In the competitive landscape of the UK business environment, having a skilled and diverse workforce is crucial for every organisation’s success. The UK growing economy has been making most of the overseas workers or talents over decades. Can any business hire an overseas worker? The answer is NO. In order to recruit a foreign worker, UK employers must obtain a sponsorship licence from the UK Visas and Immigration (UKVI) and adhere to ongoing compliance requirements. This short article provides an overview of sponsorship licence from an employer’s perspective
What is a Sponsorship Licence?
A sponsorship licence is an official permission granted by the UKVI to UK-based employers, allowing them to employ foreign workers under a series of stringent conditions. It is not a one-off process but a process that imposes on-going responsibilities on employers. While hiring overseas talents can be advantageous, these workers may also, subject to compliance, gain UK residency benefits.
Eligibility Criteria
Broadly, an employer must satisfy a series of eligibility criteria before making an application for the sponsorship licence and the main one can be summarised as:
- The company must be clean, that is, no criminal convictions or serious sanctions and did not have a sponsor licence revoked in the last 12 months;
- The company is required to have robust systems in place to monitor sponsored employees: e.g HR systems – attendance, due diligence, reporting channels to UKVI;
- The company must have good reason(s) for the need of employing overseas nationals rather than employing settled workers or UK nationals;
- The company must adhere to the key principles, duties and responsibilities:
- To keep track of sponsored migrants and any changes in their circumstances;
- To ensure sponsored migrants are paid the requisite salary for their role;
- To ensure that there is a genuine vacancy for the role in the UK which is to be filled by a migrant worker;
- To ensure that any role in the UK is performed by a migrant worker is sufficiently skilled to justify sponsorship; and
- To keep all records and adhere to its reporting duties.
- The company must establish a team to manage the Sponsorship Management System (“SMS”):
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- An authorising officer – a senior and competent person responsible for the actions of staff and representatives who use the SMS;
- A key contact – your main point of contact with UK Visas and Immigration (UKVI); and
- A level 1 user – responsible for all day-to-day management of your licence using the SMS.
Costs of Sponsorship Licence
The costs** may vary but the illustration below serves a good starting point:
Application Fee – £536 or £1,476 (depending on the size of business*)
Solicitor’s Fee – £2,000 to £5,000 (variable)
COS fee – £199 per employee
Immigration Skill Charge – £1,274 – (for 36 mths)
*A business is deemed to be small business if at least 2 of the following apply:
– its annual turnover is £10.2 million or less;
– its total assets are worth £5.1 million or less; and
– it has 50 or fewer employees.
** All fees are subject to change without notice
Based on the above the average costs for the Sponsorship licence is £4500 for the first candidate but for subsequent candidates (post the licence) the average cost is £1500 each.
Main Supporting Documents
As in any usual application of a licence, evidence is key. For sponsorship licence, the employer must, among others, have the following main documents,
- Employers Liability Insurance;
- HMRC documentation – PAYE;
- Latest Company Tax Return;
- VAT Registration;
- Evidence of recruitment;
- Evidence of all valid accreditation or professional membership;
- Latest bank statement or letter form the bank; and
- Proof of ownership of business.
Is it worth it?
It’s hard to say but it could be, depending, on the needs of the employer’s business. The major problems of employers are:
- Scarcity of good candidates: Employers’ staffing needs changes from time to time and often has a bearing on the type of customers and services. It becomes quite difficult to find the right candidate who can add value to a team.
- High recruitment agency fees: It is a common practice for employers to seek assistance of recruitment agencies agains a hefty fee of around 15%-25% of one candidate’s annual salary. Unfortunately, if this candidates leaves in a short period of time, such fees are deemed to be lost.
- Staff retention: The market is so volatile that employees tend to hop on better opportunities and leave their employers in destitute.
- Diversity: It is very common to have a diverse workforce. Employers struggle to be diverse if the right candidate is not found. It is not commercially right to just employ a candidate just so that a team ‘looks’ diverse.
The Pros
The main benefit of overseas workers is the import of fresh talents, skills and experience. This is a perk that any company would want to have. Needless to say that the quality of a workforce reflects on the image and productivity of the company.
Undoubtedly, the cost of obtaining a sponsorship licence can outweigh the cost of recruitment agencies. The average cost of a recruitment agency fee is approximately £5000 based on 20% of an annual income of £25,000. This also means that if this employee leaves the job, say after 7 months, then such fee becomes a complete loss whereas an employer, with a sponsorship licence, has an average costs of £1,500 per candidate. An overseas candidate is more likely to stay in the job for a longer period. Furthermore, an employer who, subject to the rules of the UKVI, has the licence can employ more than one person at lower costs.
Although not a direct advantage, it appears that a sponsored worker is more likely to be cautious and serious about the job given that his compliance and performance on the job reflects his future in the UK.
An employer with overseas workers certainly shows diversity in its team and hence gives a good image of the company in the industry.
The Cons
Notwithstanding the above benefits, a sponsorship licence comes at a cost in several ways.
- It is highly regulated and controlled, meaning, strict compliance is key;
- While the cost may be lower than recruitment fees there are other costs associated with administering the compliance part, like, managing the SMS;
- Sponsored companies are rated ‘A’ for being fully compliant and where the UKVI has intervened and sanctioned the company, either the licence is revoked or rated ‘B’. The status of the company will be published and can be accessed by any member of the public.
- There may also be a fine of about £1,476 to pay for non-compliance where the UKVI provide an action plan for the employer to follow.
- The company is subject to an inspection by the UKVI at any time during the term of the licence.
What’s the verdict?
While both the pros and the cons are substantial, it is clearly a commercial decision for the employer to take. Some practical considerations are warranted like:
- To what extent the employer is struggling to find the right candidate?
- Why the UK based job board or social media cannot assist to find the right candidate?
- What is the staffing need for the future?
- Does the employer has existing staff to manage the sponsored migrants?
- A costs-analysis is required to assess such a decision.
On the other hand, the employer can also consider appointing a lawyer to assist in this decision-making process. While the employer is required to manage the SMS, such responsibility can be outsourced to a lawyer.
If you require assistance with legal advice or consultation for Sponsorship licence matters, Note To Consider can connect you to a lawyer for a free and no-obligation consultation. Please fill in the short enquiry form below.
