UK visa fee increases – key considerations for employers

Investing in new hires can be an expensive process for any employer, even more so for organisations sponsoring the work visas of their staff. With the government’s recent announcement that visa fees will be increasing by at least 15-20% later this year, and the immigration health surcharge will increase from £624 to £1,035 per year, now is the time for employers to consider and plan for these fee hikes.

Costs associated with visa sponsorship

There are various costs associated with visa sponsorship. The immigration skills charge is a levy paid by employers when assigning a certificate of sponsorship. The cost of this charge depends on the size of the organisation and length of the visa. The current rate is £364 per year for small companies and £1,000 per year for medium or large sponsors. Employers are legally obliged to pay the immigration skills charge and cannot pass this on to their employees; to do so is grounds for the revocation of an organisation’s sponsor licence. Whilst there was no announcement on whether the immigration skills charge would increase, other associated fees are going up.

A breakdown of the current fees associated with visa sponsorship and proposed increases is set out below:

Optional priority processing fees for both in-country and entry clearance applications are also due to increase by at least 20%, with the rates charged being equalised, so that the same fee is charged regardless of whether the application is made within the UK or from abroad.

An implementation date has yet to be set for these changes but new fee regulations are expected to be laid before Parliament in the autumn.

Options for employers

Many organisations will have a company policy on visa sponsorship, including which roles are eligible for sponsorship, the costs the company will cover, and on what basis. Other organisations, particularly those who are new to sponsorship, or sponsor relatively few staff, are more likely to deal with matters on a case by case basis. Those with existing policies may wish to review them in light of the proposed fee increases.

How an organisation deals with the costs of visa sponsorship is a matter for them. Whilst many opt to cover all expenses, they are not obliged to. There are various ways employers approach the issue, with options including:

• The employer covers all costs associated with visa sponsorship, including the visa applications for any dependants;
• The employer covers all costs of visa sponsorship for the prospective employee but not their dependants;
• The employer pays all upfront costs, but reaches an agreement with the employee permitting the deduction of costs from the employee’s salary until repaid (with the exception of the fees the employer is obliged to pay);
• The employer only covers the costs of sponsorship that they are legally obliged to, requiring the prospective employee to meet all other costs;
• The employer pays all upfront costs but agrees clawback terms, requiring the employee to repay the visa costs

In today’s tight labour market and increased cost of living, an organisation’s position on the level of support they offer to employees in meeting visa costs is likely to be a determining factor for an individual when considering a job offer. Careful consideration therefore needs to be given to the package on offer.

Clawback agreements

Organisations have long made use of clawback agreements to provide some protection against incurring significant costs in sponsoring an employee’s visa, only to have them leave the organisation after a relatively short period of time.

If your organisation is minded to use such agreements then it is important to get them right.

The enforceability of repayment clauses generally can be challenged on a number of grounds, for example, that they are unlawful restraints of trade or (in circumstances where the repayment obligation is triggered by a breach on the part of the employee) as an unlawful penalty clause. In the latter case, in order for the clause to be enforced, an employer would require to demonstrate that the clause protected a legitimate interest and that the level of repayment was justifiable.

It would be sensible to ensure that the repayment clause is triggered by the employee leaving within a defined timeframe (with no obligation on the employee to remain in employment for any set period) as this will bring the clause outside the scope of what can constitute an unlawful penalty. You would also want to ensure that this only applied for a limited period after which the obligation would no longer apply and it would also be sensible to reduce the amount that required to be repaid so as to correlate with the length of time the employee remained in employment. It would also be viewed as more reasonable to require repayment only in the event that an employee leaves voluntarily and not in the case of a dismissal by an employer (particularly where this was for no fault of the employee e.g. in a redundancy situation).

If the enforceability hurdle is surmounted, there are some risks that remain. Depending on the nature and extent of the clause (and the manner in which an employer decides to utilise such a right), there may be a risk of a discrimination claim (the most likely basis being race).

Certain repayment obligations will be deemed to reduce pay for national minimum wage purposes (e.g. training costs) and although it is not entirely clear whether or not such an argument could be run by an employee in respect of visa fees, some comfort can be taken from HMRC’s comment that ‘costs incurred to be in a position to do or secure the job’ would be excluded.

Plan ahead

In advance of the fee increase, there are various preparatory steps that employers are can take. This includes:

• Reviewing and revising HR and recruitment budgets – the fee increases will not only affect new hires, but also existing staff whose visas are up for renewal
• Submitting visa applications earlier, if possible, to beat the fee increase
• Bringing forward recruitment campaigns to secure visa sponsorship ahead of increase
• Where appropriate, considering the use of clawback agreements to mitigate costs risks associated with visa sponsorship.

Our specialist employment and immigration lawyers can provide advice to your organisation in relation to employing sponsored workers, including advice on employment contracts, clawback agreements and wider sponsorship policies for your organisation. Please get in touch with a member of our team to discuss further.