The Plight of Intra-Company Transfers: Light At The End of The Tunnel?

The Plight of Intra-Company Transfers: Light At The End of The Tunnel?

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The year 2000 was a long time ago. Tony Blair was still in his first term as Prime Minister, we hadn’t had 9/11 or the Iraq War and the words ‘Facebook’ or ‘hashtag’ would have drawn quizzical looks. But that was when intra-company transfers (ICTs) first came onto our radar, as Labour’s Employment Minister, Margaret Hodge, announced a major liberalisation of the work permit system. Sixteen years on and after a huge amount of hard work by IPSE and our members there looks to be light at the end of the tunnel.

What’s the problem with ICTs?

Skilled immigration is something that few people would oppose and independent professionals certainly accept as part of working in a globalised world. But the ICT system has been abused by large outsourcing companies, leading to those working as ICTs being underpaid and exploited, and contractors undercut as a result of an uneven playing field.

ICT permits allow companies to transfer specialist staff between countries temporarily. Rather than being used by multinationals, however, ICTs have been used in large numbers by outsourcing companies supplying low-cost labour to UK companies. Each ICT worker must be paid the ‘going rate’ for the specific job they do. But companies can bolster this rate with the addition of numerous special allowances which are governed by complex rules. Tax-free allowances can be counted as part of an ICT worker’s salary. This leads to a lack of clarity and leaves the door open for abuse and undercutting.

Standing up for our members

This was a growing problem throughout the 2000s. IPSE (then PCG) focused on gathering evidence from our members to demonstrate that the system needed reform. The issue has always been particularly problematic in the IT sector, and in 2002 we achieved a partial success after concerted lobbying forced the Government to remove the IT sector from the shortage occupation list.

Amid the recession and with immigration becoming a hot political topic, the Labour Government announced a major reform to the non-EU immigration system. This saw the creation of a points-based system which tried to tackle the problem by ensuring those entering the UK on ICTs were earning at UK market rates.

This was, in fact, no help at all as organisations continued to circumvent the rules – including allowances for accommodation in salary calculations. It quickly became clear things were getting worse as the number of ICTs issued peaked at 30,000 in 2010.

Indeed in 2009, BBC Radio 4’s File on 4 aired a programme investigating the misuse of ICTs. This exposed the large-scale use of ‘onshore offshoring’ by BT to unfairly replace contractors. Those brought in on ICTs often suffer too – it’s been suggested that employers sometimes do not pass on the benefit of tax breaks to the ICT worker.

Arrival of the MAC

In the same year as these reforms were introduced, the Migration Advisory Committee (MAC) was established. Over the next eight years IPSE worked closely with the MAC whose role is to provide independent evidence to the Government on where skilled labour market shortages exist and which could be filled by migration. Led by Professor Sir David Metcalf, the MAC was willing to recognise the real problems created by the abuse of the ICT system.

However, progress proved difficult with the creation of a coalition government in 2010 whose focus was initially on cutting government spending. The MAC published a number of consultations, to which IPSE responded robustly, and, also in 2010, it recommended clamping down on the tax-free allowances which allow outsourcing companies to game the system; however, the Government ignored this sensible proposal.

Despite the House of Commons Public Accounts Committee finding in 2011 that two-thirds of all ICT permits go to the IT industry, the next few years only saw tweaks to the system with no real attempt at wholesale reform.

Light at the end of the tunnel

Roll on to 2016 and finally some good news to report. Following strong input from IPSE into a MAC consultation, highlighting the experience of IPSE members, the Government announced that from 2017 it will implement a higher minimum salary threshold of £41,500 for those recruited through ICTs. This could go a long way towards tackling abuse of the rules by large outsourcing companies.

We still need to press the Government to ensure there aren’t any loopholes in the system, however. The Government is currently reviewing how allowances are considered, and it must be clear that these cannot be counted as salary if the system is going to work.

But all the hard work that IPSE and its members have put into this issue over the last 16 years will hopefully be worth it. If the Government commits to a fair system, IT contractors in the UK will finally be able to operate on a level playing field and the exploitation of ICT workers will end.

ICT