sector. Experienced IT product managers, data scientists, senior developers and cyber security specialists are on the SOL but the concessions only apply to a "qualifying company" (for example DIT endorsement is required if the UK business has fewer than 20 employees) and where other conditions are met.
  • Whether or not advertising is required, the proposed Tier 2 General role must be graduate level and from April 2017, the minimum annual salary for experienced workers will rise to £30,000 (or the minimum for the role, if higher).

Of course, one unknown factor that may impact on the future ability of UK businesses to hire foreign talent is Brexit, which was fuelled in part by some of these globalisation concerns. We need to wait for the outcome of the UK's negotiation with the EU27 to determine what immigration restrictions will be imposed on EU workers. But the UK's recent post-Brexit preliminary trade deal discussions - with countries like India and Australia suggesting that they would like a relaxation of immigration restrictions as part of any new trading arrangements – demonstrate that there is likely to be continued tension between the drive for globalisation and national immigration policy for some time to come.

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Hiring foreign talent in the age of globalisation
Charlie Pring

Charlie looks at the tensions between recruitment needs and political concerns around immigration.

"There is likely to be continued tension between the drive for globalisation and national immigration policy for some time to come."