How to address the Immigration Stealth Surcharge?

The Prime Minister’s announcement last week of significant increases in both immigration application fees and the Immigration Health Surcharge will be extremely unwelcome to those sponsoring staff in the Skilled Worker or Global Business Mobility categories.

It should be noted that this seems the first occasion on which a government has advised the goal of the increase is to raise general revenue rather than simply to cover the cost of immigration applications. Given existing legal provisions regarding the rationale for such fees, this does seem potentially subject to legal challenge.

15% Higher Fees

The new fees will be 15% higher in respect of these visa application, with the Immigration Health Surcharge rising to £1,035 per adult per year, with the discounted rate of £776.  The date of implementation is awaited.  As previously, these fees will be payable at the point the applicant makes the application for the visa or further leave to remain. It is not an employers’ obligation to pay these fees on behalf of the individual, but, in many cases, the assignment will simply not happen otherwise.  I have found an increasing number of employers looking at the prospects of loans to individuals seeking to pay these fees or alternatively the employer paying the fee with some clawback provisions in place to recover this.

A suitable revenue-raising target?

It has long been considered that the fees are excessive when related to the actual cost of processing such applications. Those working in the UK are subject to normal payroll taxes and National Insurance in any event, so the Immigration Health Surcharge obliges them to pay for their notional healthcare costs twice.  There seems real inelasticity of demand in respect of immigration application fees though, which may have persuaded the Prime Minister that this is a suitable revenue-raising target.  Fee increases in recent years have not correlated with a reduction in employment-based immigration applications;  in fact, many more immigration applications are being made than previously.

Actions you can take now

Is this simply a sunk cost for employers, or are there actions which can be taken to mitigate the potential risk? I would suggest three steps can be taken to react to this increase in fees.:

1. Making a formal cost benefit assessments of the need to employ staff who require sponsorship. It is unusual for employers to decide not to hire people because the cost is too significant, but I have come across situations in recent months in which the sponsorship request is driven by applicants rather than the business and employers can be considered to have a degree of choice in respect of this. If a Graduate Visa holder, for example, asks for Skilled Worker sponsorship shortly after appointment, it may be appropriate to say “no” if there isn’t a definite business case to support this. 
2. Considering if there is a need to create or amend policies in respect of payment of immigration application fees. Employers are obliged to pay the Immigration Skills Charge and CoS application fee in any event, but there are a variety of approaches to payment of the Immigration Health Surcharge and visa application fees. I find it is still quite common for employers to presume the individual will meet this cost or the assignment will simply not happen, but this would be a wasteful approach if many candidates decline assignments because of the cost. One reaction to the announcement last week has been the unfairness of the policy to  workers who were saving money in order to pay for future immigration applications; those savings will presumably now be inadequate.
3. Assessing which clawback arrangements you have and whether it may be an appropriate time to implement these given the fee increases.  I find employers have been looking at these provisions in any event. The relevance of the clawback provision will only increase with the likelihood of many more people needing help to pay these initial fees.

Next steps

Immigration application fees have been an inconvenience for employers for many years.  The scale of the current increases poses a serious risk of operational disruption in recruitment.  By reviewing the three items above now, it should be possible to mitigate some of this risk and anticipate problems before they arise.  If you would like to discuss how these changes might impact you, please do get in touch.