Twenty-five years ago, all immigration applications were free of charge. With burgeoning economic migration and a security landscape changed for ever by 9/11, successive Governments have sought to recover the escalating costs of running the system and rising fees and surcharges have become the norm. Increasingly, employers are looking to claw back their immigration-related costs from migrant employees themselves. After all, many are willing to contribute in return for the opportunity to live, work and eventually settle in the UK. Too often employers fail to realise that there are strict and tightening limits on what can be recovered, and serious dangers for those who overstep the line.
The sponsored Skilled Worker and Global Business Mobility categories remain the dominant immigration routes through which UK employers recruit overseas workers.
When a licenced employer sponsors a worker, it incurs a number of Home Office fees and administrative obligations. The costs associated with recruiting overseas workers can be a significant proportion of the employee’s salary, especially when the cost of family dependents is taken into account. Further increases in these costs have recently been announced – see our article on business immigration changes ahead.
As a result, sponsor licence holders are investing heavily in visa sponsorship and ongoing compliance costs and looking for ways to limit them. Meanwhile. the Government’s rationale is to make the high cost of operating the immigration system at least partially self-funding, to generate revenue for programmes designed to upskill resident labour, and to disincentivise employers from seeing immigration as a low cost alternative to investing in skills and training.
Clawbacks and business health checks
Sponsors should conduct business health checks and consider recruitment budgets carefully to avoid false economies and, at worst, serious risk to their licences. Increasingly, employers are looking to claw back immigration-related costs from migrants themselves, who may well be prepared to contribute in return for the opportunity to live, work and eventually settle in the UK. However, there are dangers in doing so.
Sponsors must consider which costs can properly be clawed back from sponsored employees. Many of these costs are incurred upfront before the worker joins the business, so it makes sense to consider clawback provisions at the outset. This may be necessary where an intended hire does not join the business or leaves earlier than expected during the sponsorship period.
However, sponsors must ensure that any clawback arrangements align with UK employment law. Under section 13 of the Employment Rights Act 1996, employees have the right not to suffer unlawful deductions from wages. Any repayment or deduction must be clearly agreed in writing and must not amount to a penalty or an unfair restraint on the employee’s right to work elsewhere.
It is therefore essential that sponsors obtain employment law advice before including clawback provisions in employment contracts. These provisions must be compliant with both employment law and sponsorship duties.
From an immigration perspective, if the Home Office finds that you have attempted to recoup fees that are not permitted, your sponsor licence could be revoked. This would severely impact your ability to employ new migrant workers and could affect current sponsored employees should your licence be withdrawn.
Prohibited clawbacks
Sponsors must not, under any circumstances, recoup or attempt to recoup any of the following from sponsored workers:
- Sponsor licence fee
- Certificate of Sponsorship (CoS) fee
- Immigration Skills Charge (ISC)
- Associated administrative costs, including charges for premium services relating to the above
- Legal advice and costs associated with applying for or maintaining the above
What can be claimed back?
There are certain costs associated with sponsorship that may be passed on to sponsored employees – but context and “reasonableness” matters:
- UK visa application fee
- Immigration Health Surcharge (IHS)
- Biometric appointment fee
- Priority service or premium processing fees
- Legal advice and costs associated with the above
But note: It is sensible to consider whether it is reasonable to claw back legal fees from a sponsored employee. This is because most larger sponsors have dedicated legal representatives, and the employee may not have had a choice about which legal services were required or which representative was used.
Once again, sponsors must ensure compliance with both sponsorship duties and employment law when considering any recovery of costs.
Impact of clawbacks
The Home Office continues to focus heavily on compliance with sponsorship and salary thresholds. Roles must meet the relevant general salary thresholds and going rates. Sponsors also have a duty to notify the Home Office if a sponsored employee’s salary is reduced.
Certain aspects of clawback provisions remain subject to clarification by the Home Office. However, it is clear that sponsors must calculate salary after any deductions or repayments are made.
The Immigration Rules provide that:
SW 14.2A. Any money paid by the applicant to the sponsor will be considered as follows:
(a) The following payments will be subtracted from salary, unless (c) applies:
(i) deductions from salary; or
(ii) repayments of loans; or
(iii) investments.
(b) Any such subtractions will be averaged over the length of time the applicant is being sponsored for, for the purpose of salary considerations.
(c) Money will not be deducted where the payment is not related to business costs, immigration costs or investment, but rather an additional benefit offer which the applicant has a genuine choice whether to take up, for example salary sacrifice arrangements.
Therefore, clawbacks could potentially result in a sponsored employee’s salary falling below the general threshold or the going rate for the relevant SOC code, putting the sponsor at risk of non-compliance.
What steps should employers take?
If an employer intends to include a clawback clause in an employment contract, the clause must be transparent and pre-agreed. Otherwise, it could amount to an unlawful deduction or an unenforceable penalty.
Employers should review sponsorship agreements carefully to ensure that any repayment terms comply with both immigration and employment law. Transparency is key.
A poorly drafted clause can ultimately cost far more than the sponsorship itself. Sponsors must ensure that they remain compliant or risk enforcement action by the Home Office.
Key takeaways for sponsors
- Budget realistically: Treat sponsor licence fees, CoS fees, and the ISC as employer costs.
- Seek advice: Obtain employment and immigration law advice before implementing clawbacks.
- Be transparent: Put repayment terms in writing, agreed and signed before sponsorship begins.
- Be consistent: Avoid discrimination risk by being fair and consistent in how and to whom permissible clawbacks are applied
- Monitor salary thresholds: Ensure deductions do not push salary below the applicable Home Office minimum.
- Stay compliant: The risk of licence suspension or revocation far outweighs any potential savings.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
