What the Changing Policy Landscape Means for the Recruitment of Overseas Workers

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As an open island nation, the UK has traditionally welcomed waves of inward migration throughout its history.  From a labour market perspective, this offers a means of population growth that addresses short term labour market needs and represents a core facet of globalisation. To take an economic perspective, as a raw material in the production process, a fixed labour supply has the potential to act as a barrier to economic growth; if employers are unable to find appropriately skilled labour, they are constrained in production, and there is upward pressure on wages for workers. This can slow down production and therefore limit national economic (GDP) growth.  

Conversely, an influx of labour puts downward pressure on wages and can lead to calls from workers to restrict the supply of international labour, for fear of domestic workers being priced out of work. Thus, the management of migration requires the balancing of economic and worker interests.  Too much immigration and the downward pressure on wages will lead to domestic workers feeling undervalued and struggling to find appropriate employment. Too little, and output growth will be below national capacity and, as businesses chase scarce workers, wage inflation will grow. 

In this Insights, we provide an overview of the migrant labour market in the UK, consider recent trends and focus on ways in which employers can enhance the integration of a more diverse labour force within their organisations. 

The UK Migrant Labour Market

To understand the scale of migration for the UK, at the time of the last census (2021), the UK had 16.8% of its residents (around 10million) classified as having been born outside of the UK (ONS, 2023).  This is an increase of over 3 percentage points compared to 2011.  To put the UK into international context, as a destination country, the UK is ranked 5th, globally in the 2020s, compared to the USA and Germany, who are ranked 1st and 2nd, respectively (Migration Policy Institute, 2024). India is the country from which there is greatest emigration, followed by Mexico. The impact of Brexit has been particularly felt by the UK where there have been marked changes in the composition of migrant workers.  The Migration Observatory reports a sharp decline in EU migration, and an increase in non-EU arrivals from 2019-2023 via work and study routes (Migration Observatory, 2024). 

The distribution of migrant workers within the UK is concentrated in largely urban regions and in specific sectors.  The latter is in part the result of the immigration policy for workers which places higher values on areas of high skill and skill shortages.  The UK operates a points-based system by which employers in specific sectors can sponsor appointments. In most cases, these roles will be subject to a minimum annual salary threshold OR deemed to be a shortage occupation.  The list of shortage occupations is extensive and divides into two categories – where applicants may be paid 80% of the going rate for the occupational code, or the full rate for the occupational code. There is an additional occupation – care workers and home carers - for which there is a shortage, but which are not eligible through the skilled worker route.  

Shortage occupations are in no small part driven by opportunities in the wider UK labour market.  UK vacancies data are returning to the long-term trend following unprecedented levels since the aftermath of Covid-19. While still historically high at around 934,000 (October to December 2023), it sits at the lowest quarterly level since April-June 2021 (ONS, 2024).   There has been a reduction in vacancies across all firm size categories but across sectors, it is a mixed story.  Some sectors are still experiencing labour shortages with vacancy growth in Real Estate, Administrative and support activities, Construction and Financial and Insurance activities. Other sectors are seeing a fall in the number of vacancies, compared to the January – March 2020 period; these include Education, Transport and Storage, Wholesale, retail and the repair of motor vehicles and Accommodation (ONS 2024, fig. 2).

The changing policy landscape

In December 2023, the UK Government announced a ‘5-point plan’ which proposed changes to the immigration policy. Chief political interest centred on the proposed increase in the minimum salary threshold to £38,700 for skilled migrants entering the UK on long term work visas and for British or settled people seeking to bring their partners into the UK.  This is an increase of over 47% on the previous requirement for skilled workers, above the median UK salary and an even greater proportional uplift for partners, whose salary threshold has been brought level (Jorgensen, 2024). 

The sole purpose of the changes to policy is to reduce immigration, however, it has been estimated that the new level of salary will apply to relatively few migrants (Brindle and Sumption, 2023).  There are three main reasons for this; the introduction of the new threshold will be phased, not reaching the full £38,700 figure until 2025 (Jorgensen, 2024), there will be several exempt occupations and there are many skilled occupations where the median income already sits comfortably above this threshold.  At present, it is not clear the effect the changes will have but studies that have sought to evaluate the impact of these changes have highlighted that there will be disproportionately negative effects on younger and female migrants.   

Sectoral/occupational locations

So, where do we see concentrations of migrant labour and, to what extent do these match with important sectors for HRGO clients?  Home office immigration statistics on visas issued are reported by occupation classifications. Excluding the healthcare sector, Brindle and Sumpton (2023) report on the year 2022-23 (June to June) on the basis of a freedom of information request.  Their findings are summarised in Table 1 below:

There are a few things to note from table 1.  As discussed, the occupations affected by the higher median earnings threshold are relatively small (when healthcare is excluded).  The majority of high skill visas are issued to IT and finance sectors – potentially areas of interest for HRGO and its client base and these remain unaffected by the change.  Lower earning skills are based in the hospitality/food sectors.  Note that this is not the complete picture, over 208,000 skilled work visas were issued in total during the 12-month period ending in September 2023, of which, approximately half were issued to healthcare workers.  In addition, there are a number of subtle exemptions (young people, post docs) as well as those whose wages are set by national pay agreements. 

Spotlight on the Healthcare sector

Given the importance of migrant labour in the healthcare sector, a particular focus on this segment of the market is warranted.  Accessing data on the healthcare sector is complicated by the split between public and private employers.  However, it is recognised that the NHS and the social care sectors have a high dependence on overseas workers that has grown since the pandemic (Thomas, 2023). 

Work conducted by the Migration Observatory during the pandemic estimated that as a share of key workers, migrants ranged from 9% in public administration and defence to 35% in manufacturing, with around 22% of healthcare workers being foreign born (Fernandez-Reino and Kireans, 2020).  Cut another way, in occupations that were dominated by key workers, we see that highly skilled health professionals and nursing and midwifery occupations were particularly dominated by migrant workers and at the lower end of the skills distribution, caring personal services.  (Figure 5, Fernandez-Reino and Kierans, 2020).  There is also a marked gender dimension to these with a high proportion of female migrant workers in all categories. 

Advantages of attracting migrant labour  

Sound economic reasons exist for seeking migrant labour that extend beyond plugging the immediate skills gaps.  A more diverse workforce, with varied experience and different cultural norms can lead to better, more holistic and inclusive decision making.  This is found to be especially important in highly creative and skills-based sectors (Stahl et al, 2021). Thus, productivity benefits are thought to arise from a more open immigration policy, allowing UK businesses access to the best of global talent.  Elsewhere, in the innovation literature, there have been clear links to diversity in teams and R&D/innovation outcomes (Bosetti et al 2015). 

Barriers to labour market entry for migrant workers 

There are however recognisable challenges to recruiting migrant labour.  Arriving from different educational systems may mask the quality of recruit a business attracts.  Qualifications are difficult to map in some high skilled sectors particularly and migrants often take roles for which they are ‘overqualified’.  Research on the consequences of skill mismatch highlight the likely drop in worker level productivity through low motivation at the individual level, as well as being a waste of human capital at the national level.  This loss can persist over long periods of time (Robinson et al, 2024). Immigrants have been found to receive significantly poorer returns to employment than nationals and this differential is persistent across generations of migrants that remain (Dorn and Zweimuller, 2021). 

Another clear barrier to recruiting migrant labour is the integration of workers within the existing workforce.  The very characteristics that promote innovation and better decision-making can also slow down communication and smooth teamwork.  Language is a clear manifestation of the challenge but there are more subtle differences that make integration difficult.  Cultural barriers and how businesses can overcome these is discussed in greater detail in the following section.  

Developing inclusive workplace practices and hiring strategies 

One of the most important trends in recent years has been a focus on the importance of planning and recruiting for a diverse and inclusive workforce. This is particularly significant for organisations facing resourcing challenges as a consequence of the Government’s change in salary threshold discussed above (Farashah and Blomquist, 2022). Attracting and retaining talent is critical to organisational success and organisations impacted by the salary threshold change will need to ensure their employer brand attracts scarce talent while improving employee retention to reduce costly vacancies that may now be more difficult to fill. Research demonstrates the link between inclusion and employee satisfaction, creativity and reduced absenteeism, meaning that employees and employers stand to gain by being more inclusive because of its critical role in talent management, particularly recruitment and retention (CIPD, 2019; Fitzsimmons et al, 2023).  

The concept of workplace inclusion refers to whether individuals feel that they belong and are valued for their unique attributes and contributions (Shore et al., 2018). It is more than simply treating employees equally. An inclusive workplace culture enables all employees to thrive at work, regardless of their background, identity, or circumstance. To do this, organisations need to create a positive workplace environment in which all their employees can influence, share knowledge, and have their perspectives valued without needing to conform or mask their identities (CIPD, 2019). Research suggests that organisations should focus action on five key areas: 

  1. Employee behaviour: for a workplace to be truly inclusive, all employees need to understand the behaviour that is expected of them. Underlying principles of dignity, respect, allyship must be role modelled by senior leaders, people professionals and line managers (Priest et al.,2015).
  2. Line manager capability: inclusive management practised by line managers is paramount (Buengeler et al, 2018) requiring competencies such as sensitivity to diversity issues, integrity and valuing difference (Turnbull, 2011) to ensure employees feel they are equally valued (Mitchel et al., 2015).
  3. Senior leadership: research using leader-member exchange theory shows the positive impact of senior leadership authentically role modelling inclusive behaviours and acting as inclusion champions (Boekhorst, 2015; Brimhall et al., 2017).
  4. Policies and wider people management practices: research is somewhat divided over the benefits of general versus identity-specific approaches. Diversity needs to be seen strategically with research suggesting that policies which address the unique needs of individuals are more effective at building an inclusive environment (Li et al, 2019). Organisations should focus attention on inclusive recruitment practices to ensure fair processes are set up to attract a diverse talent pool. There is strong evidence that marginalised groups face discrimination in recruitment contexts, particularly immigrants where matching their employment to their skill level remains challenging (Elrick, 2016;Ette et al., 2016). Recruitment processes should be designed to reduce the influence of bias. Clear, objective, structured, and transparent processes are fairer for candidates, supporting more equal outcomes, and enabling employers to attract more diverse talent pools (CIPD, 2022)
  5. Organisational culture, climate, and values: organisations need to review existing workplace culture and practices for fairness to fully embed their vision for inclusion (Pless and Maak, 2004). Efforts to promote work-life balance, proactively foster inclusion by equitably valuing and esteeming difference in roles, attributes, knowledge and perspectives, and proactively levelling-up opportunities for career progression are key to this (Woodhead et al, 2022).

Authors:

Samantha Evans and Catherine Robinson

Kent Business School, University of Kent

References

Boekhorst, J.A. (2015). The role of authentic leadership in fostering workplace inclusion: a social information processing perspective. Human Resource Management. Vol 54, No 2. pp241–64. 

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Brimhall, K.C., Mor Barak, M. E., Hurlburt, M., McArdle, J.J., Palinkas, L. and Henwood, B. (2017). Increasing workplace inclusion: the promise of leader-member exchange. Human Service Organizations: Management, Leadership & Governance. Vol 41, No 3. pp222–39. 

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