Updated sponsor guidance and caseworker guidance sheds some light on the new Immigration Rule covering certain payments made by a Skilled Worker to their sponsor, but there are still clarifications needed on some important points.
If you are a Skilled Worker sponsor, it is vital that you understand and correctly apply the new rule. This is because failure to do so could affect your ability to hold a sponsor licence and could lead to your Skilled Workers' permission being cancelled.
As a Skilled Worker sponsor, how might this rule affect me?
To ensure a Skilled Workers whose CoS is assigned on or after 9 April 2025 is eligible for sponsorship (including workers whose immigration permission requires extension, you may need to:
- Review your existing arrangements for salary deductions, loans and investments; and/or
- Seek legal advice on any areas of uncertainty as early as possible.
When does the new rule apply, and what does it say?
The following new Immigration Rule applies to Skilled Worker applications supported by a Certificate of Sponsorship (CoS) assigned on or after 9 April 2025, and it's worth setting it out in full:
SW 14.2A. Any money paid by the applicant to the sponsor (or a related organisation) will be considered as follows:
(a) The following payments will be subtracted from salary, unless (c) applies:
(i) deductions from salary; or
(ii) repayments of loans; or
(iii) investments.
(b) Any such subtractions will be averaged over the length of time the applicant is being sponsored for, for the purpose of salary considerations.
(c) Money will not be deducted where the payment is not related to business costs, immigration costs or investment, but rather an additional benefit offer which the applicant has a genuine choice whether to take up, for example salary sacrifice arrangements.
The Home Office's guidance on sponsoring a Skilled Worker confirms that 'the length of time the applicant is being sponsored for' should be interpreted as meaning the length of their CoS.
Although payments to a sponsor (or related business) through salary deductions, loan repayments or capital investments are not prohibited as such, sponsorship viability may be affected where the magnitude of these figures is large (e.g. where a loan covers immigration costs for a main applicant and dependants, or a sizeable investment) and/or the initial salary is close to the applicable salary thresholds.
Note that some immigration-related costs cannot be recouped from a sponsored worker under any circumstances. See our separate article for further information on this.
Why has this rule been introduced?
The Home Office states this rule is intended to meet three policy objectives:
- To provide consistency with how paid allowances for the same purposes are treated;
- To mitigate against sponsorship costs being passed on to applicants; and
- To close an unintended loophole whereby applicants could effectively pay towards their own salary through investing in their sponsor's business.
When should the new rule be considered during sponsorship?
Paragraph SW 14.2A. is an eligibility requirement for the Skilled Worker route, so you as the sponsor are required to make the initial calculations at the time the Certificate of Sponsorship is assigned.
However, payments that are set up after the application must be reported to the Home Office if they are of a type that is caught by the new rule. This would include where a loan arrangement is set up between you and the worker, or an investment in the business is made by the worker into your business. This is because these changes would be considered a salary reduction. You would need to report the change using the sponsorship management system, within 10 working days.
You should carefully consider the implications of any proposed payment arrangement before implementing one. If it would result in the Skilled Worker receiving a salary rate that no longer meets the applicable general salary threshold or going rate for their occupation (as calculated in line with paragraph SW 14.2A), this could lead to:
- Cancellation of immigration permission for the Skilled Worker; and/or
- Sponsor compliance action, including:
- Licence suspension;
- Licence downgrade and action plan; and
- Licence revocation.
Can salary sacrifice arrangements be used to recoup immigration, business or investment-related costs?
The short answer to this is no. The wording of the rule specifically excludes salary sacrifice from being used to recoup these kinds of payments. Also, under tax law, salary sacrifice can only be applied in certain circumstances.
If you have previously used salary sacrifice arrangements as a means for a Skilled Worker to make payments to your business, you should ensure you have taken tax advice on the compliance implications of this. You should consider seeking immigration advice on whether any breach of tax law may lead to sponsor compliance action.
Are clawback agreements within the scope of the rule?
A 'clawback agreement' is an arrangement under which a worker is required to pay back all or part of costs incurred by their employer if certain circumstances apply, e.g. if their employment ends within a certain period.
Payment by a Skilled Worker to your business under a clawback agreement is not a certainty at the time their immigration application is made, so the rule would not be applicable at that point.
However, if you are considering agreeing or triggering a clawback agreement in relation to a Skilled Worker, you should consider taking employment, immigration and tax advice before doing so. This applies equally if you are considering making a deduction before the worker's employment ends, or if you are considering requiring the individual to make payment to you after that point.
Will we see further developments in this rule and associated guidance?
When a completely new Immigration Rule is introduced, it can take some time for its interpretation to become settled.
In this case, the following terms are not yet defined within the Rule itself or in associated guidance, and are therefore likely to need further elaboration:
- 'Related organisation'
- 'Investment'
Also, where a rule does not meet its intended policy objectives, it may be amended in a later Statement of Changes. In this case, whether the rule as initially drafted is robust and targeted enough to meet the Home Office's stated objectives is something that will need to be tested.
Conclusion
This new rule creates additional complexity and compliance risk for sponsors when assessing if the Skilled Worker salary requirements are met (and continue to be met). There are currently gaps in how it should be interpreted, and it may also need to be refined to better meet its policy objectives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
