By Andy McCue, 3 August 2006 14:15
NEWS
The UK's work permit scheme is being abused to import cheap IT workers from overseas at the expense of resident IT professionals, according to a report by trade union Amicus.
The union has expressed concern at the massive increase in the number of IT work permits granted - from just 1,800 in 1995 to 30,000 last year - and, in particular, the high number of permits for transfers within companies, which account for three-quarters of the total.
This comes at a time when the number of UK IT workers has declined slightly over the past four years, while pay data also shows that two-thirds of IT work permit holders are paid less than £30,000 when the average salary of an IT professional in the UK is £32,500.
Top 10 IT work permit sponsors 2000 to 2004
TCS - 10,683
Wipro (UK branch) - 4,962
Mahindra BT - 3,679
Mastek - 2,980
Infosys - 2,614
Xansa - 1,891
Accenture - 1,754
Satyam - 1,553
Cognizant - 1,553
Redbridge Corporation - 737
Source: Work Permits and the IT Industry, Institute for Employment Studies, August 2005
Six of the top 10 work permit sponsors are headquartered in India, with Tata Consultancy Services (TCS) alone sponsoring more than 10,000 IT work permit applications during the last four years.
Amicus questioned whether all of these work permits are to address genuine skills gaps in the UK or whether these companies are bringing non-resident IT staff into the UK at below going pay-rates, particularly through the intra-company transfer permit route.
Peter Skyte, national officer for the IT sector at Amicus, said in the report: "The question needs to be asked whether the skills represented in these figures are bringing in non-resident work permit holders at below going rates in the UK and what effect this will have on foreign direct investment and the future of the IT sector."
The union says the work permit scheme could be discouraging employers from making proper long-term investment in training, which will "seriously undermine" the UK skills base in the long-term, and is calling for a review of the intra-company transfer scheme to ensure it is not being used to undercut pay rates of home-grown UK IT professionals.
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1. anonymous
The issue is not so much about pay as about payroll cost, particularly in the case of intra-company transfer.
Work Permits UK try to ensure that workers from overseas are not undercutting the local labour market. In making a work permit application, employers are asked "Before deductions, how much will you guarantee to pay the person (excluding allowances)", which the employer might answer with a figure such as £25,000.
The person is treated as a permanent employee of the overseas company that will probably continue to pay normal overseas salary, seconded to UK on a substantial expenses package.
The first saving on payroll cost is that the employer does not pay NI, reducing payroll cost by 12.8%.
However, the employer may well be abusing the system by a) including expenses in the declared payment of £25,000 and b) obtaining a dispensation to pay all or most of the expenses free of tax and NI.
The final twist is that the employer will probably pay the person only the after tax/NI equivalent of £25,000. That is, pay the person £18,585 in total, of which about £15,000 is paid tax free in UK and the remainder is paid subject to tax etc in the country of origin.
In other words, the employee receives the after tax equivalent of £25,000, so is no worse of than a UK resident on the same salary, but the employer's payroll cost is reduced by more than 30%, which undermines the local labour market.