UK employers with sponsor licences who recruit overseas workers need to pay the immigration skills charge for most of their sponsored recruits. Here is our guide for employers on the immigration skills charge and what you need to know.
- What is the immigration skills charge?
- The rationale for the immigration skills charge
- Which overseas employees can be recruited without paying the immigration skills charge?
- How much is the immigration skills charge?
- Can an employer pass the immigration skills charge on to the sponsored employee?
- Can an employer get a refund of the immigration skills charge?
- When does an employer get an immigration skills charge refund?
- Date the immigration skills charge is payable
- Exemptions to the requirement to pay the immigration skills charge
- Is the ISC payable for dependents of the sponsored worker?
- The consequences if an employer does not pay the immigration skills charge
What is the immigration skills charge?
The Home Office introduced the immigration skills charge (ISC) in April 2017. It is a fee payable by employers of Tier 2 workers who have been assigned a certificate of sponsorship. This includes those recruited on the skilled worker visa and the senior or specialist worker visa.
It is important to understand the ISC to your business so you can weigh up the costs of training schemes and apprenticeships (assuming you can find workers to recruit from within the UK) against the cost of applying for a sponsor licence, managing the sponsor licence, and recruiting sponsored employees.
For information on sponsor licences and employment have a read of our articles on:
The rationale for the immigration skills charge
The ISC was introduced to address the UK skills gap as a deliberate disincentive to UK employers to hire overseas workers and to encourage UK business owners to instead invest their money in recruiting from within the UK and providing training and apprenticeship schemes to meet the UK skills gap. The money raised through the immigration skills charge is syphoned off to the Department of Education to help invest in UK worker skills training.
This approach presupposes there are suitable UK job candidates who are willing to undertake training or that businesses can wait for non-experienced workers to gain the degree of skill and expertise an employer requires of their workers to meet commercial contracts or business expansion plans.
Which overseas employees can be recruited without paying the immigration skills charge?
It is important to understand when the ISC is payable as the cost needs to be budgeted for when recruiting non-British nationals.
In some sectors of the UK economy, such as hospitality and the construction industry, some companies are reliant on a workforce that consists of up to 30% of EU nationals. If those EU workers leave their employment the cost of replacing them will rise significantly if the company must pay the ISC when recruiting each replacement worker.
If a recruit is a non-UK national your business does not need to pay the ISC if the new employee:
- Has indefinite leave to remain
- Has pre-settled status or settled status under the EU Settlement Scheme
- Has a visa that enables them to work in the UK without requiring a sponsoring employer or payment of the ISC. For example, a graduate visa holder
Business immigration solicitors recommend that employers plan for the eventual reduction of existing EU national employees that will inevitably occur through workers reaching retirement age, finding new jobs within the UK or returning to their home countries.
How much is the immigration skills charge?
The cost of the ISC is an important recruitment consideration when your business is heavily reliant on skilled migrant workers. The ISC cost is set at 2 levels:
- Higher charge of £1,000 per year per sponsored worker
- Lower charge of £364 per year per sponsored worker
The level of ISC your business is liable to pay depends on 3 factors:
- The nature and size of your business – there are 2 categories, namely small or medium
- The length of the sponsored worker’s visa
- If the job the overseas worker is being recruited for is ISC exempt
The definition of a ‘small’ business or a charity for calculating if the ISC of £364 per year is payable is:
- A company subject to the small company regime under section 381 of the Companies Act 2006 or
- A charity within the meaning of section 1 of the Charities Act 2011 or section 1 of the Charities Act (Northern Ireland) 2008, or a body entered in the Scottish Charity Register or
- A person employing no more than 50 employees
The 2006 Companies Act says at least 2 of the following company criteria must apply for a business to be classed as a small company under the Act:
- A turnover of no more than £10.2 million
- A balance sheet total of no more than £5.1 million
- No more than 50 employees
If your organisation does not fall within the definition of a ‘small’ employer or a charity then you will need to pay the ISC fee for a medium or large size company of £1,000 per year for each sponsored employee.
The sponsor licence sponsor management system (SMS) should calculate the ISC for you when you allocate a certificate of sponsorship to a successful overseas job candidate. For example, if you want to sponsor a worker for 20 months you need to pay the ISC figure for 2 years as the immigration rules say that the fee is not apportioned. For small companies, the fee is £182 for subsequent 6 months periods of employment and £500 for medium-sized businesses.
An employer does not pay the ISC annually. Instead, the company must pay the full fee when requesting the certificate of sponsorship to sponsor the overseas worker. That means if you are classified as a small employer and your recruit is applying for a 5-year visa the ISC will amount to £1,820. For large employers with visa applicants applying for a 5-year visa, the maximum ISC will be £5,000. Those amounts can rapidly increase overheads when a business needs to recruit several skilled migrant workers.
Can an employer pass the immigration skills charge on to the sponsored employee?
The immigration rules say that you cannot ask a sponsored employee to repay the ISC to your business either as a lump sum payment or as a deduction out of their earnings as reimbursement for payment of the ISC.
Can an employer get a refund of the immigration skills charge?
There are some circumstances where a business can obtain a refund on the immigration skills charge. That is important as the rules say the ISC is payable upfront before the Home Office considers the overseas worker’s application for a skilled worker or senior or specialist worker visa.
A refund provides a sponsoring employer with a solution if the recruit is either being refused a Tier 2 visa by the Home Office or leaves their sponsored employment before the expiry of their visa. The ISC can be refunded in part or in full.
A business is entitled to a full ISC refund if:
- The Tier 2 visa application is refused by the Home Office
- A new employee decides to withdraw their Tier 2 visa application or does not commence their employment
A business is entitled to a partial ISC refund if:
- The employee terminates their contract of employment before the expiry of their Tier 2 visa. For example, your sponsored employee chooses to return home or finds a new job with a different sponsor
- You terminate the contract of employment with the sponsored employee before the expiry of their visa. For example, because of poor performance
When does an employer get an immigration skills charge refund?
For cash flow purposes, most employers want to know when they will get their ISC refund. If you are entitled to a full or partial refund the Home Office will pay the amount back into the account the ISC was paid from.
Normally the Home Office will refund the full or partial ISC within 90 days of:
- When the company informed the Home Office that the sponsored worker did not commence employment
- The expiry date on the certificate of sponsorship provided that the recruit did not use the certificate to apply for a visa
- The date the visa application was withdrawn by the recruit
- The date of expiry of the visa applicant’s ability to apply for an administrative review of the Home Office’s decision to refuse the work visa application. If an administrative review is requested by the visa applicant the company will get a refund within 90 days of the dismissal of the administrative review and refusal of the visa application
If a visa is curtailed as a worker does not comply with visa conditions the Home Office will not refund the ISC.
Date the immigration skills charge is payable
Some UK employers incorrectly assume the ISC is only payable when a recruit makes their visa application. However, the ISC is payable when the certificate of sponsorship is allocated through the online sponsor management system.
The certificate of sponsorship for the sponsored employee will only be valid once the ISC has been paid and the visa will only be issued if the ISC is paid in full.
Exemptions to the requirement to pay the immigration skills charge
There are some exemptions to payment of the ISC, namely:
- Those switching to sponsored employment, such as international students switching from a student visa to a skilled worker visa. The exemption also applies when extending a visa following a switch application
- Scale-up visa applicants
- EU nationals applying under the global business mobility route senior or specialist worker visa to transfer from an EU-based business to the UK for up to 36 months provided the certificate of sponsorship was issued after 1 January 2023. The exemption applies to EU nationals (or Latvian non-citizens) but does not cover EEA, Swiss nationals or those from Iceland, Norway, Liechtenstein and Switzerland. For the exception to work the business must use an ISC-exempt certificate of sponsorship and confirm that the UK-EU Trade and Cooperation Agreement exemption applies to the worker
- Where a job applicant is applying for a visa from outside the UK and the visa will last for less than 6 months. If an application is made from within the UK the ISC is payable even if the visa is for less than 6 months
- Graduate trainee senior or specialist worker visa applicants
- Workers with specific standard occupational classification codes:
- Chemical scientists (2111)
- Biological scientists and biochemists (2112)
- Physical scientists (2113)
- Social and humanities scientists (2114)
- Natural and social science professionals not elsewhere classified (2119)
- Research and development managers (2150)
- Higher education teaching professionals (2311)
- Sports players (3441)
- Sports coaches, instructors, or officials (3442)
- Clergy (2444)
Is the ISC payable for dependents of the sponsored worker?
If a Tier 2 sponsored worker is bringing family members with them to the UK (or is subsequently joined in the UK by their dependants) their employer is not liable to pay the ISC for dependant visa applications.
The consequences if an employer does not pay the immigration skills charge
Failure to pay the ISC may delay or invalidate a certificate of sponsorship, or the following may occur:
- The visa applicant will have their application refused by the Home Office because the certificate of sponsorship assigned to the worker is invalid unless the ISC is paid. Generally, if you do not pay the ISC in full within 10 working days of the first Home Office reminder then the visa application will be refused, resulting in your business having to start the recruitment process again
- A sponsor licence can be suspended or revoked if a business tries to avoid payment or attempts to pass responsibility for payment of the ISC onto a sponsored employee. Suspension or revocation can have serious consequences for your business. Our guide on what to do if your sponsor licence is revoked offers guidance if your business finds its sponsor licence at risk