More small businesses considering sponsorship in 2023 to tackle talent shortages

10.02.2023

31 January 2023 marked three years since the UK left the European Union (EU). With its departure, Freedom of Movement between the UK and the EU ended and the UK introduced the points-based immigration system. The UK now treats EU and non-EU nationals equally under a single set of rules, granting work visas based on the skills someone can bring, not where they are from.

However, think-tanks analysing the impact of Brexit on the UK economy have found that ending free movement from the EU is ‘contributing significantly’ to labour shortages in key sectors. Joint research by UK in a Changing Europe and the Centre for European Reform (CER) found that the change has led to a shortfall of around 330,000 workers in Britain.

Certain lower-skilled, lower-wage sectors have been disproportionately impacted by the shortfall, such as transportation and storage, wholesale and retail, accommodation and food, manufacturing, construction and administration.

More small businesses considering sponsorship in 2023

UK employers that had previously relied on free movement to recruit workers from Europe must now apply for a Home Office sponsor licence if they wish to recruit workers from overseas under the Skilled Worker visa route. Becoming a licensed sponsor enables your business to recruit talent from anywhere in the world.

According to a recent survey by the Federation of Small Businesses, double the number of small businesses are now looking at sponsorship as an option to tackle skills shortages in 2023.

Many of these employers have never interacted with the sponsorship system before, having previously been put off by the costs and perceived administrative burden associated with applying for and maintaining a sponsor licence.

However, small businesses benefit from lower fees compared to larger sponsors, and the lower skill and salary thresholds under the Skilled Worker route mean more roles are now eligible for sponsorship compared to the previous Tier 2 (General) route. Sponsoring workers from overseas could therefore be more affordable than you think.

Sponsor licence eligibility

Companies of all sizes and in all sectors can apply for a sponsor licence, as long as they meet the eligibility requirements set out by the Home Office. In order to apply for a sponsor licence, your business must have:

An established business presence in the UK with a fixed office address.
The ability to offer ‘genuine vacancies’ that meet the skill and salary requirements set by the Home Office.
Appropriate systems in place to monitor sponsored employees and people to manage sponsorship in your business.
No unspent criminal convictions for immigration offences or certain other crimes, such as fraud or money laundering.

Sponsor licence application process

The sponsor licence application process consists of:

Completion of an online application form.
Submission of supporting corporate documentation.
Confirmation that your company has sufficient HR systems and processes in place to comply with your legal obligations as a sponsor.
Appointment of key personnel within your business to manage the sponsorship process.
Payment of fee.

How much it costs

The sponsor licence application fee varies according to the size and nature of your business. Medium or large sponsors must pay the ‘large’ fee which is £1,476. However, small or charitable sponsors are charged a ‘small’ fee at the reduced rate of £536.

You are eligible to pay the small fee if you:

Are applying for a licence under the Temporary Worker route only
Have charitable status
Are subject to the small companies regime as set out in sections 381 to 384 of the Companies Act 2006, or
Are a sole trader (not a company) and you employ fewer than 50 people.

You will need to pay the same fee if you apply to renew your licence when it expires after four years.

As well as the licence application fee, there are several other fees you will need to consider, including:

The Immigration Skills Charge (ISC): The ISC must be paid for each sponsored worker you recruit, unless an exemption applies. For small or charitable sponsors, the ISC is £364 for the first 12 months of employment, plus £182 for each additional 6-month period.
Certificate of Sponsorship (CoS) fees: You will need to pay a fee of £199 each time you assign a CoS to a worker. A lower CoS fee of £21 applies for Temporary Workers.
Visa application fees: Although it is usually down to the visa applicant to pay the application fee for themselves and any accompanying dependants, some employers opt to cover this on behalf of their employees.
Immigration Health Surcharge (IHS): Again, this fee is usually covered by the visa applicant at the point of application, but some employers will cover the IHS for their overseas recruits.

How to get a fast-tracked decision

Most applications for sponsor licences are dealt with in less than 8 weeks. However, if your business requires a sponsor licence urgently, you may be able to pay for a faster decision.

The Home Office pre-licence priority service allows applicants to pay an extra £500 to get a decision within 10 working days. This service is limited to a small number of applications every working day. Faster decisions are allocated on a first come, first served basis, in the order that requests arrive.

Smith Stone Walters regularly submits requests to the priority service on behalf of our clients wishing to expedite the pre-licence approval process. We recommend employers utilise the service where the need to hire skilled workers is time critical.

Support with applying for a sponsor licence

Before applying for a licence, Smith Stone Walters recommends employers read the Home Office guidance for sponsors to familiarise themselves with the requirements.

Alternatively, our dedicated sponsor licencing team is on hand to provide support to your business in gaining sponsor approval and managing the visa application process for your overseas hires. To find out how we can help, please contact us today.