Navigating the New Landscape: Updates Impacting Sponsor License Holders

Many businesses in the UK rely on legal migration to hire workers from abroad. This has been the system for many years, but since Brexit, the need has become more apparent and ever present. With the new Home Secretary announcing plans to try and curb “legal migration”, many businesses that have only recently invested significant resources into acquiring a sponsor licence, are now asking whether it is sustainable to hire foreign workers.

What is a Sponsor Licence?

Businesses and employers in the UK usually need a sponsor licence to employ someone to work for you from outside the UK. This includes citizens of the EU, Iceland, Liechtenstein, Norway and Switzerland who arrived in the UK after 31 December 2020. This also includes unpaid work, for example, for those working in a charity.

The licence grants the employer the ability to sponsor foreign nationals to come from abroad (entry) or who are already in the UK on another visa route (switching) to employ them as a migrant worker. However, this also comes with responsibilities of record keeping and reporting any changes of developments to the Home Office, with the Authorising Officer of the business essentially becoming an immigration officer themselves. If they fail to keep up these duties, the business could be fined, their licence suspended and in the worst cases, revoked.

How much does a sponsor licence cost?

As we know, Brexit ended the free movement of workers from Europe, which increased the costs of hiring overseas skilled workers. However, as it became a necessity for many businesses, it is worth noting that the costs of obtaining and maintaining sponsor licences are often perceived to be much higher than they are.

The table below breaks down various expenses involved in obtaining a sponsor licence. Some fees are one-off and other are calculated based on several factors including business size, and time periods of the sponsorship.

For example, once you have obtained the Skilled Worker sponsor licence, it would cost you the following to sponsor an individual under this route for 5 years:

What do the changes mean for UK Businesses?

The UK has always been a hub of business innovation and commerce. According to the ‘Business population estimates for the UK and regions 2023: statistical release’, published on 5 October 2023, in 2022 there were 5.6 private sector businesses in the UK, with 26% of them actively employing staff, around 1.4 million businesses.

It has however, been a record year for Sponsor Licences, with the number of applications being made for new Sponsor Licences almost doubling, from 6,536 in Q3 2022, to 11,609 in Q3 2023. The latest figures publish on 29 February 2024 reveal that in Q4 2023 this figure increased further to 12,693. The total number of applications for Tier 2 Sponsorship made in 2022 equated 24,862, which has nearly doubled in 2023, to 43,399.

There are 84,730 businesses with sponsor licences that can sponsor Skilled Workers (T2), as of data released on 29 February 2024. This is an increase of just under 30,000 licences since 2022.

Clearly, businesses have become more active in working towards hiring from abroad, and for good reason. Since Brexit took effect on 30 June 2021, business across the UK have been struggling to maintain their pre-Brexit levels of staffing and support. It has become a necessity to apply for and receive sponsor licences, either to continue to employ foreign nationals (from Europe and abroad), or to begin hiring from abroad due to staffing necessity.

This has further been compounded by the continued effects of COVID-19 and the cost-of-living crisis. Staff shortages in the Health and Social Care sectors in particular, have been strongly felt by all.

To breakdown the UK business figures further, according to data released by ONS on 27 September 2023, at the start of 2023:

• there were estimated to be 5.6 million UK private sector businesses
• 4 million (26%) businesses had employees and 4.1 million (74%) did not employ anyone aside from the owner(s)
• there were 5.51 million small businesses (with 0 to 49 employees), 99.2% of the total business population
• there were 36,900 medium-sized businesses (with 50 to 249 employees), 0.7% of the total business population
• a further 8,000 businesses were large businesses (with 250 or more employees), 0.1% of the total business population

Though the number of sponsor licences seems significantly higher than previous years, when this is contrasted with the number of businesses in the UK (with employees), it reveals that a mere 5.4% of employers in the UK possess a sponsor licence.

What are the changes?

1. Increase in Minimum Salary Threshold

The main change on the agenda, and one of the most shocking, is the increase of the minimum salary general threshold from £26,200 to £38,700. This is a significant increase for businesses looking to hire foreign workers. This change has taken place as of 4 April 2024.

This salary is also higher than the average income by British citizens (£35,000). In the words of the Home Secretary this is to “[encourage] businesses to look to British talent first and invest in their workforce, helping us to deter employers from over-relying on migration, whilst bringing salaries in line with the average full-time salary for these types of jobs”.

However, it leaves many businesses reeling as they have already invested significant time, energy and resources in applying for sponsor licences, that they will now struggle to fill vacancies at the new required salary level.

Further, the required skill level of the Skilled Worker visa will remain at RQF Level 3, which was a reduction from RQF Level 6 (made in December 2020). This new salary threshold will likely price out the jobs at RQF Level 3 which would be unlikely to be paid £38,700pa.

2. Health and Care Visa Restrictions

One of the most unexpected announcements was the desire to try and reduce the number of Health and Care visas by preventing overseas care workers from bringing their dependents. Further to this, care providers in England will now only be able to sponsor migrant workers if they are undertaking activities regulated by the Care Quality Commission.

Care workers were included in the Shortage Occupation list in early 2022 but were not added to the Skilled Occupation Codes. This created an interesting juxtaposition in sponsoring care workers, who came under the rules but through a series of exemptions.

The new changes look to deter the hiring of care workers under the Health and Care visa, despite the fact that care workers continue to be in short supply in the UK, with many health care providers already struggling with lack of staff.

The above salary threshold is, however, not being brought in in relation to the Health and Care visa route:

“Those coming on the Health and Care visa route will be exempted from the increase to the salary threshold for Skilled Worker visas, so we can continue to bring the healthcare workers that our care sector and NHS need, and we will exempt those on national pay scales, for example teachers.”

This may not be enough to offset the lack of care workers in the UK, or in assisting the NHS and other services in their already dwindling numbers.

3. Shortage Occupation List

There are plans to do away with the current system of hiring overseas workers in jobs that are severely understaffed. This is being done by bringing in a new system rebranded as the “Immigration Salary List”, which will allegedly “crackdown on cut-price labour from overseas”.

It is currently unclear how this will work, but it seems they may do away with the 20% going rate salary reduction of the salary threshold for these jobs. However, How the Immigration Salary list will function remains to be seen.

The Press Release states that the Home Office “is prioritising growing our domestic workforce through our Back to Work Plan – a package of employment focused support that will help people stay healthy, get off benefits and move into work – as part of the Autumn Statement.”

The number of changes happening around the skilled worker and health and care visa will make the process of sponsoring migrant workers very daunting to business owners, and may deter them from applying for sponsor licences all together.

4. Graduate Visa

The Migration Advisory Committee has been tasked to review the Graduate visa to ensure it is working in the UK’s interests. It is unclear what changes will be made as of yet.

However, there has been announcement of plans to remove the rights of students to bring partners and children to the UK, unless the student is studying for a postgraduate research course. This will likely reduce the number of individuals who are applying for student visas, and therefore the number who will be applying for Graduate visas at the end of their course.

Further Information and Assistance

If you are interested in obtaining a sponsor licence, or have recently had issues with your sponsorship management, our barristers and dedicated paralegal team at Clarendon Park Chambers will be happy to discuss your case with you.

We have a number of years of experience working with businesses looking to hire migrant workers; in applying for and obtaining the sponsor licence, and in entry clearance or further leave to remain applications for hiring skilled workers.

Contact us to discuss and book an appointment.