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Increase in the Immigration Health Surcharge spells trouble for businesses who employ migrant workers

17 March 2020

The new chancellor delivered a budget last week that was stock full of crowd pleasing spending promises. Unfortunately, it looks like it will be non-EU (and soon to be EU) nationals and the companies who employ them who will be footing the bill for them, via an increase to the Immigration Health Surcharge (IHS).

The IHS is a fee levied on individuals from beyond the EU who want to come and live and work in the UK for longer than six months, ostensibly to cover the costs of their usage of the NHS. Introduced in 2015 the fee was set initially set at £200 then doubled in 2019 to £400.

We have known for some time that an increase to the IHS was on the cards as it was specifically promised in the Conservative’s election manifesto. In the budget, the Chancellor duly announced that from October 2020 the IHS will increase to £624 per adult per year. There is a lower rate that will apply to students and their dependants, Tier 5 Youth Mobility Scheme participants and children under the age of 18. Their IHS will increase from £300 to £470.

This increase means that a Tier 2 worker coming to the UK for 5 years will now have to pay a fee of £3120 for the IHS alone. Added to this is the application fee of £1220 and priority processing fees of around £300 if they want a decision in a timely manner. For companies who cover the visa processing costs for their employees, they will have to factor in the Immigration Skills Charge as well which costs up to £5000 for a medium or large company. This means that there will be not much change from £10K for many companies wanting to sponsor a Tier 2 worker.

The problem is that the branding for the Immigration Health Surcharge is misleading; this is not a charge to use the NHS as the Chancellor admits that the funds gathered from it could be used on any number of spending promises. Furthermore the Department of Health and Social Care has found that on average visa holders who are subject to the charge are only likely to cost the NHS £470 a year. The fact that the IHS now dwarfs the costs its supposedly designed to recoup increases the suspicion that it is simply a way of keeping numbers down. In essence, the fear is that the exorbitant fees will dissuade people from using the immigration system to secure their future, or the future of their employees, in the UK.

From January 2021 EU nationals wanting to live and work in the UK will have to pay the IHS as well once free movement has ended.  This will increase the cost burden on companies who need to recruit foreign workers to fill skills shortages. The Government’s decision to increase the cost of the visa process at a time when it should be looking to encourage migration to the UK is risky indeed. Whether French, German or Dutch nationals are willing to pay the high price for a career in the UK when the can work in another European country for free, remains to be seen. 

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