Proposed changes to UK immigration laws could make it harder and more expensive for technology-driven companies to hire people outside the EU for their UK offices, Techworld can reveal.
Technology-driven companies across the UK are forced to bring in talented programmers and software engineers from outside the EU because there is a shortage of skilled individuals at a national and continental level.
Although the skills shortage has long been recognised, government and industry initiatives have made little impact on the problem.
Yet Prime Minister David Cameron is still exploring the idea of further reducing the number of immigrants that can enter the UK on the skilled work visa - something that many technology companies depend on.
The government has asked the Migration Advisory Committee (MAC) to conduct a review into the "Tier 2" skilled work visa, which enables up to 20,700 skilled professionals to enter the UK every year from outside the EU.
The MAC is proposing that the minimum salary thresholds for the Tier 2 visa are raised, meaning UK-based technology-driven firms would have to pay more to hire talent from tech hubs like Silicon Valley and Bangalore in their UK offices.
Technology professionals working in the UK on the Tier 2 visa must currently be paid upwards of £30,000 but the MAC is suggesting the minimum annual salary requirement for the Tier 2 visa is raised by anywhere between £10,000 and £25,000.
The likes of Google, Facebook and Amazon are renowned for paying their employees above average salaries in the UK (often in excess of £50,000) so the impact on them may not be huge. One area where these industry giants could be hit, however, is when they want to bring in high flying relatively young employees to the UK – either to fill skills gaps or enhance their experience.
A survey from salary benchmarking website Emolument.com in March found that Google pays juniors (those with 0-5 years experience) £40,000 a year on average, while Amazon pays £35,000.
Other UK based technology companies don't typically pay annual salaries of this magnitude. As a result, they'll either have to find more money to employ the people they want or let non-EU workers go.
The reforms to the Tier 2 visa - brought to Techworld’s attention by immigration law firm Fragomen, which works with 80 percent of the world’s largest technology companies and a number of Tech City firms - are to be submitted to Home Secretary Theresa May on 21 July, after she commissioned the public body to conduct a review of the Tier 2 route on 10 June.
Ian Robinson, senior manager at Fragomen and a former employee at the Home Office, said: “At the moment, a software programmer needs to be paid at least around £30,000. It could go up to £50,000. If you’re one of the large Indian or US companies who bring over large numbers of people a year you’re looking at an extra £20,000 for every assignee – the cost could be astronomical and really hit their UK operations.” Large Indian IT companies with a significant presence in the UK include Tata Consultancy Services and Wipro.
It's understood that technology firms in the UK obtain a considerable number of the 20,700 skilled work visas on offer every year. Robinson said that the impact of the proposed reforms on the sector could be “massive”.
Josephine Goube, co-managing director at Migreat, a company that specialises in providing visa information, said the increase in the minimum salary requirements will hit startups hardest.
"By raising the annual minimum salary threshold of non-EU migrant workers to at least £30,000, the UK is putting a lot of pressure on small businesses and startups that do not pay such high salaries at entry level - even though they might be made of highly-skilled workers and talents," she said.
In 2014 the Office for National Statistics revealed, IT engineers, those responsible for building the apps and products themselves, earn £25,000 a year on average in the UK. IT specialist managers earn the most on average at £49,194, while IT project and programme managers are just behind with an average salary of £48,144.
In the worst case scenario, the changes could force technology giants to start turning their backs on the UK and sending staff to work on projects in the other offices they have around the world, according to Robinson. Google, for example, could start thinking about relocating its DeepMind artificial intelligence team from London to its international headquarters in Mountain View, California, if it was no longer able to send US-based AI experts to the UK.
“It might also mean that the big companies just recruit more British people for these jobs but it depends if that’s economical and if the skills are out there,” said Robinson, whose firm helps technology companies to get the visas they need.
A 2013 O2 report, The Future Digital Skills Needs of the UK Economy, estimated that 745,000 additional workers with digital skills would be needed to meet rising demand from employers between 2013 and 2017. Half way through that time frame there has been no let-up in the skills shortage.
While the proposed reforms could be painful across the UK tech sector, there are signs that the government is already making it harder for tech firms to bring in the talent they need.
Skilled worker visa cap hit for first time ever
Last month the BBC revealed that the Home Office had reached its Tier 2 visa cap for the month of June.
There were 1,650 visas available for June but the Home Office stopped granting visas from June 25 onwards. It refused to reveal how many visa applications it received.
Fragomen is warning its clients (mostly technology companies) that the Tier 2 cap is likely to be reached again. “There is no indication that July and subsequent months will be any different,” the law firm writes in a client briefing document seen by Techworld.
It's understood at least one of the largest technology companies in the world was unable to bring in the people it wanted to as a result of last month's cap. The firm in question declined to comment on the matter, as did several others.
However, Matt Warren, cofounder of venture capital-backed ecommerce startup Veego.com, acknowledged that he was unable to hire the talent he wanted to as a result of the cap.
“One of our engineers who lives in Ukraine, is a highly experienced ruby on rails developers and has worked remotely for us for the last 18 months,” said Warren. “We want him to be physically with the rest of the team, as we have moved to SCRUM development and it’s proving to be too hard to do this remotely. We applied for a Tier 2 visa in December. It's been rejected twice since then because of extremely minor issues such as no start date on the screenshot of the advertised job in UK. The third time we passed all their hoops but then got rejected because of the Tier 2 limit being reached in June.”
Warren added: “The application process is extremely time consuming and painful, so I have wasted a huge amount of time trying to work this process. Our development speed has suffered now as a result.”
Veego.com is based out of Swansea in Wales where there is a lack of talented developers, according to Warren. “I would love to hire a local developer to do this role and we have heavily advertised, but they do not exist. By bringing these highly experienced guys in, we are actually helping the economy, as they help train the next local generation.”
The Tier 2 visa cap has been in place for four years but last month was the first time it has been hit. Doctors, nurses and teachers were also locked out of the country, as were accountants, solicitors and management consultants.
No one was expecting the cap to be hit, according to Robinson. "We knew that we were getting closer the monthly total each month but no one could have predicted how suddenly it would be so hugely oversubscribed."
Previously supply has exceeded demand for the Tier 2 visa. Around 6,500 went unused in 2013/14 and around 200 went unused in 2014/15.
A separate visa, known as the Tier 1 Exceptional Talent visa, exists for highly skilled technology professionals looking to enter the UK. There are just 200 of these available every year and they're issued by government quango Tech City UK.
However, earlier this year it emerged that Tech City UK gave out just seven of its 200 visas, raising questions about the effectiveness of the visa route.
Other visas exist for technology professionals looking to enter the UK but these have been criticised for attracting the wrong kinds of people. For example, the entrepreneur visa is often wrongly-given to investors.