Sunday, 6 December 2009

Unfair Competition for UK and EU IT Workers?

IT workers have been subject to usually high competition from lower paid professional Non EU Workers (mainly Indian) within their industry. I expect this is not the only industry that is affected the same issue. This is of course an issue for all the EU nations but the UK seems to be effected by this problem to a higher extent.


This extract of a letter to Andrew Mackay Bracknell MP from A Bracknell blog reader explains the problem quite well;

Despite the worsening economic climate and the wave of redundancies affecting IT departments across all industry sectors, 35,430 UK work permits were granted to non-EU technology workers during 2008. Relocation of staff to the UK by companies with offices based in different countries represented around 80 per cent of work permit applications issued last year.

According to APSCo (Association of Professional Staffing Companies) the recession and a more restructive immigration system introduced in 2008 has “barely dented the influx of non-EU foreign IT workers coming to the UK”.

The intra company transfer system is being massively abused to bring in Indian IT workers at lower than local market rates.

Some company's "UK" staff must consist almost entirely of company transfers e.g. providing services to other companies and directly replacing local UK staff. Offshoring sucked the blood from the UK economy from the outside, this is doing it from the inside.

Indian work permits are harder to get than UK ones, shorter and need to applied for again if you exit the country. Other countries like Germany put a minimum 40k on the salary to avoid undercutting local rates and ensure the skill is in demand and unavailable (rather than a cheap replacement).

Would you agree with my view that the British Government should now seek to protect the British workforce as other countries protect their nationals. Inward investment is commendable, but not at the expense of hardworking British families and those who choose to live here and engage in the British way of life.

If the UK government does not want to have many more families consigned to living on the dole something needs to be done. Our heavy industry has been destroyed, leaving Britain a service sector country. Now our services are being "out sourced" and "off-shored". The cost of living means we cannot compete on price with countries where the cost of living is lower.

Shouldn't the British government have a policy that if a non-UK business wishes to acquire a UK business, then they may do so only if they guarantee that a large percentage of the current British workforce will be maintained? There should also be a limit on the ability of UK businesses to outsource. Protectionist perhaps (only within Europe though), but how else can the British workforce compete, survive this economic crisis and retain a skilled workforce in a vital sector?


Why am I writing to you about this? I'm sure the UK is not the only nation in Europe to suffer from such an influx. So I would like to understand what is being done to address this issue and protect jobs for nationals primarily in the UK, but also across Europe. What is the Conservative party doing to address these issues at home and in Europe? Are you putting pressure on the current government to do something about it?



Of course I can not agree with protectionism as I believe in free trade but it appear to me that a number of things can be done, like enforcing the law with regards to work permits and ensuring that IT workers are paid at least the market rate so that UK/EU IT workers are not undercut and therefore a level playing field within the UK is ensured.

In another letter to Steve Webb (Lib Dem MP) by a different Bracknell Blog reader the more complex issues are examined.


As a UK IT worker, I am concerned that weaknesses in the current UKBA Point Based System (PBS) are leading to the undercutting and displacement of settled workers by non-EEA(European Economic Area) IT workers via employer sponsored tier 2 visas. The tier 2 Intra Company Transfer visa is the most used route for this purpose, and in 2008 alone there were over 35 thousand tier 2 ICT visas issued to non-EEA IT workers (mainly Indian nationals).

This route is not for shortage skills and it does not require any resident labour market test. The majority of these non-EEA IT workers are brought in by IT Service companies and sent to work at client sites i.e. they are not used internally by the sponsoring company.

I would like to know the Liberal Democrat position on the following:

a) the current main protection for UK settled workers is the requirement for employers to pay the "going rate". The UKBA set this rate for different occupations and it is typically set at the 25% percentile salary. This is too far too low to prevent undercutting and displacement, and is not aligned with allowing employers to bring in the "best and brightest" from the global pool of talent. I believe the "going rate" should be set at the median salary as a minimum, but the 75th percentile salary would better reflect the migrant worker's status as "best and brightest".

Should the "going rate" be set much higher?

b) the new PBS has been operating for almost a year and from 5th October employers have been able to request next year's allocation of certificates of sponsorship (COS) i.e. they must estimate how many tier 2 visas they will sponsor in the next year and request that allocation of COS's from the UKBA. The biggest users of tier 2 visas (other than the NHS) are IT Service companies.

Many of these companies have made UK employees redundant in the last year.
Should companies that have made UK employees redundant in the last year be allowed to bring in large numbers of non-EEA workers?

c) I have a great respect for the UKBA and its difficult and growing role. The recent Migration Advisory Committee report on "Tier 2 and Dependents" mentioned the issue in resourcing the policing of the tier 2 system. It was intended to be self-policed by employers, who are also one of the main economic beneficiaries of the system. The UKBA need more resources to uncover and tackle abuses. In the US, there is a $500 "Fraud Prevention and Detection Fee" added to employer sponsored visa application charges.

Should a "Fraud Prevention and Detection Fee" be added to UK tier 2 employer sponsored visas?

d) The inability to find specialist skills in the UK is often quoted by companies as a reason for sponsoring non-EEA workers. These same companies either do very little training of UK staff or have been cutting training. In the US there is a $1500 "Scholarship & Training Fee" added to employer sponsored visa application charges. This is invested in training US citizens in shortage skills.

Should a "Scholarship & Training Fee" be added to UK tier 2 employee sponsored visas?
There are a number of misconceptions propagated by employers benefiting from sponsored visas for non-EEA IT workers (primarily tier 2 ICT visas for workers from India), and I hope some of the following will help debunk these:

a) Employers can't find people with the right skills in the UK...

No. The sector skills council has stated that there are no skills shortages in IT. Independent research by academics such as the highly respected Professor John Salt of UCL has shown that the vast majority tier 2 ICT IT workers are junior staff with standard IT skills. In the US, they have 4 "skill" levels for H-1B "employer sponsored visas for skilled workers" and 80% are at the lowest level (i.e. only have a couple of years experience) and the biggest users of H-1B visas are the same IT Service companies. The real issue for these companies is that they cannot find people with the right skills that are willing to work at below average salaries.

b) At least the workers are paying taxes here...

No. the large IT Service companies get dispensation from HMRC so they do not pay income tax or national insurance in the UK as long as they stay for less than 2 years. The employer also avoids employer national insurance contributions, the median stay is 18 months (according to NASSCOM).

The MAC report on "Tier 2 and dependents" said: "We were also told that, currently, an employer can issue a three-year certificate of sponsorship while the employee simultaneously tells HMRC that he or she is coming to work in the UK for under two years.

We understand that it is common for immigrants in receipt of allowances to claim that they intend to stay in the UK for one year and 364 days."

This probably costs the UK in the order of £1/2 billion in taxes every year, and the migrant workers gets free primary healthcare and education for their children.

c) Allowing multinational companies to transfer workers from offices around the world makes the UK an attractive location for businesses to invest, and creates wealth and jobs in the UK.

Yes, it does. Most companies transfer a small number of senior managers and unique specialists between offices, and this must be allowed under the GATS agreement. However the intra company transfer route was never intended as the main source of employees, nor as a route for supplying services to clients "onshore". Some large IT Service companies have 4 times as many tier 2 ICT workers in the UK as permanent UK employees. Unlike "well behaved" users of the system, many of the large (primarily Indian) IT Services companies do not invest much or create many jobs in the UK. In fact research by many sources (including Professor John Salt) has pointed out that many of the "tier 2 ICT" IT workers from India are brought across to learn the job in the UK from the UK workers and then the job is outsourced to India and the UK workers are made redundant.

d) if we reduced the number of non-EEA IT workers allowed to work here, then the work would just move offshore to India, and it is better to have the workers doing the job here
It is at least 3 times cheaper to do the work in India. The only reason the work is being done in the UK is because it cannot already be easily outsourced/offshored. As the workers do not pay taxes but consume resources in the UK, it is probably better for the UK if they were offshore.


These letters were provided to me by the IT workers who could not get a response from their various MP's see here. They are frustrated because they feel as if nothing is being done, therefore I decided to publish their letters to get the word out there on there behalf.

This story is also related to the report on Lloyds bank here who are being investigated by the Border Agency

1 comment:

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