Recruitment and Employment Confederation (REC) – Written evidence

About the Recruitment and Employment Confederation (REC)

The REC represents over 3,500 recruitment businesses – 80 per cent of the UK’s £26.5 billion industry by turnover – and 5,500 individual recruiters through its Institute of Recruitment Professionals. REC members supply workers into every sector of the UK economy. This includes STEM-related fields such as Technology, Engineering and Technical, Life Sciences, and Healthcare, each of which has a dedicated REC sector group.

The REC supports members and drives professionalism in the industry through free legal services, training and a comprehensive professional qualifications framework. All companies applying for membership must sign up to the REC Code of Professional Practice and pass a robust Compliance Test based on statutory regulations and higher ethical standards. Members must pass the test again every two years to maintain membership and the REC provides a range of support services to help members ensure they comply with the Code. There is also an independent Professional Standards Committee which accepts, investigates and acts upon complaints, with representation from employers (via the CBI) and workers (via the TUC).

Given the REC’s focus and expertise, this submission focuses primarily on international STEM graduates in the UK labour market and their ability to pursue employment opportunities here after completing their studies.

Latest Labour Market Data

Demand for STEM Skills 

The REC undertakes research and collects monthly data on labour market trends from both recruiters and employers. The data from recruiters in the Report on Jobs is particularly valuable in forecasting trends, given recruiters’ unique position at the sharp end of the jobs market.

This data routinely tracks about 6 weeks ahead of the national ONS figures and pinpoints sectors in most need of staff and which shortage skills are in particular demand.

According to the February 2014 Report on Jobs, recruiters across the UK reported that Engineering was the most in-demand sector for both permanent and temporary recruitment.

The data from this research over the last 13 months (Feb. 2013 – Feb. 2014 inclusive) reinforces the demand for staff in STEM sectors. Looking at permanent roles over the period, Engineering was the most in-demand sector nine times, and ranked in the top five in-demand sectors in 12 out of 13 months.

Staff demand was also high in the IT and Computing sector, which ranked as the most in-demand sector twice and in the top five every single time.

The other key STEM sectors ranked consistently as needing permanent staff were Nursing and Medical, which made the top five in-demand sectors 11 times, and Accounting and Financial, which was included in the top five a total of nine times. Temporary demand followed a similar pattern in STEM-related sectors.

The Report on Jobs data breaks down further into specific skills shortages for permanent and temporary hires. Below is the latest data from February 2014:

STEM skills in short supply for permanent roles:

• Engineering: Automotive, Civil engineering, Electronics, General engineering, Manufacturing, Rail, Telecoms.
• Accountancy/Financial: Accountants, Audit, Finance, Funds, Payroll, Purchase ledger, Tax.
• IT/Computing: C++, Developers, General IT, Java, .Net, PHP, Project managers, Support, Technical consultants.
• Construction: Surveyors.

STEM skills in short supply for temporary roles:

• Engineering: General engineering.
• Accountancy/Financial: Accounting, Payroll.
• IT/Computing: Business intelligence, Developers, Java, .Net, Project managers, SAP, Support, SQL.

Evidence from Recruiters on the Ground

In addition to the Report on Jobs data cited above, individual REC members recruiting into STEM fields, particularly Engineering and IT, have long reported difficulties in finding suitably qualified candidates to fill employer demand.

This includes both new graduates and those who have graduated and worked for a year or two, who formerly could stay in the UK on a post-study visa (and then switch to Tier 2). Not only are individual graduates struggling to stay on, but the UK economy is losing out on much needed talent.

Here are some comments from UK recruiters:

“We are seeing a skills shortage across the board in IT. It is certainly difficult to fill the roles.”

“We only work with clients on a one-to-one basis. So if we are unable to the fill the role, unless they happen to fill it themselves without recruiter support (which is rare), it goes unfilled.”

“We have had very good experiences with non-EU candidates. They are genuine professionals who can fill skills shortages and gaps in our market.”

“Some of our clients are smaller companies who really need talented people to grow. If they can’t get the right staff, the company is not growing.”

These are the roles and skills where individual companies in the REC’s Engineering Sector and IT Sector groups have reported particular shortages in recent months:

IT:

• Programmers
• Developers
• Software Engineers
• Coders generally
• Java (serious shortages reported)
• Oracle e-business
• SAP
• MS Suite Technical skills
• Web Developers
• Technical Architects
• Technical Project Managers
• Software Testers

Engineering:

• Civil Engineers
• Structural Engineers
• Mechanical Engineers
• Electrical Engineers
• Design Engineers
• Project leaders

Other market factors

Although immigration restrictions are making it difficult for recruiters and employers to find the right skills for the jobs available, this situation is exacerbated by other trends. For example, engineering and technical recruiters report an increasingly ageing workforce, coupled with insufficient new entrants from the resident labour market.

In addition, UK graduates are increasingly lured away to jobs in Europe, the Middle East or even further afield. This is based on growth markets abroad offering plentiful opportunities, plus a greater willingness among younger workers (particularly in their 20s and 30s) to move abroad. Overall, younger members of the highly-skilled UK workforce are much more mobile and open to the possibility of working internationally than previous generations.

Are international STEM graduates finding it difficult to pursue employment in the UK after completing their studies at higher education institutions?

HSMP/Tier 1/Tier 2/Post-Study Visa

REC members report that STEM graduates – many with shortage skills in high demand – are finding it very difficult to pursue post-study employment in the UK.

Over the past ten years, many recruiters and employers in STEM fields (as well as graduate candidates) relied on the Highly-Skilled Migrant Programme/Tier 1 routes and the Post-Study Visa (and conversion to Tier 1 or 2). But since HSMP/Tier 1 General and the Post-Study Visa have been scrapped, recruiters have seen a marked drop in the supply of STEM graduates.

And even when graduates do attempt to stay in the UK and work, it is extremely difficult to convince employers to sponsor them through Tier 2, given the cost, complexity and uncertainty of the process. This includes those graduates on a Post-Study Visa who need sponsorship to switch to Tier 2.

In addition to the cost and complexity, many companies are still operating with a very stretched workforce, so they simply do not have the time to manage the sponsorship process, especially with no guarantee they will be able to hire at the end. Just recruiting is time-consuming enough, which is why they rely on specialist recruiters. But recruiters cannot apply for the visa on the employer’s behalf, nor can an agency place STEM graduates on a contract basis without the proper visa in place.

“Overall, few clients will go down the sponsorship route.”

“So many SMEs just won’t consider sponsorship and simply don’t appoint anyone.”

“Even when candidates do have a Post-Study Visa, it is now much harder to move them to a full working visa.”

“Smaller companies lose out – either because they cannot manage the cost, time and complexity of the sponsorship process as a large company can, or because they have had their fingers burned with previous applications.”

While it is the employer who must apply for sponsorship and a Tier 2 visa, recruiters do help them through the process. For example, recruiters provide the evidence of job advertisements and their attempts to find a UK/EU national first, to satisfy the Resident Labour Market Test. They also regularly help employers understand and navigate the various stages of Tier 2 (General) and Tier 2 (ICT) applications. This takes significant time and resource and there is no guarantee for either the employer or recruiter that the application will be successful.

Immigration Cap

REC members also worry that as the jobs market picks up, the yearly Tier 2 cap will become much more problematic and could ultimately prevent employers from even being able to make Tier 2 applications for much-needed hires.

Cooling-off Period

Even graduates who have been successfully sponsored via Tier 2 in the past are struggling to pursue further employment, given the new time limits. Some recruiters report that they have pools of candidates with much-needed skills who want to return to work in the UK. But they are stuck in the “cooling off period” required before making a fresh Tier 2 application and returning to Britain – even though companies here want to hire them and need their expertise.

Settlement

Finally, the changes to the settlement rules are also making companies feel uncomfortable and further dissuading them from applying for Tier 2 visas. Given the time and financial investment most companies make in new hires, they want an element of certainty that the immigration rules will not prevent them from retaining their staff over the longer term. 

Companies want to grow their business for the future, not just get the right person for a few years, train and develop them, and then see them forced out of the UK.

What is the evidence currently available of an adverse effect of the changes to immigration rules on prospective international STEM students choosing to study in the UK?

Although recruiters are not directly involved with applications to STEM courses in the UK, they do see the impact in their candidate pools.

“We have definitely seen a drop-off in supply. When the rules first changed, we still had Post-Study Visa holders applying, but that has now fallen away.”

“We can tell by the responses to jobs and roles that there is an impact on the number of students coming. Generally speaking, the volume of people coming to the UK for computer science and related degrees is dropping off.”

“The restrictions are very much putting bright international students off from studying in the UK.”

Recruiters speak to candidates – including international STEM graduates – every week. They report that for certain STEM fields, UK job prospects play an enormous role in students’ decision on where to study.

For example, the UK has been a magnet for talented students in the IT industry because of the innovation that happens here – not least in the City and Silicon Roundabout. Graduates want to be part of that and start their careers immersed in this dynamism.

English also plays a role – because it is the international language of IT, the UK has a strategic advantage in getting the best people interested in coming here, and therefore remaining at the forefront of the global industry. But without the chance to stay and work afterwards, recruiters report that students are less likely to come to the UK to study in the first place.

Solutions and recommendations:

Long-term approach

Of course, the principal solution for the UK’s long-term STEM skills needs is encouraging sufficient numbers of talented young British people to study STEM and then pursue – and remain in – careers in related fields. There are a number of excellent initiatives underway to drive this, some of which REC members are involved in, such as “Tomorrow’s Engineers”.

But this is a long-term process and even if properly funded, perfectly executed and successfully delivered (which is by no means guaranteed), cannot meet the current UK skills shortages. Nor is EU-based migration providing STEM graduates in volumes large enough to meet current demand, partly because it excludes nationals from some of the world’s largest STEM talent pools like India, China, Pakistan and North America.

Therefore an interim immigration solution is needed – and with great urgency – to prevent the UK losing its place among the highest-skilled, world-leading STEM economies.

Recommendations for interim policy solutions:

1)      Reinstate a post-study work visa of at least two years for STEM sectors

• While it may not be politically viable to reintroduce a post-study visa for all graduates, the acute shortage of STEM skills could be addressed by a special STEM post-study visa for those in the UK on relevant courses.
• This could be further targeted to a certain degree level, for example a minimum of a Bachelor’s or Master’s Degree, or in named disciplines (IT, Engineering, etc.)
• It could also be earmarked for graduates on particular courses at named universities to ensure it attracts students completing the very best programmes. This was the type of approach used by the former HSMP route for MBA graduates.
• Any reinstated post-study visa must have clear switching provisions to make it possible for graduates who stay and work for the initial period (e.g. two years) to extend their stay and continue adding value to the UK economy.
• A new post-study visa and switching provisions could be linked to an expanded Shortage Occupation List (see below) to ensure the most in-demand roles are able to be filled.

2)      Exempt STEM roles from the RLMT

• Just as roles on the Shortage Occupation List (SOL) are exempted from the Resident Labour Market Test, it would be expedient to exempt STEM roles from this requirement too.
• Although it is a small administrative change, the signal sent to STEM employers would help ease some of the psychological hurdles businesses often face when deciding whether to invest the time and money in applying for sponsorship.

3)      Expanding the SOL to make it easier for employers to use Tier 2

• One solution which requires no new policy or administrative change would be for the MAC and Home Office to expand the current SOL to include a wider range of STEM roles, especially in engineering and IT, at the next review in late 2014.
• Data from the REC’s Report on Jobs and other sources should be utilised to help inform this.

4)      Assess visa pricing and process barriers that disproportionately affect SMEs

• UKVI has set out an agenda for customer service improvement that is welcome, especially given past problems with excessive delays, unreachable staff and unreliable systems. If this agenda is properly delivered, it could help encourage more employers to apply in future, but this change of outlook will take time to filter through to businesses.
• In the interim, a concentrated campaign to help support SME applicants with better guidance and advice, alongside a review of the fees, would be helpful. Having named UKVI advisers who are familiar with dealing with SMEs would be a valuable step, as would proactive partnership events with business bodies like the CBI, BCC and FSB, in which UKVI could reach out to SMEs and ‘demystify’ the process. 

5)      Bring forward the unused balance from the immigration cap’s monthly quotas

• As economic growth picks up, so too do business worries about the immigration threshold. Given that the cap has not been reached in recent years, the Government should hold the balance of unused visas as a guarantee for future demand. This means that any monthly allocated unmet could be used by applicants in future and thus avoid stifling economic growth.
• As the yearly and monthly caps have already been ‘budgeted’ in the Government’s overall immigration policy, this approach would not lead to an overall increase in the allocated limits.

20 February 2014