Immigration sponsorship changes: how will they affect your business?

Like most employers, both franchisors and franchisees may struggle to fill certain vacancies and may choose to sponsor overseas nationals as part of the solution to labour shortages

Immigration sponsorship changes

The recruitment challenge faced by the hospitality and domiciliary care sectors is well documented but other sectors are also facing issues. In addition, international franchise brands moving into the UK may wish to support their franchise expansion by setting up UK offices staffed by its homegrown talent which may well require sponsoring overseas nationals.

Numerous changes to the sponsorship system have just come into effect on 4 April 2024 which have increased the bar for those wishing to sponsor employees. Civil penalties for employing individuals without the appropriate immigration permission have also increased recently.

As part of these changes, minimum salary thresholds and going rate salaries for sponsored roles have significantly increased. The Shortage Occupation List has been abolished and replaced with a far shorter Immigration Salary List and complex transitional rules have been introduced.
The new Immigration Rules apply if the Certificate of Sponsorship (CoS) is assigned on or after 4 April 2024. We’ve set out below details of the key changes.

What are the new general salary thresholds?
Under the new Immigration Rules, the general minimum salary threshold for Skilled Workers has increased by nearly 50%, from £26,200 to £38,700 per annum and for those applying under the Global Mobility: Senior/Specialist Worker route it has increased from £45,800 to £48,500.

Will any discounts to the general minimum salary threshold apply?
Discounted minimum salary thresholds will still apply if the individual being sponsored is a new entrant (here the minimum salary threshold is £30,960 per annum). There are however very specific eligibility requirements and individuals may only be sponsored as a new entrant for up to four years (and time already spent under the Skilled Worker, Tier 2 or graduate route counts towards the four years).
Discounted salary thresholds also apply if the sponsored worker has a PhD which is relevant to their role but this will not be helpful for most jobs in the franchising sector.

Will the going rate salaries and SOC Codes change?
Before issuing a CoS, the sponsor must ensure that all requirements for the relevant immigration category are met. In particular, there must be a genuine vacancy in the UK for that role and the role must be sufficiently skilled. The sponsor must also select the correct Standard Occupational Classification (SOC Code) for the role. This is a coding framework classifying occupations and assigns all jobs a four-digit code.

Importantly, in some cases, the four digit SOC Code for the role has changed. Sponsors will need to ensure that they check they are using the correct SOC Code when assigning a CoS.

Once the correct SOC Code has been selected, the sponsor must check the relevant going rate salary for that role. If this is higher than the minimum salary threshold then the individual must be paid at least the going rate salary applicable to their role.

Going rates salaries are now based on 2023 salary data and are calculated on the basis of the 50th percentile of salaries for roles within that SOC Code, rather than the 25th percentile. This has led to significant increases to the going rate salaries for certain roles, which is likely to have a particular impact on franchisors and franchisees based outside London and in sectors where pay is more challenging.
Going rate salaries will be discounted by up to 20% for those with a PhD in a subject relevant to their role and by 30% for those who are new entrants (subject to the four year maximum). However, the salary paid may not be below £15.88 per hour.

What if the going rate salary is less than the minimum salary of £38,700?
In certain roles which may be relevant to franchisors and franchisees, such as restaurant, garage, beauty salon and retail managers the going rate salary remains below the minimum salary threshold of £38,700 per annum. None of these roles are on the new Immigration Salary List, meaning unless the new hire is a new entrant, they must be paid at least £38,700 per annum. In some cases this is 20% more than the going rate salary and, as such, it is likely that most businesses will no longer be able to sponsor new hires in these roles.

What are the transitional arrangements?
Complex transitional arrangements apply for applications submitted on or before 30 April 2030 in relation to applicants whose previous application was decided in accordance with the Immigration Rules in force prior to 4 April 2024. Sponsors wishing to employ someone who is already in the UK under one of the sponsored routes will need to check carefully if the individual benefits from the transitional arrangements.

If individuals benefit from the transitional arrangements, reduced minimum salary thresholds will apply to them. Lower going rate salaries will also generally apply. This means that if a business currently sponsors someone and wishes to extend their sponsorship, the transitional arrangements (and lower salary thresholds) would usually apply.

Next steps
We recommend that franchisors ensure that franchisees holding sponsor licences are aware of these changes and that they and franchisees ensure that anyone being sponsored meets the new salary criteria and that the correct SOC Code is used when assigning the CoS.

More generally, franchisors should ensure that franchise agreements state that franchisees must comply with all employment and immigration laws. Franchisors may wish to undertake spot check audits on their franchisees’ sponsor compliance obligations to ensure that franchisees are complying with the Immigration Rules and latest guidance. Otherwise, if the Home Office visits a franchisee and discovers a breach of sponsor obligations the Home Office may take action against that particular franchisee. This may lead to further audits of the sponsor licences of the franchisor and other companies in the franchise network.

This, together with the fact that the penalty for employing someone unlawfully has increased to £60,000 and that negative publicity as a result of one franchisee’s breach of immigration laws is likely to adversely the franchise brand more generally, means that both franchisors and franchisees should ensure they stay on top of the frequent immigration changes and take advice as needed.

Kerry Garcia
Kerry Garcia