Clawback clause changes

This is a updated version of an article from January 2025.

A UK-based employer who wants to employ non-settled workers to work for them in the UK will often need to apply for, and retain, a worker sponsor licence. The most common worker route under which an employee will be ‘sponsored’ is the ‘Skilled Worker’ route. However, for the purposes of the Home Office’s sponsor guidance, sponsorship covers workers holding permission under several routes including Skilled Worker, Global Business Mobility (Senior or Specialist Worker) and International Sportsperson. This is not an exhaustive list.

The Home Office has been taking steps to restrict what costs a sponsor can pass on to its sponsored workers. Since 31 December 2024, sponsors have been expressly prohibited from recouping (or attempting to recoup):

1. Any part of the Certificate of Sponsorship fee from the sponsored migrant. This applies for Certificates of Sponsorship assigned on or after 31 December 2024. The fee is currently £525 for most workers; and
2. Skilled Worker sponsor licence fees or associated administrative costs (including premium services). For illustrative purposes, the cost of applying for a new worker sponsor licence costs £1,476 (for a medium / large sponsor).

It was already the position that sponsors could not pass on the Immigration Skills Charge.

Sponsors are also now prohibited from recouping “associated administrative costs” from sponsored workers. This includes Home Office fees relating to management of the sponsor licence and Certificate of Sponsorship requests and associated legal fees, and also legal fees incurred advising on the worker’s visa where the worker did not have a genuine choice in whether or how to obtain legal advice.

All the costs stated above must now be borne by the sponsor. If the Home Office discovers that a sponsor has been recouping these costs (or that an agreement is in place that the sponsor could attempt to recover these costs) from a sponsored worker, they will normally revoke the company’s sponsor licence.

Further restrictions from 9 April 2025

On 9 April 2025, the Home Office introduced further restrictions. When assessing whether a Skilled Worker’s salary meets the minimum requirements for sponsorship, their employer must subtract the following:

1. Any deductions from the individual’s salary;
2. Repayment of loans by the individual; and
3. Investments.

Under the current Immigration Rules (up to 21 July 2025), the minimum salary requirements for sponsorship under the Skilled Worker route are usually (1) £38,700 per year (increasing to £41,700 from 22 July 2025) and (2) the “going rate” for the Occupation Code that the worker’s sponsored role falls into.

The deduction will be averaged over the length the individual is sponsored for (for example, 3 years if they have a 3-year visa).

Sponsors do not have to subtract a payment that is not related to immigration costs or investment, but that is instead an additional benefit offer that the applicant has a genuine choice over whether to take up, for example salary sacrifice arrangements.

Companies sometimes offer sponsored workers a loan to help them cover the costs of their visa application (the application fee, Immigration Health Surcharge fee and, if relevant, Priority Service fee). The worker will then repay the loan over a period of time, with the company deducting the loan instalments from their monthly salary.

While this type of arrangement is not banned under the new rules, sponsors will need to be careful that any loan does not bring the worker’s salary below the minimum salary requirements for sponsorship. That is particularly the case if (1) the worker’s salary only just exceeds the minimum salary thresholds and/or (2) the loan is particularly large, for example if the employee is sponsored for 5 years and/or if it also covers visa fees for the employee’s family members.

This new rule could also catch out employers who offer “clawback agreements” to their Skilled Workers. Under a clawback agreement, the sponsor will usually agree to pay the visa fees on behalf of a sponsored worker on the condition that the worker will repay some/all of the visa fees if they resign within a certain period of time. For example, the agreement might require the worker to repay all of the visa fees if they resign within 6 months of obtaining their new visa, 50% of the visa fees if they resign within 1 year etc.

Technically, a clawback arrangement is not a loan as the employee is not being asked to repay the visa fees immediately. However, if an employee resigns and the clawback arrangement is triggered (that is, the employee is required to repay some/all of the visa fees) then it may become a loan at this stage. We therefore recommend that if a sponsor is looking to enforce a clawback agreement, they take legal advice before doing so to make sure that they do not fall foul of the new rules.

Now that the government has announced plans to further increase the minimum salary thresholds for sponsorship under the Skilled Worker route, the new rules on loans could impact a wider group of sponsors with workers earning just above the minimum salary requirements.