Startups & sponsor licences: scaling without slipping on compliance. Tailored advice for fast-growing firms
Hiring international talent is a valuable option for UK businesses, and can be particularly appealing for start-ups. Not only does it provide for a more expansive hiring pool, but it also carries the advantages of having personnel with experience and connections outside the UK, and the potential for international growth.
However, hiring foreign workers carries an array of challenges and compliance pitfalls. For new businesses, this can be particularly difficult to handle when already trying to manage the company’s growth.
With the prospect of severe penalties for non-compliance, it is important for new businesses to understand what is expected of them when they look to bring in international talent. This article will consider how companies can sponsor foreign workers by obtaining a sponsor licence, and the compliance duties required of them when holding such a licence.
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Sponsorship and compliance duties
A company’s first step to hiring international workers is to apply for a sponsor licence. A licence allows a company to issue Certificates of Sponsorship to foreign workers so that they may apply for a UK visa.
The process for applying for a sponsor licence can be arduous, and very document heavy. Companies must essentially demonstrate to UK Visas and Immigration (UKVI) that the business is genuine and operating lawfully in the UK and that there is a real need for the role that is trying to be filled.
UKVI will also consider whether a business can adequately comply with the duties required of being a licence holder. They could even choose to visit the business at this stage to check that there are systems in place to ensure compliance.
The guiding principle is that sponsorship is a privilege, not a right. In effect, sponsors are responsible for assisting immigration control through their compliance with their duties as a licence holder. As such, compliance duties continue throughout the life of the licence.
When considering duties and compliance relevant to being a sponsor, companies should refer to Workers and Temporary Workers: guidance for sponsors part 3: sponsor duties and compliance. The key duties for sponsor licence holders will be considered further below.
Reporting duties
It is required for a sponsor to ensure timely reporting of changes to the circumstances of foreign workers that they sponsor. This is not only changes to a worker’s job role, but also incidents of unpaid leave, absences or dismissal. Such changes should be reported within 10 working days.
It is also required that a sponsor report certain changes about the organisation – this should be done within 20 days of the change. This is important to understand for a start-up business, particularly where they may be experiencing growth and potential restructuring. Reporting includes details about the company (e.g. name, addresses, company structure) but also where there are any changes of key personnel on the licence. Throughout its lifetime, a licence must have an Authorising Officer, Key Contact and a Level 1 User in place, discussed further below.
It is also required that a business report if they would be re-classified from a small business to a medium or large business. Such reporting is not often a major concern for small/emerging businesses, however those that are experiencing significant growth should be aware of this requirement if they already have a licence.
Businesses must be aware of their reporting duties, and to report changes in a timely manner to avoid facing penalties for non-compliance.
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Record keeping
Record keeping is one of the more active duties that a sponsor needs to adhere to as they fall into the usual day-to-day management of a company’s workforce. It is required that adequate records be kept concerning all sponsored workers. All information that must be recorded and kept up to date is listed within the following guidance: Workers and Temporary Workers: guidance for sponsors – Appendix D: record-keeping duties
Sponsors will generally record much of the required information at the start of a sponsored worker’s employment. However, it is important that companies have adequate systems in place for ensuring that records are updated. When UKVI undertake compliance checks – either at the licence application stage or afterwards – this is one of the main things that they will check.
Failing to keep adequate records can lead to action by UKVI. However, more serious financial penalties could be incurred if inadequate record keeping leads to illegal working. It is key to check all employees’ right to work, and keeping reminders of all foreign workers’ visa expiries.
Other compliance duties
It is an ongoing duty for a sponsor to comply with immigration laws. These duties are essentially in place to ensure that a sponsor is familiar with its responsibility not to abuse the immigration system. For example, issuing sponsorship to persons not qualified for the role, or there being no eligible role to fill.
One common pitfall is where sponsors may be considering recouping sponsorship fees from their sponsored workers. Prospective sponsors often consider recouping sponsorship fees as part of their workers’ salary. This is often the case for smaller or new businesses who may be carefully considering the cost implications for hiring international talent (particularly with the high salaries that must be paid). However, it is key to understand that sponsors are prohibited from recouping sponsorship – as opposed to visa - fees from foreign workers, and doing so can lead to severe penalties.
Whilst not discussed in this article, sponsors are also required to comply with wider UK law and expected not to undertake any behaviours that are considered non-conducive to the public good. For more information about wider duties, sponsors should seek relevant legal advice.
Impacts of non-compliance
Where UKVI considers that a sponsor has failed to adhere to its compliance duties, there are a number of actions they can enforce upon the licence. Actions are more severe based on the breach in question, but all can have quite severe effects on a company and its workers.
Issuing Certificates of Sponsorship to foreign workers requires a company’s licence to have an A-Rating. In instances of more minor breaches, UKVI can downgrade a licence to a B-Rating which prohibits them from issuing further Certificates of Sponsorship. These breaches are often for not having adequate systems in place to deal with their compliance duties, and so downgrading will also come with a formalised action plan (and a fee). If followed, the licence should be upgraded back to an A-rating. Downgrading can be very disruptive, so it is important that companies have an understanding of their compliance duties and have systems in place from the outset.
For instances of more serious breaches where UKVI believe that a company may be acting in a way that poses a threat to immigration control, they can choose to suspend a licence. The purpose is so that UKVI can undertake further investigation in considering whether to revoke the licence – see below. The suspension stage allows sponsors to respond to the issues raised by UKVI to avoid revocation. Throughout suspension, a sponsor cannot issue any Certificates of Sponsorship, and any outstanding visa applications related to any workers will not be decided. Workers already in the UK will be permitted to stay during the suspension, but this can change if UKVI opt to revoke the licence.
Where there are significant serious breaches, UKVI can choose to revoke a sponsor licence entirely. The effect of a revocation can be very detrimental to a business, including to its reputation. Not only does it mean that the business is unable to sponsor foreign workers, but it also impacts existing sponsored worker who would need to seek alternative visa options to remain in the UK. Revocation leads to a minimum 12-month period before a business can apply for a new licence (24 months for repeat revocations).
Challenges to suspension or revocation can be a costly process, and the company will be impacted by the insecurity of the outcome to their business and their workers. In most circsumatnces, it is recommended to seek legal advice.
Breaches in compliance duties lead to direct impacts on a company’s licence. However, these duties also aid in avoiding more issues, such as illegal working. Illegal working can result in significant civil penalties for a business, starting at £45,000 per worker at the first breach, or £60,000 per worker for repeat breaches. These penalties can be very high where multiple workers are involved, and therefore very damaging for a company.
Conclusion and useful tips
All in all, understanding the many compliance duties associated with being a sponsor licence holder can be a minefield. It is very important that businesses take a proactive approach to these duties, to avoid what can be drastic effects to the business.
Here are some useful tips for maintaining compliance.
1. Ensure an understanding of the duties of being a licence holder from the outset.
It is important to familiarise with the guidance and rules associated with being a licence holder, and to consult legal experts where they may be gaps in understanding.
2. Keep up to date with changes to immigration laws and guidance
This can be tricky. Immigration law is very fast moving, and there can be changes that slip under the radar for many sponsors, for example how to conduct a compliant right to work check on an employee. It is important to stay informed as best as possible, and to consult legal advice/attend training where there may not be adequate understanding.
3. Ensure that the Key Personnel are equipped to handle their associated responsibilities
The licence must have an Authorising Officer, Key Contact and a Level 1 User throughout its lifetime. All of these roles can be held by the same person if needed. However, if doing so, it is important to ensure that they have the capabilities and/or support to handle compliance.
- Ensuring adequate recording systems are in place
Businesses should aim to have an adequate system for keeping records of all of their workers. This can be particularly prevalent for new businesses who may just be finding their feet and may be dealing with a quickly expanding workforce. Ensuring that there are good systems in place at the outset can be very advantageous for when it comes to considering sponsoring international talent.
5. Be aware of reporting duties and consult guidance if unsure whether certain changes to workers and the business need to be reported.
This also goes for understanding that there are timeframes for doing so. Acting quickly is always the best answer.
6. Consult legal advice
Taking advice from legal experts can be incredibly useful for new businesses, in particular should they be dealing with a growing workforce. A legal expert will be able to advise on the requirements for a sponsor licence and the duties required for a sponsor licence holder. It is also possible for legal representatives to be included on a licence and therefore allowing them to be more directly involved with the management of a licence.
