- within Wealth Management, International Law and Insolvency/Bankruptcy/Re-Structuring topic(s)
Regulatory Background and Enforcement Risk
The UK Home Office has implemented significant restrictions on which immigration-related costs sponsors (employers) may pass to or recoup from Skilled Workers, following policy changes announced in December 2024 and clarified in April 2025. These restrictions now form part of a sponsor's duty to comply with UK immigration laws, with failure to comply potentially resulting in enforcement action and ultimately revocation of the sponsor license. Organizations with UK sponsor licenses must immediately audit existing arrangements and revise policies to ensure compliance.
Prohibited Cost Recovery: What Cannot Be Passed On
Sponsors cannot pass on or recoup the following costs for workers:
- Certificate of Sponsorship (CoS) Fee: The CoS fee for Skilled Workers increased from £239 to £525 on 9 April 2025.
- Premium or Priority Service Fees: These fees for sponsor license applications, changes of circumstances requests, or CoS assignments are prohibited from being passed on to workers, unless the worker had a choice of whether to do so.
- Legal Fees: Legal fees related to applying for, using, or maintaining the sponsor license, or assigning, requesting, or applying for a CoS cannot be recouped from workers.
- Immigration Advice or Services: Employers cannot pass on the cost of immigration advice or services provided by third parties where the worker lacked genuine choice in obtaining such services, or where the sponsor provides such services directly.
- Immigration Skills Charge (ISC): The ISC remains prohibited from being passed to workers. In mid-December 2025, this fee will increase to £1,320 for large sponsors from the current £1,000 and to £480 for small sponsors from the current £364.
New Salary Calculation Requirements: Critical for Sponsorship Eligibility
When calculating whether the worker's salary meets applicable thresholds, the UK Home Office will subtract any deductions from salary, loan repayments, or investments made by the worker into the sponsoring business or related organization, averaged over the sponsorship period stated on the CoS.
If loan repayments or deductions reduce the worker's effective salary below the minimum threshold for the Skilled Worker route, the position becomes ineligible for sponsorship, even if the gross salary appears compliant. This impacts both new hires and existing employees seeking visa extensions.
Permitted Cost Recovery: What Remains Lawful
Sponsors retain the ability to recoup certain costs:
- Visa Application Fees and Immigration Health Surcharge: Sponsors may recoup these costs for the worker and dependents, as employers are not required to cover these costs.
- Skilled Worker CoS Fees for Certificates Issued Before 31 December 2024: Sponsors may still recoup these costs.
- Costs Unrelated to Sponsorship, Immigration, or Business Investment: Where the worker has genuine choice in the arrangement, these costs may be recouped.
Strategic Implications
Employers may wish to review the following in light of recent changes:
- Audit Existing Clawback Agreements: Review and revise existing clawback agreements that continue to have effect after 31 December 2024 to ensure they do not breach the new restrictions.
- Assess Loan and Deduction Arrangements: Obtain legal advice regarding existing arrangements with Skilled Workers for loan repayments, salary deductions, or investments into the business, as these now impact sponsorship eligibility calculations.
- Revise Employment Contracts and Offers: Ensure new contracts for sponsored positions do not include prohibited cost recovery provisions and that salaries meet thresholds after accounting for any permissible deductions.
- Budget Reallocation: Review and revise HR and recruitment budgets, as fee increases affect not only new hires but existing staff whose visas are up for renewal. The prohibition on recovering CoS fees and associated legal costs represents a direct increase in per-hire costs.
Organizations must recalculate effective salaries for employees approaching visa renewals if they have loan repayments, salary deductions, or investment arrangements. Positions that previously qualified may no longer meet thresholds under the new calculation methodology.
The UK Home Office has positioned compliance with these cost recovery restrictions as a core sponsor duty. Non-compliance carries reputational risk and potential license sanctions that could impact an organization's entire foreign national workforce. Given the clarity of the updated guidance, sponsors should expect enforcement where violations are identified during compliance audits or worker complaints.
These regulatory changes reflect the UK government's stated objective of addressing exploitation of sponsored workers while shifting sponsorship costs definitively to employers. Organizations must treat sponsor license compliance as a critical operational priority, with particular attention to the intersection of compensation structures and immigration eligibility thresholds.
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.
