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The Home Office recently updated their guidance for sponsor licence holders. The changes implement policy aimed at curbing exploitation in the visa sponsorship system.
The key changes include:
- Clamping down on passing sponsorship costs to employees: New rules restrict which visa/sponsorship-related expenses an employer (sponsor) can recoup from or charge to sponsored workers. This has immediate implications for any clawback agreements between employers and Skilled Worker visa holders.
- Changes to key personnel requirements: New sponsor licence applications must now have at least one in-house Level 1 user with settled status (with only very limited exceptions), which could pose challenges for some start-ups and smaller firms.
- Ban on sponsoring in a personal capacity: Sponsors cannot use a sponsor licence to sponsor workers for purely personal or household roles (e.g. a family nanny), outside the scope of their business. Doing so will lead to licence refusal or revocation.
While multiple areas were updated, the most impactful change for existing sponsor licence holders is the prohibition on passing certain sponsorship costs to sponsored employees. This prohibition only applies to employers with a Skilled Worker sponsor licence and the workers they sponsor, e.g. employees under the Skilled Worker visa and Health and Care Worker visa categories.
Below, we focus on these new cost-related restrictions, their scope, and what they mean for employers in practice.
Ban on passing sponsorship costs to employees
Effective 31 December 2024, employers with a Skilled Worker sponsor licence are explicitly prohibited from passing certain fees and costs to sponsored workers. The Home Office now states it will “normally revoke your licence” if an employer recoups, or attempts to recoup, any of the following from a worker they are sponsoring:
- Sponsor licence application fee for the Skilled Worker route and any associated administrative costs, including the fee to add the Skilled Worker route to an existing sponsor licence. This covers any costs related to obtaining, using or maintaining the sponsor licence (explained further below). The rule applies to any recoupment on or after 31 December 2024, even if the licence was obtained and fee paid earlier.
- Certificate of Sponsorship (CoS) fee for a Skilled Worker, when the CoS was assigned on or after 31 December 2024. CoS assignment fees before that date are not explicitly covered by the new rule, but see our guidance below on transitional considerations.
- Immigration Skills Charge for a sponsored worker, i.e. Skilled Worker or Senior/Specialist Worker. This was already a long-standing rule and continues to apply. Sponsors must pay the skills charge themselves and cannot seek reimbursement from the sponsored employee.
These changes close the “grey area” that previously existed. Until 31 December 2024, only the Immigration Skills Charge was expressly prohibited from being passed to sponsored workers. It was technically permitted for employers to require sponsored staff to pay or pay back other costs, such as the CoS fee and the sponsor licence fee. That is no longer allowed for employers with a Skilled Worker sponsor licence. The updated guidance makes clear that if an employer chooses to recruit from overseas, it must bear the core sponsorship costs of the sponsor licence, CoS, and related admin. Employers must not pass these costs onto sponsored workers. Any attempt to charge the employee for these specific costs will be treated as serious non-compliance, likely resulting in revocation of the sponsor licence.
What counts as “associated administrative costs”?
One phrase in the new rule is that “associated administrative costs” of the sponsor licence fee cannot be recouped. The guidance does not define this term, but it should be understood broadly as any costs the sponsor incurs to obtain, use, or maintain their licence.
We have received confirmation from the Home Office that this means employers cannot ask workers to pay for:
- Premium or expedited services related to the sponsor licence application or management, e.g. the £500 priority service for faster sponsor licence processing, and the £200 priority change of circumstances fee cannot be recouped.
- Legal fees for sponsor licence advice or applications if the employer hired immigration lawyers or advisors to help secure or manage the sponsor licence, those professional fees are the employer’s responsibility and cannot be passed to sponsored workers.
In short, any expense directly tied to the sponsor licence, compliance, and CoS, including professional support services, should be budgeted as business costs and must not be recouped from sponsored workers.
Ultimately, any cost recovery from employees must also comply with general employment law, so employers should be mindful of both immigration and employment regulations when structuring any clawback provisions.
What about visa application fees and other costs?
Importantly, the Home Office’s new ban does not cover every expense associated with bringing a worker to the UK. Some costs can still be borne by the migrant worker or repaid to the employer if the employer advanced the cost.
The logic is that certain fees primarily benefit the individual. The visa grants them permission to work/reside in the UK, whereas the sponsor licence and CoS benefit the employer. According to the updated guidance and our analysis, employers are still permitted to require the worker to pay for or reimburse:
- Visa application fees for the worker’s entry clearance or permission to stay. These fees, which range from £719 to £1,636 depending on the visa duration and in/out of country application, can be paid by the worker directly. If the employer paid the visa fee, it can lawfully recover that amount from the employee.
- Immigration Health Charge, this mandatory charge currently costs £1,035 per year of the visa for adults and is also considered the worker’s personal cost. Employers may have policies to cover it as a perk, but there’s no rule forbidding employers from charging it to the individual or recovering it later.
In conclusion, visa related costs and the immigration health charge fees are not included in the new prohibition. Employers can ask for these costs to be repaid, but should be mindful of best employment law practices. Employers should distinguish visa costs from sponsorship costs (sponsor licence, CoS, Immigration Skills Charge, etc.) which cannot be passed on. By drawing a clear line, employers can avoid inadvertent breaches. The employer covers the sponsor-side fees, and the employee can cover the visa-side fees.
Please note that the November 2024 ministerial statement indicated an intention to extend these cost restrictions to other sponsored work routes over time. For example, employers sponsoring under the Global Business Mobility routes should be prepared for similar rules in the future.
Implications and best practices for employers
These changes have immediate compliance consequences. An employer found to have charged a sponsored worker any of the prohibited fees after 31 December 2024 will, in most cases, lose their sponsor licence. Sponsor licence revocation is a very serious outcome. It not only damages the employer’s ability to hire from abroad for years, but also impacts current sponsored employees who could be forced to find a new employer or leave the UK if the sponsor licence is revoked.
Therefore, employers should take proactive steps to align with the new guidance:
- Review and update any “clawback” agreements or repayment clauses in worker contracts immediately. If you previously had employees agree to repay sponsorship costs (for example, repaying the CoS fee or sponsor licence fee if they resigned within a year), such provisions are now non-compliant. This includes agreements made before 31 December 2024 if they would lead to a recovery of costs after that date. Amend those agreements to remove prohibited fees, or at least make clear the sponsored employee will not be asked to cover those specific items.
- Revise internal policies and documentation related to immigration fees. Ensure your staff handbook, sponsorship policy, or assignment letters reflect that the employer covers the sponsor licence, CoS, and Immigration Skills Charge costs. Any template that previously passed on those fees should be changed.
- Educate your HR and finance teams and anyone involved in recruiting sponsored workers about the new rules. All relevant personnel should know that charging these costs to sponsored employees is off-limits. For instance, if a sponsored employee leaves early, payroll should not deduct the CoS fee from their final payslip even if an old agreement permits it, and HR should not attempt to enforce any such repayment.
- Budget for higher sponsorship costs going forward. With the inability to recoup licence or CoS fees, employers must treat these as a normal cost of hiring international talent. This may impact hiring budgets and cost projections. Plan ahead to absorb the sponsor licence fee, £239 CoS fee, and any associated admin expenses as a cost of doing business. You may also consider whether to cover some employee-side costs (like visa fees or IHC) as a benefit, but that remains optional.
As well publicised immigration enforcement action continues across the country, employers should protect themselves from compliance action and ensure their sponsorship processes are in line with the latest Home Office expectations.
Should you wish to discuss any of the issues raised in this article, please contact Madni Chaudhary or Lynsey Blyth. Our leading Immigration and Employment law teams are available to guide you through these changes, ensuring your organisation remains fully compliant with the new rules.
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