Large increases in sponsored workers’ salary thresholds – how this change could cause employment law issues

Most employers sponsoring international workers will be aware of the substantial changes to the UK immigration system that came into force on 4 April 2024. One of the more headline-grabbing changes was the increase to minimum salaries sponsored workers have to be paid in order to be able to obtain a Skilled Worker visa.

Skilled Worker visa requirements

The Skilled Worker visa is the most common work visa in the UK. It requires an international worker to have a job offer from a UK employer who holds a government-approved immigration sponsor licence. Any job offered must be on the Government’s approved list of sponsorable jobs and meet both minimum salary and skill requirements. Candidates must also speak a requisite level of English and, in some instances, undergo medical and security clearances.

Not all jobs are included in the list. Before Brexit, any sponsorable job had to be skilled to university degree level. However, to cushion the blow of the end of free movement between the EU and the UK, this was lowered to A-level equivalent in December 2020, meaning eligibility for visa sponsorship has been relatively easy to meet. The minimum salary thresholds were historically also relatively easy to satisfy.

However, the increase to minimum salary thresholds on 4 April 2024 from £26,200 to £38,700 has significantly restricted the viability of the Skilled Worker visa route. Workers either have to be paid at least this minimum salary threshold, or the specific salary dictated by their position, whichever is the higher. This has impacted SMEs heavily and even some larger FTSE100 companies have cut their graduate programmes because the new visa salary thresholds are too high.

Salary threshold increase

Each job on the Government’s list is assigned a specific minimum salary. Until recently, this was calculated by reference to the 25^th percentile of all wages paid in a particular profession. The new calculation is based on the 50^th percentile of all wages paid in a particular profession, so a marked increase. This was introduced to ensure there cannot be any undercutting of the resident labour market wages for British workers as all international workers have to be paid above average for their industry.

As an example, software developers now need to be paid £49,400 for a 37.5 hour week (previously £27,200 per annum), finance and investment analysts £40,600 (previously £28,600). Laboratory technicians have a salary of £30,960 as per the list, so they will need to be paid £38,700. There are some very limited exceptions to these thresholds.

Transitional arrangements

The UK Government has introduced transitional arrangements for those who are already in the UK in the Skilled Worker category. However, even these visa holders have not escaped an increase in minimum salary requirements (albeit that it is less steep than the increase introduced for employees new to this visa category).

Any employee who entered the Skilled Worker visa category before 4 April 2024 can still be paid a minimum salary calculated on the 25^th percentile. However, to take account of inflation since the last time the salary thresholds were reviewed (in 2010) they have also increased. When employees come to extending their Skilled Worker visas, or come to apply for Indefinite Leave to Remain (ILR) in the UK, they will have to be paid whichever is the higher of £29,000 or the minimum salary for their specific job code as per the Government list. To go back to the examples used earlier, software developers now need to be paid £36,300 for a 37.5 hour week, finance and investment analysts £32,100. Laboratory technicians have a salary of £23,200 as per the list, so they will need to be paid £29,000.

These transitional arrangements will end on 3 April 2030.

Problems that can arise

While these increases may not necessarily represent a problem for all employers, it is likely that there will be a number of employers who will not be able to pay new job applicants an eligible salary – reducing the talent pool they can recruit from. We are also seeing many instances where existing employees also do not meet the increased transitional salary and therefore will not be eligible when they next need to apply for their immigration permission to remain in the UK.

Both of these scenarios could present issues when it comes to employment law – with employers facing the prospect of having to let staff go.

Paying more to an employee on a Skilled Worker visa to satisfy the new salary thresholds under immigration law is likely to amount to unlawful discrimination against a UK national in the same position on a lower salary. As well as resulting in potential discrimination (or equal pay) claims, this may also lead to significant industrial relations issues resulting from a ‘two-tier’ workforce.

On the other hand, any policy or practice of not hiring workers or dismissing existing workers requiring an increased salary to comply with the Skilled Worker visa salary thresholds will also need to be carefully managed so as not to open an employer up to discrimination and unfair dismissal claims. It may be possible to fairly dismiss workers in these circumstances, but employers will need to follow a careful and thorough procedure, including consulting with the employee and giving full consideration to alternatives to dismissal, before making the decision to dismiss on this basis.

What you should do now

Activities employers may wish to undertake will differ between the two cohorts, i.e. those in the transitional group, and those who have been, and will be, recruited since 4 April 2024.

Transitional cohort

Employers who hold a Skilled Worker sponsor licence and sponsor employees in the transitional cohort may wish to undertake a salary audit to establish whether their employees are likely to encounter shortfalls in salary when they apply for their visa extension or Indefinite Leave to Remain.

Where there is a shortfall, salaries should be reviewed in a way that is consistent and does not open the business up to discrimination claims.

New cohort

The most obvious activity to undertake in relation to the new cohort is to establish whether vacancies can be filled from the local/national pool of workers. This will reduce the need for sponsored workers.

Another solution would be to make use of the ‘New Entrant’ category, which allows employers to pay a reduced salary to Student and Graduate visa holders. However, the employer needs to bear in mind that an employee can only be a new entrant for a maximum of four years (time spent on a Graduate visa is included in those four years). Once they have exhausted this period they will have to be paid the full salary required at the time.

However, often there are not sufficient numbers of skilled workers in the UK to fill all available vacancies. If that is the case, employers may need to evaluate their salary structures and raise them to the levels required by the Skilled Worker visa category in such a way that does not run the risk of discrimination against existing employees with no sponsorship requirements.

As a last resort, employers could consider remote working arrangements, which would mean employees do not need to enter the UK to work. However, this is often only feasible for more experienced members of staff. It is also prudent to remember that if the employment contract is located in the UK employees cannot come to the UK as visitors, even if they would technically stick to the permitted activities as per the UK Immigration Rules for visitors. That is because the Home Office considers any entry into the UK as being connected to their employment in the UK if they are ‘employed’ in the UK.

The Birketts view

It is very likely that going forward visa minimum salary levels will be adjusted much more regularly than they have been until now. While salaries can be ‘locked in’ for the duration of an employee’s visa, it will be down to the new UK Government to decide whether they will continue to allow employers to pay existing sponsored employees less (as they have done in relation to the changes introduced on 4 April 2024), or whether at some point salary increases will apply to all employees at the point of their next visa application.