UK update: Clawback Clause for Visa Costs: What Employers Must Consider

Any employer currently sponsoring migrant workers will be aware of the fees associated with doing so.

The combined total cost of settling application fees, the Immigration Skills Charge (“ISC”) and the Immigration Health Surcharge (“IHS”) is easily one of the biggest obstacles facing businesses looking to widen their talent pool to a global level, in some cases to reclaim their ability to hire from the EU. One way of ameliorating this issue is through the use of a clawback clause.

A clawback clause is used to refer to terms within employment contracts where the visa fees paid on behalf of the prospective employee are recovered should the individual leave their job early or never actually commence work.

Such terms are simple enough to define, though companies should be cautious when drafting a clawback clause due to the delicate balance between both immigration and employment law.

Visa application fees are subject to an annual increase. This year, the change to the IHS saw a significant rise in costs from £624 to £1,035 per year of their visa category. For context, where a 3-year Skilled Worker sponsorship would previously have carried a £1,872 IHS charge, this would now total £3,105.

Tally that cost alongside the £719 application fee, a £3,000 ISC, and a £239 charge to assign a Certificate of Sponsorship to the applicant, and a company would be investing over £7000 to employ one worker for a 3-year period.

Irrespective of the sector this is a significant investment, and employers would want to make sure they are not facing a loss should the employee fail to see out their sponsorship period.

Some visa costs must be paid by the employer.

The Immigration Skills Charge mentioned above must be paid by the employer, when assigning a Certificate of Sponsorship to the candidate using their sponsor licence. The Home Office have explicitly stated that:

“You must not pass on any of the charge to, or attempt to recoup it from, the sponsored worker. If we find out that you have done so, we will normally revoke your licence.”

The Immigration Health Surcharge can, in some circumstances, be recouped due to a sponsorship period ending before the agreed end date. The caveat here being that the Home Office can, in some cases, refund part or all of the IHS (and in some cases the ISC ).

Due to the sometimes-lengthy refund turnaround, any clawback clause should account for delay and oversight caused by the Home Office.

The salary of a skilled worker can be a tricky business to work out. It is based on a number of factors such as job role and weekly hours. Employers should note the Statement of Changes published in March of this year revised all eligible occupations for sponsorship, alongside the minimum salary for each role. You can find out more on that in our insight on the new “going rates” for skilled workers here.

Some employers may be contemplating a repayment agreement between the company and the employee for certain costs which could be deducted from their salary over time. There are legal implications and consequences here, and so employers should tread carefully.

One such consequence could be a visa curtailment by the Home Office. Skilled Workers cannot be sponsored unless their income meets the minimum salary threshold for their occupation. A significant drop in a skilled worker’s salary may render the sponsorship void should their earnings drop below the threshold. A deduction could cause this issue.

In short, there is a lot to consider from an immigration perspective.

To understand this matter fully, it would be worthwhile reflecting on the employment law considerations summarised below:

Enforceability Issues. A clawback clause must be carefully drafted to avoid being classed as a penalty clause or otherwise discouraging employees from leaving employment (such that they could be said to amount to a restraint of trade). If the provisions are found to constitute a penalty clause or a restraint of trade, they will not be enforceable.

So that the provisions are not seen as unreasonable, the amount to be repaid should be proportionate to the loss experienced by the employer. To assist with enforceability, the sum to be “clawed back” should be reduced proportionately over time on a sliding scale. It is also good practice to limit the scope of the clawback provisions to specific circumstances, for example where the employee resigns or opts for voluntary redundancy or where the employer is entitled to terminate their employment summarily.

Unlawful Deductions. A clawback clause should expressly state that deductions can be made from sums owed to the employee under the contract. The drafting should be clear and unambiguous to mitigate against claims for unlawful deductions from wages. As far as possible, the employer should set out what exactly is liable to be recouped/repaid, taking into account any restrictions on what can be reclaimed from the employee (as set out above). Before clawing back any sums an employer should also consider whether the deduction will reduce the employee’s total earnings for National Minimum Wage purposes.

Repayment after termination of employment. If the sums cannot be recouped from the employees’ final pay (because the amounts to be recouped exceed the final pay or deductions are prohibited for other reasons), the contract should make provision for the monies to be repaid by the employee. In the interests of fairness, it is good practice to make provisions for agreeing a repayment schedule in the context of what is likely to be reasonable for a particular employee.

Be mindful of discrimination risk. In order to mitigate against the risk of indirect race discrimination complaints, employers should ensure that the clawback clause can be objectively justified as a proportionate means of achieving a legitimate aim. It is the general view is that providing for a lengthy repayment period could disadvantage certain groups who may be less likely to remain in employment for a long period (for example, older or disabled workers), which should be kept in mind at the drafting stage.

By Burness Paull LLP, Scotland, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact ukscotland@transatlanticlaw.com

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