The immigration factor: what every financial institution must know

Last month, the Government introduced its White Paper, Restoring Control over the Immigration System, outlining proposed reforms to the existing legal framework. The document outlines its future policy intentions to curb legal migration and implement stricter UK visa eligibility criteria. The proposed changes are expected to be introduced at various points over the course of this parliament, with full implementation by 2029.

The proposed changes to the immigration rules are set to influence the way organisations within the financial services sector plan their workforce strategy and recruit for talent. For example, the proposed change to the graduate route, which currently permits international students to remain in the UK for two or three years after completing their studies, with unrestricted work rights, will be cut to 18 months – prompting employers to have to assess graduate talent earlier and expedite sponsorship processes to secure high-potential individuals.

Similarly, with employees now potentially facing longer routes to permanent residency (proposed to increase from five years sponsorship to ten years), this could have a long-term effect on staff retention and may prompt employers to reassess retention initiatives in order to maintain talent and stabilise their workforce. 

Despite these changes, the overall impact to the financial service sector is expected to be manageable, as the Government proposes to continue to facilitate highly skilled employees coming to the UK. This includes providing opportunities to those working in the artificial intelligence field – which will be essential for growth and keeping up with the demands of the financial sector.

To stay ahead of the curve, financial institutions must stay up to date with changes in the pipeline and adhere to immigration rules when recruiting international workers – particularly when offering visa sponsorship. Immigration compliance remains a concern for all sponsoring organisations, but it is especially critical for institutions regulated by the Financial Conduct Authority (FCA), where maintaining compliance is essential to avoiding legal penalties, reputational damage and operational disruption.

Compliance requirements

Compliance requirements should typically include a number of things.

• Recruitment screening: when considering applicants for a role, employers need to be careful not to implement policies that discriminate to prevent them from hiring international workers. Employers must balance compliance with fair hiring practices to avoid discrimination claims related to nationality or residency status. Further, as graduate schemes are increasingly common in the financial sector, employers will need to consider Temporary Work visas for overseas nationals – for example under the Youth Mobility or Government Authorised Exchange schemes.

• Hiring from overseas: when recruiting for a role where sponsorship is required, employers need to ensure that the eligibility criteria is met and that the role is eligible for sponsorship (per Appendix Skilled Occupations) and the correct salary is being paid (for example, a financial manager or director would need to be paid £70,000 for a 37.5-hour week).

• Visa sponsorship: Companies sponsoring migrant workers must ensure that employees’ sponsoring information remains up to date on the Home Office Sponsor Management System. Further, for existing sponsored employees – employers need to ensure that visa expiry dates are tracked, and timely renewals are made to ensure compliance with sponsorship obligations.

• Right to work checks: Companies must verify an employee’s legal right to work in the UK. These should be carried out by a company prior to an employee’s work state date and include:
  • checking the ID document or Government share code on the online right to work portal,
  • carrying out an imposter check to verify the physical likeness of the candidate to the documentation and
  • ensuring evidence is retained within the company’s HR files, in case of Home Office audit.

The implications of non-compliance

Companies that are not compliant with their obligations as a sponsoring organisation risk being subject to a number of consequences. Those that have not carried out the prescribed checks can face a civil fine of up to £60,000 per illegal worker. In more serious cases, employers may receive a criminal conviction which can lead to up to five years in prison and an unlimited fine.

Other consequences include:

• business closure and a compliance order issued by the court
• disqualification as a director
• loss of sponsorship rights, meaning the employer cannot sponsor migrant workers
• seizure of earnings made from illegal employment.

Further, a company also faces reputational damage, as they may appear of the Home Office’s quarterly publication of non-compliant business.

In addition to the above, Principle 11 of the FCA’s ‘Principles for Businesses’ requires a firm to deal with its regulators in an “open and cooperative” way. It places and obligation on firms to disclose anything “of which the FCA would reasonably expect notice” and applies to both regulated and unregulated activities.  This is a very broad requirement and arguably a failure to comply with immigration rules (whether such failure is attributable to the firm or individual) should be reported.  Any violation of this can result in supervision or enforcement action by the FCA.