Navigating changes for employers with sponsor licences

19 April 2024

What are the April changes for sponsors that employers need to know about?

Spring, traditionally the season of hope and new growth, has instead this year brought sponsoring employers in the UK a raft of immigration rule changes designed to substantially reduce immigration numbers.

The most significant changes are the increase in salary requirements for sponsored workers, the updating of the Standard Occupational Classification (SOC) codes to the SOC 2020 system and replacement of the Shortage Occupation List with the much-reduced Immigration Salary List.

All three of the relevant salary rates increased on 4 April 2024. For standard new Skilled Worker applications, the general minimum salary threshold increased from £26,200 to £38,700 gross per year, the hourly rate increased from £10.75 to £15.88 per hour, and the ‘going rate’ increased from the 25th percentile of jobs in their occupation code according to the Annual Survey of Hours and Earnings (ASHE) to the 50th percentile of jobs in that occupation code, known as the median. As sponsoring employers must pay the higher of these three figures, this means that from 4 April 2024, to hire a new Skilled Worker a sponsor will need to ensure they are paid more than half of all the people who work in that profession.

There are transitional arrangements in place for persons who were issued with a Certificate of Sponsorship (CoS) before 3 April 2024, which had prompted a last-minute rush of applications, but this article looks at the position for sponsoring new workers after that date.

What effect will these immigration changes have on employers sponsoring workers?

Profitable or well-paying sponsors will be able to accommodate these costs. Financial managers and directors SOC code 1131 had a pre-4 April 2024 going rate of £42,800 which post-4 April 2024 became £70,000, an overnight increase of 64%. We would expect most Finance Directors in large firms to be earning more than this already. However, as you move down the eligible SOC code list it becomes clear that many sponsors will need to pay 30%-40% more to fill positions that tend to be relatively lower-paid and this will clearly be a greater struggle for smaller sponsors, start-ups and skilled sectors that are historically not well paid. It is also clear that sponsors paying London wages will be far less affected than in other regions. The same ASHE pay survey used to determine median wages for different occupation codes also reveals vast salary differentials between different regions of Britain.

The higher salary requirements push sponsors towards hiring senior people whose salaries are in the top half of their profession, rather than graduates and young professionals. The disincentive for start-ups and new employers highlights what looks like a lack of joined-up government: the economic growth the Treasury seeks could be undercut if the immigration policies enacted by the Home Office succeed.

Our experience is that several large sponsors have already indicated they will restrict sponsorship to a bare minimum as the salary increases, in particular the increases to the going rate, now make it economically unviable to hire from abroad. This may be music to the ears of those fixated on net migration figures, but one of those sponsors is a significant actor in the UK energy market, an employer whom one might think government policy would aim to help. Indeed, the solution for clients in this situation may be to tweak the role and bring global employees to the UK under Appendix Visitor: Permitted Activities, thus swapping a well-regulated Skilled Worker, paid and taxed in the UK, for a much less-regulated Visitor who is paid and taxed abroad, in many cases with minimal review or oversight of actual activities in the UK (particularly with the ongoing move to a digital border, which will has the effect of reducing detailed scrutiny at port).

For sponsors and their legal representatives these changes require taking a more holistic approach to filling positions rather than relying on what has become, for many sponsors, the default Skilled Worker route. Within the Skilled Worker route there are discounts for the going rate available for applicants with relevant PhD qualifications or a relevant PhD in a STEM (science, technology, engineering and mathematics) subject, but this applies to few people.

What are the changes for employers sponsoring shortage occupations?

The first ‘go-to’ option would previously have been to check if the job fell in the Shortage Occupation List (SOL) and thus benefited from a 20% discount on both the general salary threshold and the going rate as well as reduced visa fees. The April changes, which follow the recommendations of the Migration Advisory Committee (MAC), have not only introduced a new name, the Immigration Salary List (ISL), but have also abolished the going rate discount. This means, for example, an electrical engineer SOC code 2123, which used to be on the SOL and benefitted from a 20% discount to both the general salary threshold and the going rate, could now only get a discount to the general salary threshold if it was on the list, while the going rate is the median for the profession which is £53,500. As this figure is higher than the general salary threshold (now £38,700) there is no point in this occupation being on the new ISL—a reduction in the threshold is of no benefit if the going rate is still higher than the original threshold. In this manner, 55 occupations which were on the SOL have been reduced to 23 occupations on the ISL, reducing its usefulness for many sponsors, although extensions remain possible for those originally on the SOL.

Gone from the list are physical scientists in the construction, oil and gas industries, civil, mechanical and electrical engineers, quite a few IT/software professionals along with host of medical professionals and therapists, and veterinarians. Pharmacists and psychologists, along with doctors and nurses are also no longer on the list, as they score points for being on the national pay scale list. They already benefit from a lower threshold and 25th percentile going rate so would gain no benefit from being on the ISL. They differ from the other group above as the first group has requirements that are too high to benefit, while this group has requirements that are too low to require any benefit.

Sponsoring New Entrants

lients who want to continue to hire graduates or young professionals at the start of their careers can make use of the ‘new entrants’ discounts which remain quite generous and go some way to offsetting the inherent seniority bias produced from increasing the going rate salary to a level of more than half of all those in the profession. The general salary threshold has a 20% discount to £30,960 (up from the previous discounted rate of £20,960) and a going rate discount of 30% which, for most SOC codes, has the effect of bringing the salary back down below the level of the previous 25 percentile rate, meaning this will be of significant value to sponsors. Although the main ways for qualifying are age (under 26 on the date of application) and switching from Student or Graduate routes, it should be remembered there are other options including being sponsored in certain postdoctoral science SOC codes as well as a higher education teaching profession SOC code, and, of particular interest to people going into professions late in life, where the applicant is working towards a recognised professional qualification in a UK-regulated profession or towards full registration or charted status with the relevant professional body.

Applicants can be new entrants for a maximum of four years. This includes time spent in any Tier 2, the Graduate or Skilled Worker routes. This means if an applicant is currently in the UK with valid leave as a Graduate and they have been on this permission for almost two years, they can only be sponsored as a new entrant for a further two years. As generous and useful as the new entrant discounts are, four years is not a great deal of time to get to a salary commensurate with more than half of the people in that profession if they wish to subsequently get a Skilled Worker visa. As an example, a solicitor, having spent two years as a trainee and now two years’ qualified would have to be earning £52,300. This seems likely to be a particularly risky recipe for employment law discrimination issues, where the relevant rise required to meet the higher standard rate would mean that the sponsored worker would have to be paid more than non-sponsored workers at the sponsor in the same role.

Global Business Mobility Senior or Specialist Workers and Scale Up Sponsor Licences

The effect of the new changes to the Immigration Rules may cause sponsors to look again at the Global Business Mobility (GBM) route (which replaced the intra-company routes from 11 April 2022).

Firstly, the salary increases to GBM route have been marginal. The GBM—Senior or Specialist Worker salary threshold has risen from £45,800 to £48,500 and the Graduate Trainee route salary threshold has only increased from £24,220 to £25,410. Secondly, and all importantly, the going rates have remained at the 25th percentile, meaning that for many SOC codes the going rate is less than the going rate for Skilled Workers. Thirdly, allowances can be included in salary under this route, whereas they are specifically excluded under the Skilled Worker route. Though previous employment with the corporate group is required (and ‘high earners’ with an annual gross salary of £73,900 are exempt from this) and the route does not lead to settlement, we suspect this route will get renewed interest, especially for short-term roles.

A somewhat niche, but intriguing alternative for some sponsors, is the Scale-up visa, which has a similar general salary threshold as the Skilled Worker, rising in April from £34,600 to £36,300. The attractive differences are the going rate remains on the 25th percentile, the fees for the sponsor licence and Certificate of Sponsorship are lower than for Skilled Worker and there is no Immigration Skills Charge at all. However, as it is designed for companies with annualised growth in either turnover or staff of at least 20% for the previous three-year period and a minimum of ten employees at the start of the period, as appealing as it is, its use could remain limited. Since 13 April 2023 there has been an ‘endorsed body pathway’ route which allows potential sponsors to obtain endorsement to use the route from a Home Office-approved endorsing body where the organisation does not yet meet certain of the requirements of the route but is on the way to doing so. For some sponsors the main detriment is that the migrant need only remain with the sponsor for six months before being able to change employers or become self-employed, but the trade-off is shorter compliance responsibilities.