Immigration fees increase: what does HR need to know?

Our legal director, Karen Kaur recently spoke with People Management Magazine - read the full article here.

Immigration fees increase: what does HR need to know?

As part of its efforts to fund the public sector pay deal, the government recently confirmed a slew of immigration fee hikes. But experts say this could create a “cost burden” for employers.

The plan, which was unveiled on 13 July by chief secretary to the Treasury, John Glen, outlined a 15 per cent increase in the cost of work and visit visas, as well as a 20 per cent increase in the cost of study visas, credentials, sponsorship and other items.

The increase comes as millions of public sector workers are set to receive pay raises of 5 to 7 per cent as part of a government package that could prevent some strikes. But while the government said the bulk of money for pay rises will come from “savings and efficiency” in existing budgets, some money will be raised by increasing the migrant health surcharge to £1,035 and putting up some visas.

According to Joanna Hunt, head of immigration at Fieldfisher, with many employers already covering visa costs for their employees, this “news will come as a surprise”. She emphasises, however, that because the precise date these fee increases will take effect is unknown, existing visa applications will not be affected.

But it is “recommended that any applications in the pipeline be submitted as soon as possible to benefit from lower fee costs”, she says.

Despite no date being set for the proposed changes, the increases could be significant. People Management spoke with legal experts to establish what HR should know, how they can prepare and whether this would make attracting EU talent more difficult.

The new cost of fees

The Immigration Health Surcharge (IHS), which is a levy paid by visa holders who come to the UK for six months or more, will be increasing from £624 to £1,035 per year.

• Work and visit visas will see a 15 per cent increase 
• Student visas, certificates of sponsorship, settlement, citizenship, entry clearance and leave to remain applications are set to see an increase of at least 20 per cent – an applicant will now be paying a minimum of £2,884.80, an increase of nearly £500. 

What are the cost implications for employers?

Chetal Patel, immigration partner at Bates Well, says the increased immigration fees will “undoubtedly” impose a huge additional cost burden on individuals and employers. While no date has been set yet for when these fee increases will kick in, Patel adds, things for employers to consider now include:

• Submit visa applications earlier, if possible
• Review HR and recruitment budgets and policies
• Talk to your recruitment team and/or line managers about these changes and the potential impact on your recruitment plans

According to Michael Stokes, head of employment and immigration at Harrison Clark Rickerbys, the increases are significant and contribute to the “slightly odd” policy world in which immigration finds itself.

“Although healthcare workers coming to the UK don’t have to pay the IHS, those who are affected are mainly skilled workers, including those in shortage occupations identified by the Home Office and whose services our economy desperately needs,” he says.

It is worth noting that skilled employees who come to the UK frequently pay tax to HMRC, so they are already contributing to the costs of the UK’s public services, he adds.

Karendeep Kaur, legal director at Migrate UK, says HR should be aware of the fee increases and how it may affect their current workforce and any new talent they are looking to source. “Consideration will need to be given to not only the employee, but their family members and the duration for which an employer is looking to sponsor during the initial period.”

As such, she stresses that if the company is hesitant to fund applicant and IHS fees, costs must be addressed upfront with an employee to avoid any problems while applying for a visa.

If a business is planning to hire and offers have been made,, it would be wise to submit applications sooner rather than later, as the fee increase could come into force as early as the autumn 2023 budget, Kaur advises.

Kate Palmer, HR advice and consultancy at Peninsula, emphasises that the surcharge is payable by the individual themselves, so employers do not make this payment. However, employers will still need to be “mindful” that costs are increasing and consider what “impact that this may have on the business and wider industry”.

Employers should assess if their workplace, salary and benefits will remain appealing to employees in light of the planned cost hike, Palmer adds.

Will this exacerbate talent shortages?

According to Angela Barnes, head of business immigration at AfterAthena, the “country’s stringent immigration policies only exacerbate” the serious labour shortage and a war of talent in the UK.

“The upcoming rises in immigration fees will affect everyone, but it is likely to impact different sectors in various ways,” she says, adding that one example is in the construction industry, where the government has recently included several construction roles on its shortage occupation list (SOL).

The Home Office announced last week that bricklayers, plasterers and other construction jobs have been added to the government’s SOL – which would see workers from those professions paying a lower visa fee and paid 80 per cent of the job’s “usual going rate”.

Kaur says employers will face additional pressure to cover these application fees from employees and, as a result, they may lose out to competitors who are willing and able to cover the fees. “Major impacts will be felt by the smaller organisations who simply cannot afford the visa costs to assist a migrant worker to come to the UK,” she says.

Additionally, Mark Templeton, immigration specialist at Anderson Strathern, says that for employers the increase in fees will be “challenging”. He added that, if the increase in fees continues to be met by the employer, it will “likely give rise to greater reliance and focus upon repayment agreements”.

Vikki Wiberg, senior counsel in the Mobility team at Taylor Wessing, says employers may end up picking up the 66 per cent increase in the IHS from £10,940 to £18,100 for a five-year visa for a family of four..

“This is not a mandatory company fee, but employers may find themselves under pressure to pick up this cost if they want to attract the best talent in the future,” she says. For lower-skilled roles, the “increased visa costs may make it prohibitive to sponsor visas, especially for smaller companies”, she adds.

For Palmer, employers may also be affected “indirectly” by the hike in fees as some individuals “may be put off from coming to the UK” as a result. “For those that still do, it may mean that they are looking for increased salaries and benefits to make it more worthwhile for them, considering this additional cost,” she says.

If employers have agreed to reimburse the cost of surcharge to applicants as a perk, employers will have to consider whether they can continue to absorb the costs, given the increase and the impact of withdrawing this, Palmer adds.

Contact us

If you would like further information - please get in touch with the Migrate UK team.

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