Immigration uncertainties mean stubborn year for recruiters

Recruiters, head hunters and immigration experts have had a challenging year: Uncertainties persist for work permit and permanent residence applications, while unemployment remains stubbornly high and economic growth is sluggish. 

Bright spots are on the horizon, however: Projects are taking shape in Bodden Town’s Beach Bay, at Frank Sound’s Ironwood resort, West Bay Road’s Kimpton hotel and the George Town port, while planners at Health City and Cayman Enterprise City are looking at an ambitious set of projects. 

Most will boost tourism, whether resort or medical; few will boost Cayman’s second economic pillar, financial services. Local recruitment agencies worry about the neglect, lamenting the escalating costs in the industry, fearing for its future – and by implication, their own – while facing a public perception they are giving jobs to expats, keeping Caymanians out of work. 

“This is simply incorrect,” says Stefan Cohen, co-owner of Cayman recruitment agency Baraud International, founded in 1992 by Caymanian Betty Baraud. 

“The vast majority of our placements are Caymanian candidates, albeit in this market typically skilled Caymanian candidates. 

“[I]t’s our strong preference to place Caymanian applicants wherever possible with our clients as it eliminates any immigration risk and uncertainty and, from a temporary staffing perspective, it is more cost effective,” Cohen said, adding that most of Baraud’s “temporary support pool” comprises local employees and that many of them “often convert from temporary to permanent roles relatively quickly.” 

Steve McIntosh, CEO of CML, specializing in financial services, legal and IT recruitment, says the employment market is different for every sector, but his 10 years in the business have taught him that whatever sector, the market functions in response to supply and demand, “just as any other.” 

“Sometimes this is hard to see from the perspective of a single employer, employee or job applicant,” he said, because personal experience is “the most limited of samples”: one. 

The tourism sector recently has been strong, he said, and that means upward pressure on salaries. Financial services, however, he says: “Not so much.” 

“Fund administration, for example, continues to decline in Cayman. Because many fund-administration firms have either downsized or left altogether in recent years, a high supply of candidates combined with very low demand for staff equates to downward pressure on salaries – and little in the way of promotional prospects.” 

Initially, the fallout from a declining market for fund administrators was absorbed by the demand – expanding as rapidly as the latter’s decline – for fiduciary-services providers. That, however, “seems very close to being topped out at this point as the sector becomes increasingly fragmented and commoditized,” McIntosh said.  

Industry growth in 2015 “seems set to continue in 2016” for corporate services,” while “corporate administrators have never been in such high demand. 

“[A]nd as a result of unofficial immigration restrictions in the sector, salaries have increased dramatically,” McIntosh said.  

“What has happened, just like in many other sectors, is that employers need experienced staff to service an unforeseen increase in work,” he said. 

“Immigration (rightly or wrongly) is loath to grant work permits to allow companies to hire experienced staff from overseas. Training isn’t an option in the short term, so the next best option is to simply poach a staff member from a competitor by offering them a little more money. 

“This is, of course, wonderful for experienced Caymanian corporate administrators, but at the same time a significant drag on the growth of the sector and an incentive for firms to [move] offshore, outsource and automate as much of the work as possible. This kind of ‘salary bubble’ is very much what led to the decline of fund administration,” McIntosh said. 

Immigration must balance encouragement of industrial expansion and demand for labor – and $63.2 million dollars in work-permit revenues alone in 2015/16 – with the political necessity to employ Caymanians. 

According to Immigration Department statistics, as of Oct. 15, 2015, government had issued 22,618 work permits or government contracts, an increase of about 10 percent since mid-2014. 

Increases in work permit fees took effect at the start of 2010, tripling fees in some categories. On average, permit costs increased by $3,000 per employee in most professional categories at the time. Work permit fees increased again in 2012. 

Permit fees in 2014 approximated $60.4 million – the mainstay of Immigration earnings of $89.5 million. 

Milly Serpell, founder of Stepping Stones professional recruiters, acknowledged the conundrum, suggesting she was relieved not to have to balance government finances, and observing that the work-permit scheme is often a discouragement for employers: “The cost of work permits has been an extra motivation for our clients to recruit only locally for a significant number of roles. We have witnessed many roles being left vacant for prolonged periods of time rather than employers submit work-permit applications.” 

McIntosh suggested, however, that the question of balance may be overblown: “I’ve never bought into the idea that immigration is seen as a profit center by government. From everything I have ever seen, the revenue never comes into the determination as to whether or not to grant a work permit. 

“The idea that a work permit board member would be sitting weighing whether or not to grant or deny a permit and think ‘well, this company doesn’t really need a work permit but …. the government needs the money,’ so BAM, approved: It just doesn’t make any sense,” he said. 

“One solution to this issue that may be more politically palatable than granting more work permits would be to issue limited-duration work permits, of, say, two [years] or three years that could not be extended, and afterwards required a minimum one-year break of stay. 

“This would provide much greater labor-market flexibility and give companies more time to train Caymanians to replace the experienced work permit holders they need,” McIntosh said. 

The three professionals nod toward the National Workforce Development Agency, a sort of government-sponsored clearing house for Caymanian ditch-diggers, cooks, civil servants, prison guards, hospitality workers, blue- and white-collar alike: “Every sector and job under the sun,” said McIntosh. 

“The NWDA’s main focus is getting the unemployed or underemployed back into the job market,” said Alan Brady, Cohen’s co-owner at Baraud International. “[It] is … centered on getting people back into the workforce and training them with the necessary skills. 

“In addition, they are responsible for ensuring that registered Caymanian applicants are put across for positions that are advertised for work-permit purposes for which they are suited, and therefore they are closely tied to the work-permit application process.” 

Brady said Immigration appeared to be deferring any work permits until vacancies were listed with the NWDA. Neither Brady, Serpell nor McIntosh consider the agency a competitor. However, all said they work closely with both units. 

“We encourage our clients to advertise not only in the local newspaper, but to advertise with the NWDA at the same time,” Brady said. “We often reach out to them on vacancies [when] we feel they may have suitable candidates.” 

Serpell agreed, explaining Stepping Stone’s cooperation: “[We] will often share candidates that perhaps we cannot help or NWDA know may suit vacancies that we have.” 

McIntosh was explicit, though, about the differences: “[W]e work mostly with professional candidates for the financial-services sector … To give you a sense of what the NWDA is up against, we only deal with jobs that make up about 15 percent of the workforce, we have twice as many staff and the very best systems. So, no, we don’t see the NWDA as a competitor. In fact, we cooperate with them whenever we can.” 

Brady underscored the white-collar/blue-collar divide, further differentiating between professional recruitment and the agency’s more general “clearing house” function: “Degree level is a requirement for most roles that we deal with. Often, the types of positions employers use agencies [to recruit candidates] require a professional designation. 

“In addition, clients are aware that in the current climate they can advertise locally and source suitable administrative-level candidates directly, and, as such, usually use an agency for higher-skilled positions requiring three years to five-years-plus experience along with the requisite educational background,” he said. 

Complicating matters further are evolving market demands for younger and IT-literate workers: “The market has moved towards more tech-savvy candidates,” Cohen said, “and therefore there is an element of training and up-skilling involved. In addition, there is, unfortunately, an impact on medical premiums when hiring candidates over a certain age bracket which poses a challenge.” 

While older workers present unique challenges, Cohen said, “we have undoubtedly found the baby boomers to be one of the most reliable and hardworking groups to deal with.” 

In mid-October, the Economics and Statistics Office released the latest workforce figures, pegging Cayman’s labor pool at 40,000, those employed at 38,000 and those unemployed at 2,250. The unemployment rate was 5.6 percent. 

However, the 19,000-member local labor force is half the overall total. Local employment, at 17,400, is also roughly half the overall total. Unemployed Caymanians, however, number 1,575, or 8.3 percent, much higher than the general 5.6 percent rate. 

For the first time, ESO 2015 workforce figures distinguish between permanent residents with the right to work and the “non-Caymanian population.” The former has 4,227 members, but with an unemployment rate the same as Caymanians: 8.3 percent. 

The non-Caymanian workforce numbers 17,000, but with only 323 people unemployed, a 1.9 percent rate. 

The low non-Caymanian unemployment rate, however, is built into the system. 

“There should not in theory be unemployed work-permit holders on the island,” said Cohen. “Expats … tend to understand that if they lose their job, they only have a short window of time in which to source alternate employment or they will have to leave the island.” 

Underlining the disconnect between local unemployment and expatriate recruitment, Serpell says Immigration officials and work-permit boards scrutinize every application: “Caymanians are always given priority, and it has been refreshing to see how current Immigration boards are truly examining each and every work-permit application with very close review of any Caymanian candidates – and frequently deferring work permits for further clarification … [of] why Caymanian applicants were not selected.” 

However, she said, while “unemployment is a reality in Cayman, we must acknowledge that it has been a global reality for a very long time. The economy needs to be significantly stimulated to allow for new-business investment and local-business growth, which will in turn lead to more employment opportunities. 

“It is very exciting to see the number of new hotels that are planned which will continue the growth of employment and career opportunities outside of the financial-services sector,” Serpell said. 

Widespread sentiment suggests that immigration rules, intentionally or not, are slowly suppressing financial services. “Cayman has become an exceedingly expensive jurisdiction in which to operate and unfortunately we have seen many clients in the financial sector leave to set up in lower-cost jurisdictions [in] the past few years,” Cohen said. 

“We feel there needs to be more of an effort to attract new business to Cayman for everyone’s benefit, especially in creating job opportunities for locals. 

“While many companies are registered in Cayman, unfortunately a number of them no longer have a presence locally as they have sought out less-expensive offshore jurisdictions in which to operate. We have seen the fund-administration business dissipate greatly in the past few years. This year we saw a number of banks wind down their Cayman operations, adding to the unemployment figures. Work-permit costs are certainly a factor in the cost of doing business on island, especially for SME’s [small and medium enterprises], which should be the backbone of our economy, they are feeling the biggest pinch,” Cohen said. 

Serpell sees an increasingly urgent need for economic expansion. “There are more people than ever looking for work in the Cayman Islands. In the local market the Caymanian workforce continues to grow,” bolstered anew annually by college graduates both local and returning from abroad. 

“There are opportunities at all levels for all backgrounds, but qualifications are becoming more and more important. Experience is also vital, but it is a competitive employment market, and certifications and qualifications and evidence of continued learning and development is essential,” she said. 

Picking up the subject of an inexorably swelling workforce facing inadequate employment opportunities, McIntosh said, “What’s clear is that the number of Caymanians in the workforce is increasing year on year, mostly because of new status grants as well as school-leavers outnumbering retirees. Unfortunately, the economy just isn’t keeping up. 

“The sectors of the economy showing the most growth (tourism and construction) are, unfortunately, the ones that have struggled the most to attract Caymanians over the years. That doesn’t mean it’s a bad thing, but it is downright bizarre that the government has no problem approving tourism projects that will create a thousand jobs for expatriates and have little impact on most [other] sectors of the local economy – while holding back growth in financial services that would have a much greater economic impact with far fewer work permits,” McIntosh said, pointing at a changing economy insufficiently served by a lagging immigration system. 

“From my perspective, the immigration system in Cayman is pretty much of a deal breaker for growth in financial services,” he said. “In order for any financial-services company to establish or grow in Cayman, they have to be guaranteed to be able to hire the people they need to run their business, be they Caymanian or otherwise, at a cost that allows them to remain competitive. 

“All that the current system guarantees,” he said, “is delay, cost and frustration … and all of this while having to suffer the opprobrium of the politicians and the public who think you are part of a conspiracy to avoid hiring them and take over the country. 

“The immigration system is an enormous drag on our economy,” McIntosh said. “It drives good jobs from the island and prevents new jobs being created. 

“It’s not about benefiting expats vs. benefiting Caymanians. It’s about having a thriving economy or not. Holding the economy back for fear of creating jobs for expats is like cutting off your nose to spite your face. A job held by an expat today can be held by a Caymanian in the future.” 

If, on the other hand, he said, “a job is lost or never created, no Caymanian will ever hold it. 

“The entire immigration system is badly in need of modernization. Most Caymanians think it only works for business; most businesses think it only works for Caymanians. The truth is,” McIntosh said, “It works for no one. 

“But politicians seem paralyzed because they see any change that makes the system more effective as a Faustian bargain making it easier for companies to get permits when many Caymanians want it to get more difficult. 

“It would not be difficult to fix if the political will existed. The common ground between all stakeholders – Caymanians, employers and even work permit holders – is that each wants transparency, expediency and fairness. A new system that commits to those three principles for all can succeed where the current system has failed.” 

Inevitably, the sense arises that the system is at best nebulous, if not whimsical, in many cases forcing recruiters into roles as immigration and work-permit consultants. 

“We have noticed over the past year that our clients are increasingly looking to outsource their immigration administration to an agency as they find the process cumbersome and time consuming and that it detracts from their core business,” said Cohen. 

“There has also been an ongoing uncertainty with the PR system and its application and therefore we have been managing our client’s expectations and supporting them through the process.” 

The last word belongs to CML’s CEO: “The Cayman Islands has many wonderful attributes – wonderful people, beautiful scenery, modern infrastructure and a modest burden of taxes. 

“We should be fighting off inward investment with a proverbial stick. The country has enormous potential; until government finds a way to fix the most glaring obstacles to our success, it always will.” 

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Immigration uncertainties pose challenges for recruiting firms in Cayman.

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