Immigration update: key changes to Tier 1 and Tier 2

From the inception of the Points-Based System (PBS) in November 2008, the UK government has made numerous changes to the Immigration Rules affecting each tier of the PBS. Sub-categories have been added and removed in the last two years, from the removal of Tier 1 (General) in April 2011 to the introduction of Tier 1 (Exceptional talent) in the same month; Tier 2 has been restricted through annual quotas, increase in skills threshold and minimum salary requirements and the criteria for indefinite leave to remain for PBS migrants have been gradually tweaked to exclude certain sub-categories leading to settlement upon five years continuous employment in the UK.

April 2012 has certainly been a big month for changes by our present government; the closure of Tier 1 (Post Study Work) came into effect on 6 April, further changes were made to settlement rules for Tier 2 migrants and annual limits for Tier 2 were re-set for 2012-13. A new Tier 1 (Graduate Entrepreneur) category has been introduced for graduates who have developed their entrepreneurial skills, to extend their stay after graduation to develop their business in the UK. At the same time that the PBS is gradually being shaped to welcome entrepreneurs and investors to enter and remain in the UK, the routes that were designed to support skilled labour from outside the EEA appear to be narrowing.

Changes to Tier 2

Following a report from the Migration Advisory Committee (MAC) published in January 2012 advising the government on the 2012-13 annual limit for Tier 2, the government announced on 4 April that the Tier 2 (General) limit will remain at 20,700; no change from the previous year. While this news has been welcomed by UK businesses and practitioners, further changes to Tier 2 that have been implemented this month and others are due to come into force on 14 June 2012, need to be looked at closely to determine the potential impact of these changes.

Changes to Tier 2 can be summarised as follows:

  • A maximum period of six years spent as a Tier 2 (General), (Minister of Religion) and (Sportsperson) has been introduced. Successful applications will be granted leave up to three years with the possibility of extending for a further three years. Applicants will either need to apply for settlement upon completion of five years in the UK under Tier 2 or leave the UK before the expiry of their stay; if individuals opt for the latter, they will not be able to apply to return as a Tier 2 Migrant until 12 months after their previous leave has expired;
  • A new minimum salary requirement of £35,000 (or the appropriate rate set out in the codes of practice, whichever is higher) has been introduced for those who wish to settle in the UK. This requirement will therefore affect migrants who were granted leave to enter/remain in the UK under the rules in place from 6 April 2011;
  • The introduction of a 12-month ‘cooling-off’ period across all Tier 2 routes. Tier 2 migrants will need to wait for 12 months from the expiry of their previous visa before re-applying for entry clearance under Tier 2.

Tier 1 (Graduate Entrepreneur)

Tier 1 (Graduate Entrepreneur) is a new sub-category, for graduates who have been identified by UK higher education institutions (HEIs) as having developed world-class innovative ideas or entrepreneurial skills, to extend their stay in the UK after graduation to establish one or more businesses in the UK. The UK Border Agency (UKBA) defines a higher education institution as a recognised body or as an organisation that receives public funding for specific funding bodies, and therefore, this will not apply to all education institutions in the UK.

The HEI must also be a ‘highly trusted sponsor’ and have an established process for identifying, nurturing and developing entrepreneurs among their graduate and postgraduate population. The UKBA have applied an overall limit of 1,000 places for initial applications for each of the first two years and applicants will be granted an initial period of 12 months, with the option to extend for a further year, largely dependent on whether the HEI is satisfied of the progress a migrant has made. Other key points of the scheme are as follows:

  • applicants are expected to spend the majority of their time developing their business but may also work up to 20 hours per week;
  • this is a temporary category, which will not lead to settlement;
  • migrants under this category are expected to switch into Tier 1 (Entrepreneur) or leave the UK;
  • funds required to switch into Tier 1 (Entrepreneur) for those who have registered as self-employed or a director will be lowered from £200,000 to £50,000;
  • the lower funding threshold will also apply to applicants switching from Tier 1 (Post Study Work).

Closure of Tier 1 (Post Study Work)

The announced closure of Tier 1 (Post Study Work) may have, even for a short time, threatened the future of Tier 4, the route available for students to study at degree level (and below) at a UK institution. Tier 1 (Post Study Work) enabled graduates from the UK to apply for leave to remain following the award of their degree unless they had an offer from a sponsor under Tier 2 of the PBS. The operation of Tier 1 (Post Study Work) was flexible; graduates would be able to look for work and gain experience with a UK employer without sponsorship or set up/join an existing business during the two years permitted under this category. Graduates would have the option of switching into an appropriate Tier 2 or Tier 1 sub-category during their period of leave. The attraction of Tier 1 (Post Study Work) for graduates and employers has been the ability to work in the UK without sponsorship under Tier 2, where minimum salary levels and associated costs of sponsorship may not have been attractive during a period of recession.

The government viewed Tier 1 (Post Study Work) as an opportunity for migrants to take unskilled jobs/jobs that can be filled by the resident workforce. However, the government has introduced the following post-study work provisions into Tier 2 to soften the blow:

  • Students who have lawfully completed and passed a UK degree, Postgraduate Certificate in Education or Professional Graduate Diploma of Education, or have completed a minimum of 12 months study in the UK towards a UK PhD during valid leave as a student will be able to switch into Tier 2 (General) provided the following requirements are also met:
  • the course must have been studied at a UK institution that is a UK recognised or listed body, or which holds a Tier 4 sponsor licence;
  • The student studied one of the above courses during their last grant or leave;
  • The student’s period of study was undertaken while they had valid leave to enter/remain in the UK, which permitted them to undertake a course of study in the UK.
  • Employers are not required to satisfy the resident labour market test provided the above requirements have been met.

As graduates will be exempt from the resident labour market test, the good news for employers is that current Tier 1 (Post Study Work) migrants will be able to also switch into Tier 2 (General) as of 6 April without having to complete six months employment in the same role with the same organisation to benefit from the resident labour market test exemption.

Changes to take effect from June 2012

Employers and practitioners also need to be aware of the changes that are coming into force from 14 June 2012.

Twenty-seven jobs are being removed from the UKBA’s occupation list in light of the government’s announcement to increase the skill level under Tier 2 from National Qualifications Framework (NQF) 4 to NQF6. For many businesses, the removal of these jobs from the skilled list, such as IT technicians, will lead to staff shortages if alternative code cannot be used to sponsor a non-EEA national.

The UKBA has recognised that it is not appropriate to advertise highly skilled jobs (within PhD level) and positions that attract a salary of £70,000 in Job Centre Plus, and therefore they are exempt from the Job Centre requirement, although positions will still need to be advertised in one other medium. There will also be an extension to the validity period of a resident labour market test from six months to 12 months for PhD-level jobs.

The level of funds to satisfy the maintenance requirement will also increase from £800 to £900 for Tier 2 migrants and from £533 to £600 for their dependants as of 14 June 2012. These funds must either be held by the migrant and their dependants for a consecutive 90-day period or certified by the employer. The inability to satisfy this requirement will lead to the refusal of an entry clearance/leave to remain application, with costly consequences.


The recent changes have reinforced the government’s desire to restrict Tier 2 to highly skilled occupations and at the same time, encourage entrepreneurs to invest in the UK. The introduction of a 12-month ‘cooling-off’ period under Tier 2 could affect the performance of overseas companies operating in the UK and, despite the new provisions allowing students to switch into Tier 2 in certain circumstances, the closure of Tier 1 (Post Study Work) could deter students from applying to study in the UK, as the routes to work in the UK after graduation have become more restrictive.