An open letter from the UK’s startup ecosystem on the changes to individual occupation going rates for the Skilled Worker Visa and its impact on start

Dear Home Secretary,?

Britain’s tech sector is the largest in Europe, and is now worth over $1 trillion. From East London to clusters in cities such as Manchester and Edinburgh, British tech is not just leading the charge – it’s setting the standard for the world to follow. Our ability to attract talent from around the world has been critical to our success. In 2023, The Entrepreneurs Network found 39% of the UK’s fastest-growing startups have at least one immigrant co-founder – down from 49% in 2019. Prime Minister Rishi Sunak has repeatedly cited this statistic to demonstrate the contributions migrants make to the economy.?

So far, our immigration policy has been designed with this in mind. The points-based immigration system targets the skills most needed by employers while remaining flexible to labour market changes. The Government has introduced the Graduate and High Potential Individual Visas to encourage recent graduates to work in the UK and contribute to our economy. The Scale-Up Worker Visa has also helped ease talent challenges for startups, and the Global Talent Visa has brought tech innovators from around the world to the UK.?

Today, the Government announced its Future Technology Research & Innovation visa scheme to bring more AI researchers to the UK. More high quality visa access is of course welcome, but the simultaneous changes to the Skilled Worker Visa – which is the most utilised and well-known visa route – mean this is one step forwards, and two steps back.

Among the recent changes include an increase in the going rates – or minimum salary requirements – for specific occupations to qualify for the Skilled Worker Visa. Salaries had previously been set at the 25th percentile for Annual Survey of Hours and Earnings (ASHE) data, but with the new changes these rates have now been increased to the 50th percentile. In practice, this means startups hiring software engineers will now be required to pay them a minimum salary of ￡51,000 if they want to employ a foreign worker.?

The ability to meet these new salary requirements may not be feasible for early stage startups, who cannot always pay their workers high wages at the outset. Instead, these startups often offer early stage employees equity stakes in their businesses as part of their compensation packages. This grants them a portion of ownership in the company, entitling them to a share of the company’s value and potential future profits and giving them an incentive to grow the company to its full potential. However, the new salary requirements will mean many startups who compensate their employees through a mixture of wages and equity shares will be unable to employ foreign workers using the Skilled Worker Visa.?

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.?

It is also important that startups are able to demonstrate to funders that they have built the right team with the right skills to get the job done. In an already tight investment climate, access to the brightest and best from around the world is more important than ever. If startups are unable to access this source of talent from abroad, we risk stifling innovation and undoing the progress that has been made in the past decade.?

We believe that there are small changes the Government can make that would mitigate the unintended impacts on startups. We would like the Home Office to 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, which will be going up to ￡38,700, but not the occupation threshold if they are also compensated through equity stakes in the business.?

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.?

More broadly, allowing the use of equity stakes to be counted towards salary requirements for the Skilled Worker Visa will help the UK compete with our global peers in the race for talent – ultimately contributing to job creation, innovation, and economic growth here in the UK.

We the undersigned look forward to hearing from you on this matter.

The Entrepreneurs Network

Startup Coalition