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Engineered for success or running out of fuel Immigration and the automotive industry

03 August 2016

The manufacture of cars and commercial vehicles has increased enormously – more than 25% in the last 10 years. In the UK, car production has increased by over 5% between 2014 and 2015.

The manufacture of cars and commercial vehicles has increased enormously – more than 25% in the last 10 years. In the UK, car production has increased by over 5% between 2014 and 2015 - see here for details. Immigration activity has also increased by almost 50% in the Professional, Scientific and Technical Activities industry sector since 2011 according to recent Home Office statistics, which can be viewed here.

The demand for automobiles is greater than ever. So is each company’s need to hire the best people for the vast array of jobs.

Manifolds to microchips – times have changed

Electric windows and CD players were once blue-sky concepts, later becoming expensive optional extras only available on some car models. And Bluetooth might have been something to see the dentist about. Now these are nothing less than standard in a lot of cars. Times have clearly changed, and ‘engineering’ is something very different to what it was when Ford made the Model T and Bugatti’s Type 35 first appeared. The mechanical, quality and design aspects absolutely remain, but are now joined by electrics, electronics, and audio-visual (to name a few) roles as part of the overall ‘engineering’ of an automobile. Quality, safety, fuel economy and emissions are at the forefront of the design and development of automobiles, in addition to handling, styling and mechanics.

The landscape of immigration law has also changed and will continue to do so. The automotive industry will face new challenges over the coming months, with the Home Office looking likely to implement various new policies and rules. The full impact of these changes remain to be seen, but companies will need to consider minimum salary requirements, additional charges and the possibility that certain engineering roles will be more difficult and expensive to recruit for from outside the UK.

Optional extras?

For more than a year, new hires employed outside the company structure have been liable to pay the Immigration Health Surcharge. This applies to migrants applying from overseas and migrants who are sponsored by a different UK company. From Autumn 2016, employees transferring from the same company overseas (known as ‘Intra Company Transferees’) will also be liable to pay this fee. This is calculated as £200 per person per year and is payable in one lump sum at the time of application. Where a family of 4 will come to the UK for 5 years, this will be an additional £4,000 on top of application fee and other fees.

In April 2017, other changes will take place. One of these changes will be the introduction of the Immigration Skills Charge. The exact sum is yet to be finalised, but it is expected to be charged at £1,000 per year. As no rules have been put in place yet, it is not possible to predict how this fee will affect applicants, but it is anticipated to apply only to the main applicant and not to family members.

Also in April 2017 will be the closure of the Tier 2 (Intracompany Transfer) Short Term route. Applicants who would have come to the UK under this route (where the minimum salary level required was £24,800) will now have to be paid the same minimum salary as those in the Long Term route – currently £41,500 per year.

Full speed ahead?

The industry encounters difficulty in recruiting candidates from within the labour market due to a lack of required skilled and qualified candidates, particularly in the field of engineering. To recognise the skills deficit, the Home Office designates some of these engineering roles as ‘Shortage Occupation’ roles. It means that there are not enough resident workers to fill the available jobs in the sector.

An advantage of the ‘Shortage Occupation’ designation is that employers are not required to undertake the Resident Labour Market Test (RLMT) and can sponsor migrants more quickly than if they did have to satisfy the test.

One potential issue is that when the Home Office decides that these roles are no longer shortage occupations, employers will be required to undertake the RLMT. It is not possible to predict when or even if this might happen. If it does, there will be an increase in the cost, administration and scrutiny of applications. For manufacturers who employ significant numbers of non-EEA migrants, this could represent a substantial increase in expenditure.

Other issues facing automotive employers are not necessarily specific to that industry, but the changes will likely make it more difficult to bring someone over, for example on a discreet development project for 6 months. The changes will also make it more expensive to employ a highly skilled design engineer to work on heat displacement or internal electronics.

If the automotive industry is to grow in the UK as it has done in recent years, companies will certainly need to hire the best employees for the jobs. With costs increasing substantially, what remains to be seen is whether the automotive industry will justify the expense.

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