The Reform party has announced plans for an “employer immigration tax” on companies that choose to employ overseas workers instead of British citizens.
FactCheck takes a look.
What is Reform’s employer immigration tax plan?
National insurance is a tax paid by employees and employers.
Reform announced on 30 May a plan to require businesses to pay a national insurance “premium” if the worker is from overseas.
Richard Tice, who was then the party’s leader, said “if you want to employ people, non-British passport holders, then we think it’s perfectly reasonable that you pay a premium on National Insurance, so actually what you should pay is National Insurance of 20 per cent”.
This would be up from the current rate of 13.8 per cent, which is paid regardless of where people are from.
But Mr Tice said there would be exemptions for businesses employing five people or fewer, and for health and social care.
He also said the party believes that “over one electoral cycle that this employer immigration tax will raise over 20 billion pounds”, but that this “varies of course depending on how quickly employers adjust their recruitment processes”.
We asked Reform how it reached this figure but it is yet to provide an answer.
How would this tax work and what could the consequences be?
Mandeep Khroud, partner and head of immigration at Irwin Mitchell Solicitors, told FactCheck that the intention behind Reform’s plans is “to encourage these firms to prioritise the employment of British staff” and that they “could be viewed as discriminatory”, which “may potentially lead to legal challenges and claims of discrimination in the Employment Tribunal”.
She also explained that if this policy was implemented, “UK firms struggling to recruit for positions within their organisation may have no choice but to establish companies in other countries”, which would allow companies to hire the most suitable candidates for the job, who would then only enter the UK for business meetings and other similar purposes.
“Such a shift could have a negative impact on the UK economy not only from an application-fees-based revenue for the UK government perspective but also in respect of employability rates across the country,” the lawyer added.
We also spoke to Ben Brindle, from the Migration Observatory at the University of Oxford. He told us the government already charges companies who hire workers from overseas under the Immigration Skills Charge. It could be that the proposed Reform plans would be implemented under this scheme, as changing an existing policy would be easier than changing the tax system, he noted.
Mr Brindle also said “most economists would expect that higher charges would reduce employers’ demand for migrant workers,” but this depends on whether firms can pass the costs onto migrants through lower wages.
If they can, “migrant workers would be a bit poorer and the government would generate additional funding, but hiring patterns wouldn’t change all that much,” he added.
But, if employers can’t pass these costs on, “then it would likely lead to reduced hiring of migrant workers,” he said, adding that the extent to which any of these occur “would depend on the specific job in question”, for example how easy it is to train UK-based workers for that role.
Harry Qiu Yu Yu, immigration solicitor and associate at law firm Russell-Cooke, told FactCheck that he’s previously seen “such ‘cost-upping’ strategies fail to achieve their objectives”.
The Home Office has increased visa costs multiple times in the last 10 years, which he said has resulted in “draconian costs for employers and in some cases migrant workers”.
Like Mr Brindle, he also pointed to the Immigration Skills Charge, which can cost up to £5,000 for a 5-year work visa, and noted that despite this “migration figures are still at an all-time high and record numbers of work visas are still being granted”.
But Ms Khoudra also noted that at present, government charges can amount nearly £12,000 to employ a foreign national for a period of five years, because on top of the £5,000, there’s also immigration health surcharges and other costs.
Mr Brindle thinks, however, that introducing a new employer immigration tax is “unlikely to deter many employers from hiring overseas labour”, as the market it’s “already by no means ‘cheap’ and is oftentimes highly competitive”.
Although Rom Bhandari, senior lecturer in Law at the University of East London, told FactCheck that “for industries dependent upon the positive contribution of foreign workers – like hospitality and agriculture – it would prove devastating for the economy and only lower the UK’s international reputation”.
Reform was approached for comment.
The Conservative party was also approached for comment.
(Image credit: Victoria Jones/Shutterstock)