Background
Maintenance of a sponsor licence is of utmost concern for any organisation that wishes to sponsor migrant workers in the UK. The Home Office grants Sponsor licences to businesses in the UK, which permits these businesses to hire migrant workers from overseas or within the UK. After acquiring the licence, the business issues prospective migrant workers with a Certificate of Sponsorship (CoS), with which they can apply for their Skilled Worker visa, which gives them permission to live and work in the UK.
In return for holding a valid sponsor licence to enable them to hire an overseas workforce, sponsors have to adhere to strict compliance obligations to keep records, monitor employees, and report changes when necessary to the Home Office. The sponsors should understand Home Office rules and guidance, even before applying for the sponsor licence, which can run to thousands of pages. These requirements can be described as “conditions of participation” in the licencing regime, so the sponsors are required to comply with the requirements to curb illegal working.
Failure to discharge a sponsor’s duties and obligations leads to severe effects. The Home Office can downgrade, suspend, or cancel a licence if licenced sponsors fail to meet their responsibilities and obligations. These effects further blemish the organisation’s reputation and hamper the sponsored workers’ employment and right to work. The recent increase in compliance audits has skyrocketed, owing to the rise of resources by the Home Office to undertake this, which highlights the importance of adhering to the compliance requirements. There has been a very high rise in Home Office compliance action against the sponsors, including suspension and revocation of the sponsor licence. The significant increase in the revocation of the sponsor licence is due to the Home Office’s efforts to prevent and stop abuse of the immigration rules in place and curb illegal working. However, there are other factors in play as well.
Before 6 April 2024, a sponsor licence had been in place for four years, and sponsors were required to renew this every four years. Even though the Home Office reserves the right to conduct compliance checks at any time, these were prevalent when renewing the licence. From 6 April 2024, sponsors whose licences are due to expire after this date automatically acquired 10-year extensions. Removing the requirement for sponsor licence renewal freed up resources within the Home Office, which is why compliance audits are prevalent now.
Key Insights
- Most companies lose their sponsor licence because they don’t adhere to the requirements stated by the Home Office, primarily failing to maintain proper records and report migrant’s change in circumstances.
- The UK still faces significant critical skills shortages in its key sectors, such as manufacturing, healthcare, and technology, as it continues to suspend an increasing number of sponsor licences.
- The loss of a sponsor licence causes a recruitment freeze, with added costly legal battles and reputational damage for the business, making it absolutely critical for sponsor licence holders to be proactive and compliant.
- The most vulnerable sector is the care home industry, with many care homes losing their sponsor licence due to failure to comply with their sponsor duties.
- Recent state reports have indicated that the revocation and suspension of sponsor licences have had an enormous impact, as over 500 businesses were affected in 2024.
Introduction: Rising Sponsor Licence Suspension & Revocation
As the Home Office issues suspensions and revokes an increasing number of sponsor licences, the UK is witnessing an unprecedented rise in scrutiny of Sponsor Licence compliance. This situation evokes anxiety in employers regarding managing skill gaps and the uncertainty it can create in the labour force, thereby creating pressure for businesses of all sizes.
Don’t you know somebody working for a company that recently lost its sponsor licence? There have been so many suspensions and revocations that 2024 peaked in contrast with the last three years. There was an increased trend of 109% suspensions and 51% revocations since 2023. We are seeing more of this under the new Labour Government, boasting in its manifesto that employers who “flout the rules will be barred from hiring workers from abroad”. According to the latest data from the Home Office, as many as 1,023 employers had their skilled worker sponsor licence cancelled in the second quarter of 2024, compared with only 519 for the first quarter.
This sudden increase forces companies to raise their compliance standards or face severe repercussions for losing the privilege of sponsoring highly qualified workers. The new pressure on immigration compliance is further intensified by the substantial increase in fines for employing illegal workers, which now stand at £45,000 per illegal worker and £20,000 to £60,000 for repeated offences after 13 February 2024.
Below is a graph highlighting the increase in sponsor licence suspensions and revocations between 2021 and 2024. The data is at its peak for suspensions in nearly a decade.
The Impact on the Current Landscape of UK Sponsor Licence Suspensions & Revocations
This clampdown on sponsors will create an existential crisis for businesses dependent on sponsored workers. The information published in the public domain by the Home Office related to the businesses that have flouted the rules will also affect the reputation of these businesses. Employers’ sponsor licence suspensions may negatively impact the potential hiring of overseas talent. A B-rating downgrade puts sponsor licence holders on a time-bound action plan, and failure to comply with the requirements results in revocation of the sponsor licence. On top of that, there is no right of appeal and also a cooling off period, which is usually 12 months for sponsor licence reapplication. The reputational damage that comes with this is often irreversible.
When the sponsor licence is suspended and revoked, the sponsored employees are threatened with “dire” consequences. The sponsor licence is revoked immediately, leading worried sponsored workers who will lose their right to live and work in the UK to fear they will no longer be able to find a new sponsor within 60 days.
Along with these broader cuts in immigration numbers, which have recently been an extensive focus area under the last Conservative government, primarily carried out through changes in visa rules, comes extensive scrutiny of sponsor licence holders. New reforms, introduced in April of this year, do not allow sponsored care workers to bring their spouses or kids with them when arriving in the UK. The sponsors should also pay their workers no less than the minimum income of £38,700, in contrast to the lower threshold of £26,200.
These policies have greatly affected the inflow of international skillset holders in the UK. According to data from the Home Office, work visa applications between January and June 2024 were 286,382. This is 11% fewer than in the same period last year. ‘Health and Care Worker’ visas were reduced to 89,095. Although this is 81% lower compared with April to June 2024, this number is a 26% decline from last year.
Hence, high salaries and sponsorship application fees are proving to be costly for most corporations. Adding to this, financial pressure has made sponsorships unfeasible for a few. For instance, a massive multinational media company is now desperately trying to relocate all its facilities abroad. The suspension and revocation of sponsor licences have skyrocketed, bringing on a crisis within the UK labour market. There is already a skill gap in the market, and the sponsor licence suspensions are widening the gap by taking away the right of organisations to hire overseas talent to bridge this gap. The significant industries taking the hit are healthcare, hospitality, and manufacturing. Companies need to respond and act quickly to this surging demand for compliance.
The Home Office audits are tightening their grip with stricter actions around the businesses to ensure sponsor licence compliance. Many businesses are taken aback by the level of detail involved during the audits and how even a tiny mistake can lead to sponsor licence suspension or revocation. However, the fines are now much higher for sponsor licence suspension, which can strip a business of even the best workforce. Still, revocation can shut the recruitment operation of overseas talents.
Below is a graph highlighting the drop in skilled worker visas amid an increase in sponsor licence suspensions and revocations between 2023 and 2024.
Why Are Sponsor Licences Being Suspended?
There are many reasons why sponsor licence suspensions have risen lately, though most of the suspensions are brought about by a few compliance failures. Here’s what the Home Office mainly flags in its audit:
- Failure to report changes: Sponsors must report any change in a sponsored worker’s circumstances, whether they have changed job title, pay, or work location. Failing to report these updates might lead to suspension.
- Poor record keeping: Sponsors are liable to ensure they hold proper records regarding sponsored workers. These should include up-to-date copies of the right-to-work checks and all other relevant documents. Poor record keeping can be a reason for failing to fall into a category of non-compliance.
- Failure to comply with audit demands: Failure to respond to the Home Office’s request for information/documentation within the stipulated time frame may result in suspension of the licence.
The Home Office requires businesses to maintain high standards in these areas. Small mistakes quickly add up and carry the threat of suspension and revocation.
Another reason for the rising number of sponsor licence suspensions and revocations is the exploitation of overseas workers in the care sector. An anti-slavery charity claims modern slavery cases involving care workers are rising in the UK. The charity unveiled a report titled “Who Cares – Modern Slavery in the Care Sector,” released in October 2023. This report shows a 606% increase in care-related modern slavery reports to the UK Modern Slavery & Exploitation Helpline in 2022. This was matched with 712 potential victims – mostly overseas workers – although it only reported 63 cases the previous year.
Such an exponential rise is due to unscrupulous recruitment, where organisations recruit workers, promising them a job only to be exploited upon arrival in the UK through debts and mistreatment by employers. The rise in unethical behaviour has compelled the Home Office to take necessary enforcement actions, contributing to an increase in sponsor licence revocations and suspensions.
Yash Dubal, director of A Y & J Solicitors, said the clampdown on sponsor licences on sponsorship was part of the initiative to cut down immigration. He stated, “The measures the previous government brought in are working, but do they benefit businesses? Only time will tell”. Sectors requiring international workers to cover their shortfalls will suffer because it will become increasingly challenging to source workers, especially in health and care, which has faced profound reductions in work visa allocations and applications and where migrant workers are integral.
Critical Sectors Facing Skill Shortages Amid the Rise in Sponsor Licence Suspensions & Revocations
As the immigration rules become stringent, there is a rise in suspensions and revocations of sponsor licences, and the grip has begun to tighten on several industries. Businesses already dealing with the problem of bridging the critical skill gap in their workforce are feeling the impact of the sponsor licence suspension. It is felt sharply by the sectors that heavily rely on international talent.
Wherever it may be, whether in healthcare or engineering, IT or skilled trades, such shortages of qualified professionals only worsen workforce gaps, making companies vulnerable to operational disruptions and risks related to regulatory compliance. Knowing which sectors are damaged by these shortages can help organisations navigate such a challenging landscape and protect their access to the global talent pool.
The Shortage Occupational List (SOL) lists occupations in sectors within the UK that have skill shortages. The ‘Immigration Salary List‘ replaced the SOL. The number of eligible roles under this list has fallen dramatically. For example, all engineering and technology vocations have been removed from the list. However, if such workers are already sponsored in one of the roles removed from the shortage occupation category, a lower salary threshold will still apply to them, although this may be higher than their current pay rate, provided they remain with they were on a Skilled Worker visa prior to these changes.
The sectors facing the most significant skill shortages include:
- Healthcare & Social Services
- Construction
- Creative Arts (Musicians, Dancers, Artists)
- Agriculture, Fishing & Trades
- Life Sciences (Biological, Chemical Scientists)
1. Health & Social Care
Occupations: Carers, senior carers
Skills Shortage:
- Due to the number of carers and senior carers on this list, there is a severe shortage of managers and workers in health care and residential care services.
- Healthcare management positions are desperately in demand. The minimum salary requirement is £30,960, however, care workers qualify for a lower going rate of £23,200.
Implication: This reflects an acute shortage in the UK in terms of health care management and direct care. It also indicates the country’s ageing population and pressure on health services.
2. Construction
Occupations: Bricklayers, masons, roofers, carpenters, plasterers, welders, and other construction trades.
Skills Shortage:
- The shortage of skilled tradespeople in construction is critical, and salaries at 80% of the market rate are still sufficient to attract international workers.
- There is a widespread demand for essential construction roles like bricklayers, roofers, and carpenters. The standard salary threshold starts from £30,960. The lower rate is £23,200, which applies to people already on the skilled worker route before changes.
Implication: The UK’s housing and infrastructure projects are constrained by a lack of skilled workers, which could delay significant construction projects and impact housing affordability.
4. Creative Arts
Occupations: Artists, musicians, dancers, choreographers, graphic designers
Skills Shortage:
- There is a shortage of specialised occupations in the creative industry, such as ballet dancers, orchestral musicians, and graphic designers. However, these professions demand exceptional qualifications, such as international recognition in ballet dancing.
- Artists and musicians tend to have lower rates, about £32,800 and £35,300, respectively, but their inclusion on the list shows that the creative industry lacks the diversity of skills it needs.
Implication: The UK has world-class industries in arts and culture, but this means it needs more talent, especially in fields such as classical ballet, partly due to international competition and high barriers to access.
5. Agriculture, Fishing & Other Trades
Occupations: Deckhands, pipe welders, agricultural and fishing trades.
Skills Shortage:
- Both agriculture and fishing suffer shortages. Most are more skilled: deckhands on large fishing vessels.
- Jobs in these sectors play a huge role in the rural economies of the UK. However, wages are as low as £30,960.
Implication: The labour shortage has a huge knock-on effect on the rural and coastal economies, potentially affecting the food chain supply and local economies.
6. Life Sciences
Occupations: Biological scientists, chemical scientists,, archaeologists
Skills Shortage:
- Most life sciences roles are in demand, particularly those in biological and chemical sciences. The nuclear industry is hiring specific jobs in Scotland. The salary scale of chemical scientists in the nuclear sector is £35,200.
Implication: The UK is losing its position as a scientific research and development leader due to increased demand for better-skilled scientists, especially in specialised areas such as nuclear science and biotechnology.
Summary & Implications
This shortcoming impacts many professions in health, science, and artistic skills across the entire length and breadth of the UK. Therefore, it is not a case of regional shortages but national shortages in skilled labour.
This includes highly skilled life sciences positions to trading professionals in construction and agriculture. An apparent demand for special education and training exists to attract overseas talent and bridge the gaps.
Most professionals in short occupations receive 80% of the minimum rate, so lower wages are introduced to bridge the shortages without triggering wage inflation. Still, a few continue to get enormous wages: care workers and electrical engineers- the two most critical industries.
In reality, targeted recruitment and training, among other immigration policies like the Skilled Worker visa route, will be the key strategies to fill current shortages. It should look at skills developed domestically to build capacities toward more significant short-term capacity improvements and longer-term workforce sustainability.
The Home Office’s Increased Scrutiny: What It Means for You
Why the increased scrutiny? The Home Office has raised the stakes on compliance in response to growing public concern over immigration control and the integrity of the sponsorship system. In this respect, it acts against businesses that misuse their sponsor licence or fail to meet the legal requirements to employ overseas workers. The Home Office has promised that only genuine employers, using proper procedures, will have the chance to utilise the sponsorship regime.
What does this mean for you? Businesses must be constantly prepared to comply with the country’s immigration laws. For non-compliance with any regulation, you will now face suspension and even revocation of your sponsor licence and hence lose your ability to hire international talent.
How to Prepare for a Home Office Audit:
- Regularly conduct internal audits and solve any compliance issues.
- Keep an up-to-date record for all sponsored employees.
- All HR documents related to the right to work and visa expiry should be accurate and up-to-date.
- Train the HR team to detect compliance gaps and fill them immediately.
- Keep the Home Office updated about changes in circumstances.
Remaining proactive and vigilant is crucial for reducing the risk of suspension and enabling the recruitment of global talent with less costly disruption.
Best Practices for Compliance: How to Avoid Sponsor Licence Suspension
It is best to take measures to remain compliant with the Home Office regulations to avoid being part of a long list of employers with a suspended sponsor licence. It is essential to stay ahead of the curve. Here are a few strategies:
1. Accurate Certificates of Sponsorship
The job descriptions should be correct and align with what sponsored workers will do in their positions. For example, compliance officers will question a company for examples of work done to ensure this aligns with the role in the job description. Sponsors should not “cut and paste” pre-prepared CoS (Certificate of Sponsorship), but it must be specific to each Skilled Workers job in the UK.
Review the position of the worker regularly and, in case of any changes, report to the Home Office. Gaps and discrepancies can cause severe problems for sponsors. If the employee’s role does not correlate with the job description, then the Home Office can question the same and be prompted to conduct a compliance audit. Furthermore, if you share any false information as part of the CoS application, or if the Home Office has reasonable grounds to consider the role for which the CoS has been allocated not to be genuine, the Home Office can choose to conduct a compliance audit, and after that suspend and revoke your sponsor licence based on the audit.
2. Be prepared for an audit at all times
The Home Office compliance officers may visit sponsors on an announced or unannounced basis at any time during the lifetime of a licence. They may inspect any work locations listed on a sponsor licence and third-party offices if migrant workers work from these premises or conduct a remote compliance visit.
We expect all sponsors to be audited sometime during the lifetime of their sponsor licence. The most common audit triggers have always been after applying for a sponsor licence or when applying for renewal. Until recently this year, sponsor licences were required to be renewed after every four years. The Home Office has abolished the expiration date on sponsor licences, so sponsors are no longer required to renew them. This was an area where the Home Office would scrutinise the sponsor licence (and sponsors tend to prepare every four years to do so by internal audit).
Regular mock compliance audits or annual health checks with an immigration adviser can prove indispensable for providing compliance advice and ensuring that sponsors are fully compliant in the event of a Home Office visit.
3. Robust HR system
The Home Office required businesses to maintain robust HR systems so that activity from sponsored workers and corporate structural changes can be monitored and recorded. Those sponsoring must report significant changes in circumstances to the Home Office within tight deadlines. Usually, these changes are to be reported within 10 or 20 working days, depending on the type of the change. Some of these are relatively apparent changes, such as a change in the migrant’s job title following a promotion or a change of ownership or parent company.
Sponsors should ensure that the Authorising Officer and other Key Personnel’s record changes as appropriate. The Key personnel must know their sponsorship duties, such as reporting and managing the sponsor management system (SMS). It is essential to ensure that sufficient numbers of Key Personnel are appointed in the system so that if a Key Personnel leaves the business or takes annual, sick, or sabbatical leave, reporting duties and the ability to comply with sponsor duties are not impacted.
Sponsors should also be prepared to explain to the Home Office’s compliance officer how their systems and records work. In any case, sponsors can expect the Home Office’s scrutiny in an audit of any changes not reported on time or reported late.
4. Remote working
The Home Office recognised a work-from-home model during the pandemic. However, last year, the Home Office clarified its position to confirm that sponsors must declare where a worker will work full-time or permanently from home and if they work in a hybrid working pattern. If the sponsored workers will be working from home permanently, then the Home Office can request justification as to why the individual needs to be in the UK.
Sponsors must explain to the Home Office how they continue to meet all sponsor obligations in such circumstances, especially reporting and record-keeping. For instance, they can monitor right-to-work hours and their responsibilities or even check attendance or sickness absences. Businesses need to maintain transparent policies and systems that demonstrate their adherence to compliance.
5. Complying with record-keeping duties
Sponsors must hold a range of records regarding their employees as determined within Home Office guidance. This will include information that would form part of any HR file and other details, such as historical contact details for sponsored workers. Conducting and keeping a record of right-to-work checks on all employees is paramount. Failure to produce such records can trigger an audit by the Home Office, which could lead to severe consequences.
The key personnel should always know the location of employee files, payroll data, and sensitive policy documents during an audit. If you would like further details regarding any of the above, contact a member of our Immigration team. We frequently advise employers on immigration and compliance matters. We also conduct mock audits and health checks on licence holders and provide compliance training for key personnel.
Following these guidelines minimises the risk of a sponsor licence suspension and protects your business from penalties.
What to Do If Your Sponsor Licence is Suspended?
When your Sponsor licence is suspended, do not panic. You will need to address any compliance issues resulting in suspending your sponsor licence. However, the process is complex and requires swift action. Below are a few steps you can take:
- Understand the Problem: As a first step, read the Home Office’s findings and identify why the licence was suspended.
- Correct Compliance Issues: Make all compliance changes that relate to updating your record and other internal procedures simultaneously.
- Consult with an Attorney: When licence are suspended, seek the services of an experienced immigration attorney to help you submit the requested evidence and representations.
A Y & J Solicitors have expert advice and assistance for sponsor licence suspension and revocation. Their qualified team of solicitors can offer the best solution to restore your licence and prevent such occurrences.
Conclusion: Stay Ahead of the Compliance Curve
The rise in sponsor licence suspensions and revocations is unending. As compliance requirements become more challenging and the Home Office increases its clampdown with audits, businesses must intensify their efforts to safeguard their sponsor licences. This requires staying updated, conducting regular internal audits, and strengthening their HR system in line with the sponsor licence requirements.
Do not wait for a suspension to occur if you feel overwhelmed by the complexity of sponsor licence compliance duties. Get expert help from A Y & J Solicitors to help you navigate the complexities of UK immigration law and have your business up and running in no time.
Holding the fort and keeping on top of things as you maintain your sponsor licence ensures the ability to continue hiring talented workers worldwide and long-term business success.
