Blog - 20/01/2025
Immigration
Sponsor Licence fees: how to clawback sponsorship immigration costs
There are a number of fees that an employer will incur when sponsoring a migrant worker for permission to work in the UK. All of these fees are incurred ‘up front,’ before the individual has commenced employment in the UK and it can represent a significant cost to the employer.
The question that arises is; if the individual has a ‘change of heart’ and decides not to join the employer, or starts their employment but resigns only a few months into the job or at any point during their sponsored employment, can the employer recoup from the individual the costs incurred by the employer in sponsoring the individual.
The answer is ‘yes’ in relation to some of the fees incurred, but there are some ‘safeguards’ which must be considered.
The fees that an employer will incur in sponsoring an EU or non-EU national on a Skilled Worker or Global Business Mobility visa are as follows:-
- Any professional fees incurred by the employer in connection with obtaining a Sponsor Licence.
- The fees for obtaining a sponsor licence (currently £536 for small companies and £1,476 for medium and large companies) plus any professional fees incurred in connection with that application.
- The fee for the Employer issuing a Certificate of Sponsorship (CoS) for the relevant individual (currently £239).
- Any professional fees incurred by the employer in connection with the issue of the CoS for the relevant individual.
- An Immigration Skills Charge (ISC) fee of (currently) £364 a year for small companies (for a 3 year visa the total cost would be £1,092) and £1,000 per year for large companies (for a 3 year visa the total cost would be £3,000)
In addition to the above, the relevant individual who is being sponsored has to pay the following fees at the point of submitting their application:
- A UKVI visa fee (a duration of 3-years or less) of £719 (if inside the UK) or £827 (if outside the UK) (save where the individual qualifies for a Health & Care visa or if the job is a Shortage Occupation role, the visa fee would be reduced) but for out of country applications, the fee is slightly higher.
- The Immigration Health Surcharge (IHS) which is £1,035 per year (for a 3 year visa the total cost would therefore be £3,105); again, this fee would not be applicable if an individual qualifies for a Health & Care visa.
- Any fees paid to expedite the issue of the UK VI visa. These fees would typically range from £500 – £1,000 depending on the level of priority service purchased.
The fees listed above at 6, 7 and 8 would be applicable for each dependant applying for a visa but the Immigration Health Surcharge fee for dependants under 18 is slightly lower. If applying for a visa duration of more than 3 years, the fees are 6 and 7 would be higher.
It is common for the employer to offer to pay the fees which are payable by the individual listed at 6 to 8 above, which presents a greater ‘up front’ cost to the employer particularly where there are number of dependants who will join the individual. To put this into perspective, the total cost for an employer (small company only) to sponsor a foreign worker and 3 dependants (spouse and 2 children under 18), on a 3-year visa, would be just over £15,000 in Government fees alone.
Following changes to Home Office guidance on 31st December 2024, from the fees listed above there is a specific prohibition on any clawback or repayment obligation of:
- The Sponsor Licence fee (2 above) (where the application was made on or after 31st December 2024)
- Any “administrative costs” associated with the Sponsor Licence (including premium services) (potentially arguable 1 above applies) (where the application was made on or after 31st December 2024)
- The CoS fee (3 above) (where the CoS was assigned on or after 31 December 2024) and
- The ISC (5 above).
If the employer were discovered by the Home Office to have recouped the above fees from an employee, it is likely to result in compliance action being taken against the employer which would normally lead to a revocation of its Sponsor Licence.
Of the remaining fees, the common law will inform the entitlement to include a clawback/repayment clause in the contract and the relevant issues to consider will include:-
- the rule against penalty clauses in the event of breach of contract (the individual not starting work at all in breach of the contract that was signed);
- restraint of trade (where there is no breach but the individual leaves within a few weeks or months’ such that the employer has not had the ‘benefit’ of the financial investment made);
- discrimination.
Penalty Clauses
The common law provides that any clause in a contract which provides for an amount to be paid by someone who is in breach of contract that amounts to a ‘penalty’ for that breach, will not be enforceable where it imposes a ‘detrimental obligation’ on the individual in default which is ‘out of all proportion’ to any legitimate interest of the employer. This would be relevant where, for example, in breach of the contractual obligation to start work on a particular date, an individual has a ‘change of heart’ and decides not to join the employer which has sponsored them.
Proportionality of the ‘penalty’ (the repayment obligation) will be assessed by considering whether or not the sum which is required to be repaid is ‘extravagant and unconscionable’ in comparison to the greatest loss that could be established as flowing from the breach by the individual.
In short, if the amount that is required to be repaid is proportionate to the loss suffered by the employer, then any repayment clauses will be enforceable.
Given the requirement for proportionality, any repayment obligation in respect of the application for the sponsorship licence and any professional fees involved with that (1 and 3 above) if the individual does not start work, is likely to amount to a penalty because it is not a cost which is specifically relevant for that individual. Every employer should have a sponsorship licence to protect it from allegations of discrimination against any overseas worker who applies for an advertised role but is rejected simply because the employer is unable to sponsor them.
Restraint of trade
Case law on proportionality has been well developed in the arena of clauses requiring employees to repay training fees which have been paid by the employer on the basis that the training would enhance the individual’s skillset and the employer would obtain the benefit of those enhanced skills.
Workers may hesitate before resigning their employment if there is a significant obligation to repay immigration fees, such that it may discourage them to leave and as such, any repayment/clawback clause may amount to an unlawful restraint of trade.
To avoid any attack on the enforceability of a repayment clause on this basis, the same proportionality arguments will be relevant and a ‘sliding scale’ of reimbursement upon the lawful resignation of a sponsored individual, would be appropriate to ensure it is enforceable, given that the longer the skilled worker’s employment continues, the greater the employer will have had the benefit of their work, justifying the cost incurred to sponsor them.
Discrimination
In the case of Walworth v Scrivens Limited the Employer suspended time running under a clause requiring the repayment of a training fee when the Employee was on maternity leave. Effectively, her time on maternity leave was not counted as ‘active service’ which extended the period of time for repayment of the fees. The Employee asserted that this was less favourable treatment because of her pregnancy and/or her maternity leave. The Employment Tribunal agreed with her and she won her claim.
In the circumstances when drafting clawback clauses the employer should bear in mind any protected characteristics which may mean that the clause is treating someone less favourably. Academic commentary has suggested this could include older workers or disabled workers who, statistically, are less able to remain in continuous employment for a prolonged period of time; this would therefore reinforce the requirement for any repayment clause to not be too long.
Unlawful deduction from wages
Frequently, obligations to repay monies are enforced by making deductions from the Employee’s wages over a period of time.
Given the issues referred to above, the amount of the deduction should be reasonable and not place the Employee in financial hardship. Further, there has to be an express written agreement between the Employer and the Employee agreeing to such deductions being made, which should specifically refer to the repayment of these fees rather than ‘any money’ due from the Employee to the Employer.
Jurisdictional Considerations
Clawback/repayment clauses are obviously much easier to enforce where the relevant worker commences work because they would be earning a salary against which deductions can be made. Enforceability issues, however, obviously arise where the skilled worker is overseas and has a ‘change of heart’ about joining the business and never commences work or leaves very shortly after starting work (and possibly leaves the jurisdiction) before much repayment has been made. The employer then faces the prospect of having to reclaim fees under any signed contract of employment against an individual who is overseas.
In the circumstances employers may require a migrant worker to pay those fees that are the worker’s obligation (5 to 7 above) with an offer to ‘repay’ those fees over time when the worker commences work. Whilst this would be an ‘up front’ fee for the individual, they would be repaid those fees through a salary enhancement for a number of months and the cost may safeguard against any last minute changes of heart about joining the employer which has sponsored them.
Review existing clawback/repayment agreements
There will no doubt be some businesses that already have in place clawback/repayment agreements prior to the changes announced by Home Office guidance. Those documents will now need to be carefully reviewed to avoid potential revocation of a business’s sponsor licence.
For businesses that are considering sponsorship for the first time (there are already over £100,000 businesses with a Sponsor Licence) the changes force business owners to absorb additional costs where previously may not have been the case.
Edwin Coe
If you need any advice or assistance in preparing a clawback/repayment agreement or clauses in a relevant contract of employment, or reviewing previously drafted clawback/repayment agreements (in light of the changes from 31st December 2024 onwards) do not hesitate to contact Linky Trott, Head of Employment or Head of Immigration Sundeep Rathod.
Further Reading
Visit our general ‘Sponsor Licences for Employers’ page for an overview of this topic and a series of FAQs, or learn more about ‘Sponsor Licence downgrading, suspension and revocation’ here.
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