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Employer Sponsorship and SMEs: Not just a ‘big business’ issue

Businesses of all sizes are currently exploring whether they need to hold a sponsor licence in order to fill key vacancies and address current labour shortages.

In the post-Brexit era, employee sponsorship – normally in the Skilled Worker category – is often a legal requirement for recruiting any non-UK nationals (including EU nationals).

I find myself saying on an almost daily basis that employer sponsorship is no longer a ‘big business’ issue, but an ‘all business’ issue… and yet, the anecdotal and statistical evidence is that SMEs are not applying to become sponsors and are shying away from using the Skilled Worker route, potentially missing out on highly skilled talent and strategic opportunities for economic growth and development.

The statistics are shocking. Whilst the number of businesses holding a sponsor licence has increased by a massive 65% following the end of free movement; from 30,278 at the end of Q4 2020 to 49,916 at the end of Q3 2022; the number of SMEs holding a sponsor licence remains worryingly small.

A survey conducted by the Federation of Small Businesses indicated that just 2% of SMEs have utilised employee sponsorship to take on migrant staff in the last 12 months (and only 4% anticipate doing so in the next 12 months). In contrast, pre-Brexit some 26% of SMEs employed at least one member of staff who is an EU national (excluding those from the Republic of Ireland). At the same time, 78% of SMEs surveyed indicated that they are currently experiencing recruitment difficulties in the current economic climate.

So why is this?

Undoubtedly employer sponsorship is more administratively burdensome and costly than free movement (for which there were no visa requirements, application fees etc), yet there seems to be an alarming amount of misinformation about the costs and requirements of the visa application process that are putting SMEs off.

The costs.
The cost of obtaining a sponsor licence for a business qualifying as a small employer is £536. This is a one-off fee to secure a sponsor licence for four years. Although the fee is payable in a lump sum up front when the licence application is submitted, it is equivalent to a cost of £134 per year. At the end of the four-year period, if the business wants to continue to hold the licence, they will need to pay this fee again in order to renew their standing as a sponsor.

Thereafter, employers wanting to sponsor individual employees will need to pay a cost per Certificate of Sponsorship (or work permit) of £199 per person. Unless an exemption applies, they will also need to pay the costs of the Immigration Skills Charge, which is a levy charged by the UK Government on all employers taking on sponsored migrants. This fee is also payable up front and is determined by the length of the visa. For small employers, the cost is £364 per year of the visa. As such, if the employer is seeking to sponsor an individual for three years in the first instance, the cost of the Immigration Skills Charge is £1,092. The total fee for the Certificate and the Skills Charge for sponsorship for 3 years is therefore £1,291 (or equivalent to £430 per year).

Of course, individuals then need to pay visa fees in order to submit their visa applications, including the application fee, the immigration health surcharge and any fees for any priority or additional services they might require. Whilst these may add up, these are not fees that a sponsor is obliged to pay. Whilst some businesses do pay all of these fees, or make a contribution towards some of these fees, there is no obligation for them to do so. In my experience, many SMEs limit their contributions to these fees and, where they do contribute, provide for repayment provisions (often on a tapering basis), to enable recovery if sponsored employees leave.

The compliance obligations.

Sponsors are subject to an enhanced compliance regime to ensure the legal requirements of the Immigration Rules have been met.

Some of the legal requirements apply to all businesses in any event (such as complying with the right to work checks to prevent illegal working).

Others may involve some additional requirements around HR practices and processes, but in my experience, these are manageable for small businesses so long as some thought is given as to how the requirements will be met at the outset of the sponsorship process. Compliance does not require expensive HR self-service systems or niche programmes, but can be done by way of diary reminders, spreadsheets, emails and regular check ins etc. The key is making sure that individuals who have a day-to-day responsibility for managing compliance have a clear understanding of what is needed. In many ways, ensuring compliance is easier for an SME who may be sponsoring a small number of migrants within a small workforce and management team, rather than a large multinational employer juggling a large number of sponsored migrants in different teams and in different locations.

Lack of experience

Interestingly, anecdotally at least, one of the issues often raised by SMEs as a blocker to using the sponsorship regime is a lack of experience in navigating the visa system, along with not knowing where they can go for support and advice.

It is certainly true that pre-Brexit many SMEs would not have been familiar with the Skilled Worker regime, given that they would have potentially been able to fill vacancies using UK or EU nationals under the freedom of movement provisions. However, given the changes post-Brexit this is something many more businesses are having to become familiar with (which is evidenced by the rapid increase in sponsor licensing). As such, SMEs who explore the Skilled Worker route may find it is not quite as difficult or expensive as they have been led to believe.

How we can help

We can provide support and guidance throughout the licence application and visa process to SMEs so that you feel confident in navigating your way through this new area. We can provide ongoing support and training to upskill your business on the compliance requirements, whilst remaining on hand for any tricky issues as they arise. We are able to offer fixed fee services for all of these areas, giving transparency and keeping you in complete control of costs at each stage.

If your SME is struggling in the current economic climate to fill your vacancies or you’d like to find out more about making the visa system work for you, please get in touch with me, or any member of our Business Immigration Team for an initial discussion.