Visa sponsorship costs & salary deductions: What sponsors need to know now

Investing in new hires can be an expensive process for any employer, even more so for organisations sponsoring the work visas of their staff. As a result, it is common for employers to ask sponsored workers to cover some of these costs directly, or for employers to recover a portion of these expenses by way of deductions in salary, loan repayments or clawback agreements if the employee leaves before the sponsorship period ends.

Recent changes to the skilled worker route introduce restrictions on what associated immigration costs can be passed on or recouped from skilled workers, and how any repayments are treated when calculating a skilled worker’s salary for the purposes of sponsorship. This article provides a snapshot of the main changes and what they mean for existing and future arrangements between employers and their skilled workforce.

What are the main costs involved in visa sponsorship?

There are various costs associated with visa sponsorship. Employers looking to sponsor foreign nationals to work in the UK will first need to obtain a sponsor licence, with the licence fee payable linked to the size of the organisation.

Once the licence is in place, sponsors will need to assign a Certificate of Sponsorship (CoS) to employees to enable them to submit their skilled worker visa application. The fee to assign a CoS rose from £239 to £525 on 9 April 2025. With limited exceptions, employers will need to pay a levy, known as the Immigration Skills Charge, each time they assign a CoS to a new or existing skilled worker. The cost of this charge depends on the size of the organisation and length of the visa. The current rate, which is not set to increase at present, is £364 per year for small companies and charities and £1,000 per year for medium or large sponsors.

Once assigned a CoS, the skilled worker will need to submit their visa application, paying the relevant visa application fee and immigration health surcharge. There is no obligation for employers to pay their sponsored workers visa fees, although some organisations choose to do so.

A summary of the latest visa sponsorship fees, which increased on 9 April 2025, can be found here.

What costs cannot be passed on or recouped from the skilled worker?

It has always been the case that the Immigration Skills Charge could not be passed on to skilled workers. However, in December 2024, the Home Office updated its sponsor guidance to include further restrictions on which costs could and could not be passed on to skilled workers with the stated aim of addressing immigration related exploitation of skilled workers. This included confirming that from 31 December 2024, the fee for assigning a Certificate of Sponsorship can no longer be passed on or recouped from workers.

The Home Office also extended the rule to prevent the passing on or recouping of costs associated with sponsorship. In a recent update to its guidance, the Home Office has provided further clarification on what is meant by ‘associated administrative costs’. The term has been defined to include any costs incurred by a sponsor to obtain, use or maintain its licence and includes, but is not limited to:

• fees for premium services or priority services for sponsor licence applications, changes of circumstances requests, or assigning, requesting or applying for a Certificate of Sponsorship;
• fees for legal advice related to applying for, using or maintaining your sponsor licence, or assigning, requesting or applying for a Certificate of Sponsorship;
• immigration advice or immigration services provided by a third party to a sponsored worker where the worker did not have a genuine choice in whether, or how, to obtain such advice or services, or where you provide such advice or services to the worker directly.

As a result of these changes, not attempting to recoup the sponsorship fees set out above now forms part of a sponsor’s duty to comply with UK immigration laws. Failure to comply with this duty can result in enforcement action and ultimately the revocation of the sponsor licence.

In practical terms, these changes mean that sponsors should review their processes to ensure that they are not requiring workers to pay any associated administration costs, and that any use of clawback agreements is in line with the amended guidance.

What are the new rules in relation to salary deductions from skilled workers?

In keeping with the changes to passing on and recouping sponsorship costs, new rules were introduced on 9 April 2025 in relation to salary deductions for skilled workers. In the Home Office’s Explanatory Memorandum, it said the proposed changes were being made “for consistency with how paid allowances for the same purposes are treated, to mitigate against sponsorship costs being passed on to applicants, and to close an unintended loophole whereby applicants could effectively pay towards their own salary through investing in their sponsor’s business”.

What this means in practice is that for any new certificate of sponsorship assigned on or after 9 April 2025, the skilled worker’s salary will be calculated after deductions are made for the following:

• deductions from salary;
• repayments of loans; and
• investments.

This means that when calculating whether the worker’s salary meets the applicable salary thresholds, the Home Office will subtract any deductions from salary, repayments of loans or investments made by the worker into the sponsoring business or a related organisation. These deductions will be averaged out over the period the worker is being sponsored for, as stated on their CoS. There are exceptions to this rule where the payment is not related to business costs, immigration costs or investment, but rather is an additional benefit offer which the worker has a genuine choice whether to take up, with salary sacrifice arrangements being cited as an example (as long as they do not result in the worker’s pay falling below the national minimum wage).

If the adjusted salary still meets the requirements of the Skilled Worker visa route, the role may still qualify for sponsorship. However, if the reduced salary falls below the relevant minimum threshold, the role may no longer be eligible for sponsorship under the new rules.

What costs can still be passed on or recouped by an employer from the skilled worker?

While many employers will cover the visa application fee and the Immigration Health Surcharge of a skilled worker (and their dependents), they are not required to do so. These are costs which an employer is entitled to recoup. As mentioned above, fees for certificates of sponsorship issued before 31 December 2024 can also still be recouped. Payments caught by the new provision on salary deductions, loan repayments and investments in the sponsor business have not been banned. However, employers will need to set a salary for workers which meets or exceeds the relevant threshold after deductions are made, as outlined above.

Takeaways

With the Home Office increasing its scrutiny of sponsors to ensure compliance with immigration laws, it is more important than ever that employers are up to speed with these changes.

We would recommend employers with sponsored workers to:

• Review and revise existing clawback agreements which continue to have effect after 31 December 2024 to ensure they are not in breach of the new restrictions;
• Take legal advice on any new clawback agreements in light of the recent changes;
• Take legal advice regarding existing arrangements with skilled workers for the repayment of loans, deductions from salary or investments into the business;
• Review and revise HR and recruitment budgets – the fee increases will not only affect new hires, but also existing staff whose visas are up for renewal

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.