We just published a letter we’ve written to the Home Secretary alongside our friends at Startup Coalition. It argues that the new salary requirements will cut off international talent to many UK startups.
As covered by UKTN, we think the Government should allow companies to count equity towards the salary requirements for the Skilled Worker Visa. This would enable startups to continue to sponsor foreign workers whose salaries meet the new general salary threshold (£38,700), but not the occupation threshold if they are also compensated through equity stakes in the business.
As the letter states: “Founders frequently tell us that access to talent is a key barrier to scaling their businesses. Startups need staff with the right skills to develop and execute innovative ideas. They often compete with larger, more established companies for talent too – yet these changes could see dynamic startups miss out on the skills they need, while established tech giants will be unencumbered by them. Startups based outside of London, where data shows tech salaries are lower, will be disproportionately impacted by these changes.”
“Equity is a standard form of compensation for many startup employees. Not taking this into account could dramatically underestimate their actual earning potential. Allowing equity to be counted towards salary requirements provides a more accurate reflection of an employee’s total compensation package, and ensures that startups are not unfairly disadvantaged in accessing talent. It would also help to facilitate startups’ ability to access talent from abroad – especially those who are interested in the high earnings potential enabled by equity stakes.”
The threshold hikes are incredibly shortsighted and show a lack of understanding of the UK’s startup scene. Ambitious startups will be hit hardest by the changes as equity compensation is often the only way they can compete with large companies to attract top talent. As Bella Rhodes, Talent Policy Lead at Startup Coalition, says: “UK startups are already struggling to access skilled workers, and the changes that come into force today make it more difficult to fill vacancies.”
I should point out, this isn’t the only policy change we want. We also think the government needs to reduce visa fees, expand the High Potential Individual visa and the Youth Mobility Scheme, and much, much else besides. All are focused on targeting proven and high potential talent.
Whatever is going on in the national debate on immigration, the demand from businesses and returns to the economy for high-skilled immigration is only increasing. There is absolutely no sign of this slowing and every sign that it’s intensifying.
We won’t rest until the UK has the best visa system in the world for founders (and even then we will need to defend it). To that end, next week I’ll share a link to a Jobbatical report on this topic (sign up for the launch at the Sea Containers in London on 18 April here); later this year with Fragomen we’ll release the next edition of our Job Creators report; we’re working with UK Day One Project on building out some of our policy proposals for the next Government (whoever wins); we’ll continue our MP immigration roundtables with Kingsley Napley; and hopefully one or two more projects. Get in touch with my colleague Derin Kocer if you’re equally passionate about this topic.
Dis Credit
This week nine startup founders told the Financial Times that HMRC’s failures in administering R&D tax credits has left them exploring moving overseas, scrapping plans to create jobs or rethinking investment decisions.
Matthew Millar, co-founder of Really Clever, said that he was considering moving its operations abroad after his fungal discovery platform was asked to repay £44,000 in relief: “[The process] just pressurises the entire situation the business is in, from a resource perspective, for us having to explain it to investors [and...] our board.”
There are many more such cases and it’s not a new phenomenon. As regular readers will know, esteemed organisations like the Chartered Institute of Taxation (CIOT) have been highlighting the dysfunction for a while now. All the way back in July 2023, the CIOT was pointing out that HMRC is rejecting legitimate claims and stone-walling other genuine claimants with a bureaucratic system driving them to give up on their claims. For additional reading, check out their 12-page letter to HMRC and the efforts of Lord Leigh and others in Parliament.
There is a way out of this mess. As well as giving insights on the latest R&D in key sectors like tech and life science, the Spring Budget 2024 document promised that a new panel would “help review guidance to ensure HMRC and its directives remain up to date, while also giving clarity to claimants.” The CIOT recommended that this panel should help with the training of caseworkers at HMRC to ensure that the rules are applied consistently and address some of the issues that we have seen in the compliance approach. It’s time that some feet were held to a metaphorical fire.
Talk of becoming a ‘Science Superpower’ is dirt cheap when the government isn’t even getting the basics right.
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