Visa rules being abused to bring in offshore IT staff, investigation claims

UK companies are using lax visa rules to bring in cheap offshore IT staff at the expense of local contractors, an investigation by the BBC's File on 4 programme has found.

In a practice that will be familiar to most people who have worked in an IT department in the UK, IT staff are brought over to the UK from a low-cost location – typically India or south-east Asia – to work locally in the UK for a period. It's known as "on site offshoring", and workers brought over in this way use something known as an intra-company visa.

This can be perfectly permissible – and indeed legitimate – under current rules, where the member of offshore staff has unique skills or specific company knowledge that cannot be found in the UK.

But according to the BBC, these rules are being bent to use offshore staff as a low-cost on-site alternative to local resources. A former contractor at BT Global Services claimed he was told by a BT manager that he was being displaced by an Indian contractor from an offshore supplier for cost reasons.

According to the BBC, the contractor was told: "We have to cut costs, you've got to go." He added that his rate had been £400 a day, while he was told by his line manager the offshore contractors cost £220 a day.

In response to the BBC's allegations, the offshore contractor, Tech Mahindra – a company part-owned by BT – told the programme: "Our operations in the UK comply with all the prevalent laws governing immigration and work visas. Employees are transferred to the UK if and only if their particular skills are needed to execute a client's projects."

"The revelations in the recent edition of 'File on 4' come as no surprise to us" commented John Brazier, managing director of the Professional Contractors' Group. "We are extremely disappointed in this behaviour by BT, and by attempting to cut costs in this way they are ignoring the substantial talent pool of highly experienced, specialised IT contractors that exists in the UK.

"We had been hearing for some time from contractors that BT may perhaps be one of the worst offenders for replacing contract staff with workers on Intra-Company Transfer visas. Such behaviour reduces opportunities for IT contractors in the UK, and in a recession opportunities should be created, not limited."

Professor David Metcalfe, chair of the UK Border Agency's Migration Advisory Committee – the body that advises the government on workforce migration issues – said his committee would investigate the BBC's findings.
In March, he told the House of Commons Home Affairs Committee: "The people coming in to do IT jobs are disproportionately coming in through the intra company transfer route and we will be having a proper look at that in our review.

"If there were real elements of, for example displacement or undercutting, we will report on this."

The story has provoked a storm on internet forums. In a post that is unlikely to surprise anyone who has borne the brunt of an offshoring initiative, one anonymous internet user, who has worked for a major Indian offsite offshoring company, claimed the practice is widespread throughout the industry.

Claiming the "self-issuing" system of work permits leaves the system open to abuse, the poster added that UK companies routinely use the system to cut wage costs using two loopholes: firstly, employers are free to pay offshore employees a flat tax-free sum each month under HMRC's "dispensation scheme". Ostensibly, this money is to cover expenses, but the poster claims employers use this amount to reduce salary, leaving the offshore employee with the same take-home pay as local staff for a substantially reduced cost. Secondly, employers do not have to pay national insurance contributions for the first year, if the employee is in the country for less than two years. The poster also claimed that employees are rotated to get around the two-year rule.

Brazier added: "We believe the system should be amended, and Professor David Metcalfe's comments stating that the Migration Advisory Committee will be exploring potential options for doing so are encouraging. We will shortly be making our submissions to the MAC calling for significant amendments to the system. Ideally, we would like to see no position filled by an Intra Company Transfer without first ensuring that no UK worker is available to fill the post, in a similar manner to that of non-ICT visas.

"PCG has been campaigning on this issue for many years and we are pleased the Government is listening. We have had a seat on the Migration Advisory Committee's Stakeholder forum since its inception and we regularly make submissions to the MAC. As a body, it has great and positive potential to reform the system. Our recent evidence gathering campaign has shown that abuses of the system do take place and thus it urgently needs reform. Contractors are losing out, and in a recession, action needs to be taken to protect livelihoods."

The news comes as three men were jailed this week for a scam creating bogus documents to support UK visa applications under a number of leave-to-remain schemes including the Highly Skilled Migrant Programme and the International Graduate Scheme. Immigration authorities were criticized by the prosecution for their "shambolic" system.

Graham Taylor
 

Editor's note: Further reading:  Intra-Company Transfers & Work Permit updates