Self-employed migrants and the UK’s immigration rules: A square peg for a round hole

The Brexit transition period ended on 31 December 2020, meaning migrants from EU member states are now subject to visa requirements under the new points-based system if taking up work in the UK.  Such visa requirements ought not affect EU nationals already living here as they can reasonably expect to acquire settled or pre-settled status by making the appropriate application. 

The UK’s immigration rules allow for sponsorship under Tier 2 in respect of a role for which (a) there are no suitable resident workers or (b) there is a skills shortage within the relevant industry.  If an individual is sponsored by an employer under Tier 2, they will be granted leave to remain and have the right to work in the UK subject to the conditions attached to their visa.

The large number of EU nationals working in the UK construction industry tells us that a trades shortage is real across a number of disciplines – including plant operation, groundworks, steel fixing, tunnelling and concrete.  The shortage is unlikely to be resolved any time soon, meaning many companies will want to offer work to migrants so as to service their projects.

There are Home Office fees due from an employer both for obtaining a Tier 2 licence and sponsoring an individual migrant.  Recruiting a permanent staff member on this basis is workable.  However, as I’ll explain below, the Tier 2 sponsorship regime is not well-suited to the use of self-employed migrants and the government ought to address the problem (for its own sake, ultimately).

Readers will know that construction is a project-based sector and that trades come and go depending on the phase and duration of the relevant works.  For this reason, construction is, and probably always will be, an industry full of transient labour.  Whether labelled freelancers or self-employed subcontractors, hundreds of thousands of construction workers are not in direct employment – either because the sector is project-based (as mentioned) or because construction workers enjoy the freedom to move around and chase better payment rates.  It would also make little sense for those same construction workers to have multiple PAYE tax codes.  Helpfully, HMRC’s Construction Industry Scheme gives subcontractors a natural home where all earnings are under one tax rate, with any balances settled via an annual return.

At the time of writing, there is no visa route available to self-employed migrants who fail to meet a capital requirement (which is out of reach for the average migrant worker).  This leaves such migrants to rely on sponsorship.  Although a bit of a fudge, Tier 2 sponsorship (the ‘Skilled Worker’ route) can be used by construction businesses to acquire the services of self-employed migrants not already in the UK.  There are at least four reasons why this is less than satisfactory:

1. there is no mutuality of obligation within a self-employed engagement. The Tier 2 sponsor (the construction business using the worker) could meet the Certificate of Sponsorship fee and any other visa costs, following which the self-employed migrant worker could freely leave the project or site at any time.  Putting to one side complications for the migrant worker’s visa, the relevant business could meet those costs and lose the migrant worker in short order;

2. sponsors will still need to comply with their monitoring obligations and maintain control over the duties, functions and outcomes of the job carried out by the migrant. While there is no suggestion that this necessarily overlaps with control for the purposes of status law, ideally a business using a freelancer would exert no or little control;

3. routinely in the UK construction industry, freelancers are not engaged by the party that uses their services. Supply chains can be complex.  There will often be a split between the party holding the Tier 2 licence and the party engaging the migrant worker, or we may find that the party best-placed to hold the licence will have no control over the worker’s duties;
4. owing to the convolutions of pushing the square peg of self-employment into the round hole of Tier 2 sponsorship (points 1 – 3 above), some businesses may look to simply employ new migrants. Starting from that point, and against a history of more flexible arrangements, labour-related overheads will surely soar.  During projects, employers will have to meet pension contributions, holiday pay, sickness pay and various other costs.  When projects conclude, the migrant workers will still be employed.  The employer will have to wrangle with lay-off and possible industrial relations issues.  On the migrant worker’s part, they will likely experience a partial loss of freedom and collect PAYE tax codes if moving around in pursuit of better pay.  On top of all that, the impact of Covid-19 is at its deepest and many construction businesses are under significant financial pressure.  Many of those businesses may have found it helpful to have the option of using self-employed migrants so as to keenly manage labour costs.

Given the UK government currently has extensive infrastructure ambitions, I would hope that the Treasury and Home Office have one eye on how the many thousands of workers needed on forthcoming construction projects will be engaged.  The state should be exercising fiscal restraint given the immense public spending brought about by the Covid-19 pandemic.  Large, directly employed workforces throughout infrastructure ventures are unlikely to aid restraint.

In my view, a modest exemption or concession for key UK industries – such as construction, rail and utilities – should be enacted in order that self-employed migrants with skills can move to the UK freely and take up work. 

If you would like to raise anything we’ve discussed in this article, please contact us at info@guildhubservice.co.uk and talk to our expert team. We’re here to help.

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