Memorandum submitted by Gary Burgess
SUMMARY
1. Summary
— The tier 2 intra-company transfer route
is not the same as the GATS intra-corporate transfer, and has
much lower requirements. — There are several heavy users
of the tier 2 intra company transfer visa system; they use these
visas to bring in thousands of workers every year; and transferees
make up the majority of their UK workforces eg Infosys, Wipro
and TCS. — The US has recently introduced laws that specifically
target companies that use employer sponsored visas to provide
the majority of their workforce, and the chairman of the US Senate
immigration subcommittee has specifically named Infosys, Wipro
and TCS as abusers of the visa system. — India has a cap
on foreign workers, but criticizes the UK for introducing one.
— Tier 2 intra-company transfer visas are
heavily open to abuse as the requirements are so low and the policing
non-existent.
— Many tier 2 intra-company transferees
pay little or no income tax in the UK and are effectively subsidised
by the UK taxpayer.
— ICT migrant workers can be underpaid
and their employers' may be keeping their tax refunds.
— Employers claim they have difficulty
finding UK workers when the opposite is true.
INTRODUCTION
2. I am submitting this memo as an individual,
and not as the representative of any organisation.
3. My submission concerns the intra-company transfer
route of tier 2 under the PBS. The MAC report on "Tier 2
and Dependants", found that two thirds of intra company transferees
were Indian IT workers. A large proportion of those are sponsored
by companies such as TCS, Wipro, Infosys, Cognizant, Mastek, Tech
Mahindra and Mahindra Satyam. These companies' UK workforces mainly
consist of thousands of intra-company transferees.
4. I became interested in the intra-company
transfer route just over a year ago when friends and colleagues
were displaced and out of work as a direct result of companies
using this route to bring in underpaid workers from outside the
EEA.
5. The more I have uncovered about the system
and how it is abused, the more astounded I became. The tax side
particularly caught my attention as it appears that intra-company
transferees pay little income tax in the UK, yet consume public
services like the NHS and schools.
WHETHER AND
HOW INTRA-COMPANY
TRANSFERS SHOULD
BE INCLUDED
IN A
CAP
Tier 2 ICT route is not the same as ICT GATS and
FTA commitments
6. The UK must allow companies to move certain
personnel between establishments in different countries under
the EU commitments to the World Trade Organisation's General Agreement
on Trade in Services (GATS), and also under various bilateral
free trade agreements. Intra-corporate transfers are covered in
these agreements and I have included the text below:
(i) the temporary presence, as intra-corporate
transferee,* of natural persons in the following categories, provided
that the service supplier is a juridical person and that the persons
concerned have been employed by it or have been partners in it
(other than as majority shareholders), for at least the year immediately
preceding such movement:
(a) Persons working in a senior position within a
juridical person, who primarily direct the management of the establishment,
receiving general supervision or direction principally from the
board of directors or stockholders of the business or their equivalent,
including:
— directing the establishment or a department
or sub-division of the establishment;
— supervising and controlling the work
of other supervisory, professional or managerial employees;
— having the authority personally to hire
and fire or recommend hiring, firing or other personnel actions.
(b) Persons working within a juridical person who
possess uncommon knowledge essential to the establishment's service,
research equipment, techniques or management. In assessing such
knowledge, account will be taken not only of knowledge specific
to the establishment, but also of whether the person has a high
level of qualification referring to a type of work or trade requiring
specific technical knowledge, including membership of an accredited
profession.
7. Intra-corporate transferees should be
senior managers who report to the board or specialists who have
essential uncommon knowledge. Research, by experts such as Professor
John Salt, and the experience of those working with intra-company
transfer IT workers suggests that the most intra-company transfer
IT workers are in the UK to use standard, readily available IT
skills, and do not possess or do not need any uncommon or proprietary
knowledge. As many are sent to work at clients' sites, they are
more likely to be here to acquire proprietary knowledge from the
client.
8. The tier 2 intra-company transfer route
is one of the easiest routes to satisfy under the Point Based
System and there is no requirement for the transferee to be a
senior manager or have uncommon knowledge. The "1 year of
previous experience" requirement was recently added.
9. The GATS intra-corporate route was intended
to allow companies to bring in a small number of essential staff,
and not a workforce of thousands. The tier 2 intra-company transfer
route is not the same, and some companies use it to bring in thousands
of workers every year.
10. There is no reason why the tier 2 intra-company
transfer route should not be included in the cap while it remains
in its current form. However, there may be a need for a proper
GATS intra-corporate visa to satisfy the UK and EU commitments.
Recent Developments in the USA
11. On 13 August 2010, President Obama signed
the U.S. Border Security Bill. The Bill had been passed unanimously
in the US Senate a week earlier. The most controversial part of
the Bill was the large increase in charges for employer sponsored
visas (H-1B and LI) for companies that have more than half their
workforce on such visas. Roughly speaking, H-1B is equivalent
to tier 2 general and L1 is equivalent to tier 2 ICT. Senator
Schumer (chairman of the senate immigration subcommittee) singled
out companies like Infosys:
The emergency border funds will be paid for by
assessing fees on foreign companies known as chop shops that outsource
good, high-paying American technology jobs to lower wage, temporary
immigrant workers from other countries. These are companies such
as Infosys.
12. Senator Schumer also described these
companies as "multinational temp agencies", which was
a fairly accurate summary. Surprisingly, outsourcing companies
like Infosys and TCS actually generate half their revenue from
workers that are sent onshore/onsite (ie to client work sites)
where they are charged out per day and work on client teams. Staff
augmentation is a major part of their business model.
India's Employment Visa policy
13. The biggest users of tier 2 ICT visas
tend to use Indian workers, and the Indian government actively
opposes any restrictions on Indian professionals working in other
countries. However India itself has a restrictive employment visa
policy (see the Indian Ministry of Home Affairs website):
http://www.mha.nic.in/pdfs/work_visa_faq.pdf
14. In summary, India has a cap on companies
employing foreign professional workers of 1% of their workforce
(to a maximum of 20 foreigners). IT workers are not included in
the cap provided they are paid at least $25,000, which is 30 times
the average Indian salary and twice the average Indian IT worker's
salary. Indian missions abroad also have the right to deny an
employment visa if they think a qualified Indian worker would
be available. India has a zero cap on employment visas for non-professional
workers.
The going rate, allowances, taxes, underpayments
and UKBA policing
15. If the UK visa system worked as we are
told it should, then I and many others would not have an issue
with it. However it is heavily abused to the detriment of UK workers,
companies that employ UK workers, UK taxpayers, and even migrant
workers. Intra company transfer visas are particularly abused
by some businesses because the requirements are so low and there
is so little checking. For instance, there is no requirement to
check or prove that no one already in the UK could do the work,
and the salary does not need to be paid in the UK. It is very
easy to undercut UK workers and underpay migrant workers using
intra company transfer visas.
16. The going rate/appropriate rate set
by the UKBA is usually the 25th percentile salary for the occupation.
Therefore it is significantly less than what an average UK worker
in the same occupation would be paid, and incongruous with their
exceptional and essential skills. It has not been uncommon for
Indian IT workers on tier 2 ICT visas to switch to tier 1 visas
in the UK and move jobs. They often earn significantly more and
switch from being net beneficiaries of the UK tax system to net
contributors.
17. Tax free allowances (eg to cover temporary
place of work expenses for the first 2 years) are counted towards
the migrant's salary, so their actual taxable salary in the UK
is usually small. This also means employers avoid employer National
Insurance contributions (and under HMRC rules transferees do not
have to pay national insurance for the first year anyway). The
MAC report on "Tier 2 and dependants" said this could
be used to undercut UK workers and recommended that the use of
allowances should be reviewed. The UKBA policy document released
in Match 2010 said they recognised the problem but would take
no action:
The MAC recommended that allowances be scaled
down when calculating points for prospective earnings, to prevent
the tax system being used to subsidise migrant labour and undercut
pay for resident workers...
we do not propose to make any changes relating
to allowances from 6 April 2010. Scaling down allowances could
place a heavy burden on businesses that use allowances for legitimate
contractual reasons and not to undercut ...
18. Allowances should not be counted towards
reaching the minimum required salary. They are businesses expenses
and not remuneration, hence HMRC does not tax them. The expenses
of working away from home are not additional expenses, uniquely
incurred by intra company transfers. When a UK employee is sent
to another office or a client site then allowances are paid on
top of their UK salary, and this is part and parcel of doing business.
To protect migrant workers from being underpaid and UK workers
from being undercut, it is important that companies are required
to pay allowances on top of a proper UK salary.
19. The low tax status of intra company
transferees also means that many cost more to UK public services
than they pay in taxes. They and their employers are subsidised
by the UK tax system. However, there also seems to be evidence
that some employers do not pass on the benefit of tax dispensations
and refunds to their ICT employees eg they force their employees
to sign over any tax rebates.
20. Alternatively employers exaggerate salaries
when they apply for visas/Certificates of Sponsorship and, in
March, the UKBA decided to specifically say that it was against
the rules to "use any tax exemptions that apply to multiply
upwards net salaries and allowances to an artificial figure",
as there had been so many queries over this practice. Based on
what I have been told by ICTs, this practice of underpaying migrant
workers appears to be common among some of the biggest users of
the tier 2 intra company transfer system.
21. It is probably best to use a real example
to show the problems with the system, so I have included real
details and information provided by an ex intra company transferee
as additional documentation with this memo. From this additional
documentation you should be able to see that:
— the work permit salary is not the same
as what is actually paid, and the HR department clearly believes
this is normal;
— the substantial tax free allowance means
the actual taxable salary and income tax paid is very low; and
— there appears to be no proper policing of
the system and, as can be seen, this issue has been reported to
the UKBA and received no response.
"problems recruiting staff in the UK"
22. Senior executives seem quick to say
that they have problems recruiting staff in the UK, when in fact
the opposite is true. In May, Wipro's new European head, Jeffrey
Heenan Jalil, told Karl Flinders of ComputerWeekly that
Wipro were struggling to recruit staff in Europe. Many of the
European jobs advertised on Wipro's internet site were in the
UK (about 100). In August, Karl Flinders asked Wipro why, after
over two months waiting, job applicants were still stuck in the
first part of the Wipro's recruitment ("to screen").
Wipro HR responded that they had received a large number of applications
and had a large backlog. Clearly their problem recruiting in the
UK was nothing to do with finding skilled workers in the UK. http://www.computerweekly.com/blogs/inside-outsourcing/2010/08/if-wipro-wants-50-of-european-staff-to-be-locals-it-had-better-get-its-act-together.html
RECOMMENDATIONS
23. Recommendations
— The intra company transfer route should
be included in the cap. Alternatively the "uncommon knowledge"
requirement should be fully enforced or a minimum UK salary of
£50,000 should be introduced to discourage abuse. —
The UKBA going/appropriate rate salary should be at least the
average salary for the occupation and it should be paid and taxable
in the UK (otherwise there should be a charge equal to the average
income tax paid by a UK worker to reflect a fair contribution
for UK services). — There should be effective and transparent
policing of the system so that UK workers are not undercut and
migrant workers are not underpaid. If necessary visa costs should
be increased to pay for additional UKBA staff.
— There should be a thorough investigation
of employers underpaying and keeping tax rebates from intra company
transfer employees. Guilty employers should be required to pay
any misappropriated money back to their migrant employees.
August 2010
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