Britain is one of India’s major economic partners, and bilateral trade was £17.5 billion in 2015.
India is the second largest global job creator in Britain and third largest source of foreign direct investment. Indian firms earned the UK Economy £30 billion last year – 4 billion more than they did in the year before.
However, following Brexit the UK’s priority is to reduce net immigration. While it currently cannot influence EU nationals coming into the country, Its only weapon to reduce immigration is targeting Non- EU Nationals especially through Tier 2 Visa’s
Indian IT workers accounted for nearly 90 per cent of visas issued under Tier 2 Intercompany Transfer
Under the new visa rules released this week anyone applying after November 24 under the Tier 2 intra-company transfer (ICT) category would be required to meet a higher salary threshold requirement from before. under the Tier 2 intra-company transfer (ICT) category would be required to meet a higher salary threshold requirement of 30,000 pounds from the earlier 20,800 pounds. A substantial 50% increase in Salary is a sending out a clear message to Non-EU companies that it will make it more difficult now for employees to gain entry into the UK.
Apart from hikes in the immigration salary thresholds. There are various other measures expected that will try to deter companies transferring employees into the UK
- Skills Surcharge
- Companies disclosing the number of International Employees.
- Increase and stricter Immigration Audits
- Sponsorship License and Visa Fee Increases
- Stringent Eligibility tests for companies and employees
It is unlikely this will dissuade Indian Companies from transferring employees to the UK. With the billable rates averaging around £500 per day the margins are still high even considering the 50K plus Salaries Indian companies pay to its employees.
The UK government is hoping Indian Companies will train and employ local workers through narrowing the labour arbitrage. However, hough there are still major advantages for Indian companies to continue to send over Indian employees
For the first 52 weeks there is no employer or employee National Insurance Costs and the employee may benefit from detached duty relief which can cut employee tax upto 50% enabling the company to pay a less salary greater than the immigration threshold but the employee gets a much higher net Salary compared to a local worker.
One of the other main reasons why Indian companies tend to send Indian employees initially is due to the years of training some of its employees have undertaken to become IT specialists while it will take time for the local employee to undertake training and get up to the standards required which will mean investment and costs as well as loss of revenue. There is also a trust and comfort with their own employees.
In the long term Indian companies do start employing local workers and the work force starts to become a mix of Indian and Local employees as they start to invest, recruit and train locally.
Indian companies are facing more scrutiny and restrictions and this may persuade companies looking at other EU Countries. Some EU countries like Hungry are taking advantage of Brevit and dangling a carrot through various incentives for Indian companies to locate their European headquarters in Hungry
UK has been always the number 1 destination for Indian IT Companies for a number of reasons – historical ties/relationship, language, gateway to Europe, ease of business, presence of large multinational companies and UK companies value the IT Skills of Indian Companies and therefore can demand a high fee for certain Niche Skills.
While Brexit and the associated consequences will make Indian Companies think twice about setting up in the UK – the expected high level of profits coupled with still a fairly decent exchange rate makes UK still have a very attractive proposition. An additional incentive is the UK Corporation Tax is expected to gradually fall to 15% in the next 5 years
If Indian Companies are to setup in the UK then this is the ideal time – while the door will never get totally slammed as the UK will always require specialised IT Skills but it will become more difficult and more expensive each year.