Visa application fee rises: what does it mean for business?

Last week the UK government announced that it would significantly increase visa application fees, as part of its plan for funding the newly announced public sector pay deal. Chris Harber, head of immigration at Boyes Turner, examines how businesses should respond.

At a time of skills shortages across the economy, this move feels questionable at the very least. For businesses reliant on international talent the move is set to have a huge impact – on talent pipelines, global mobility, and skills diversity in the workplace. That’s before we look at multinationals considering what this means for future investment into the UK.

What will these cost increases mean for HR leaders and teams, and how can you start to navigate these?

How much are fees going up by?

All visas will cost more.

• Fees for work and visit visas will increase by 15%

• Fees for study visas, certificates of sponsorship, settlement, citizenship, wider entry clearance, leave to remain and priority visas will increase by at least 20%

• The Immigration Health Surcharge is increasing from £624 a year to £1,035 a year, and the discounted rate for students and under-18s is increasing from £470 a year to £776 a year.

To put these fees into context, right now it costs £9,554 for a standard five-year visa application under the skilled worker route, the primary work visa. However, once these increases come into effect, the cost will rise to about £11,900.

How businesses will be affected

We’ve seen visa application fees increase dramatically since the introduction of the 2015 Immigration Health Surcharge. The immigration skills charge was only introduced in April 2017; so within the past 10 years, the cost of a standard five-year visa application under the skilled worker (formerly tier 2 general) route has risen from about £1,300 to nearly £12,000.

Despite this, the number of businesses wanting to recruit from overseas has continued to increase year on year; periodical increases in fees haven’t been a deterrent. Indeed, there’s the argument that, when considered holistically, businesses still see the immigration system as offering value for money thanks to the wider talent pool that they can recruit from and not having to pay as much in finders’ fees to recruiters.

Nevertheless, the impact of these increases on the bottom line will be severe. The biggest users of the immigration system are the big four accounting firms and IT multinationals such as Wipro, TCS and Cognizant. Each will typically sponsor more than 200 applicants each year. Even for companies of this size an additional £450,000 in government fees every year may give some pause for thought.

For smaller businesses who may only sponsor a handful of overseas workers, the increases will be just as keenly felt.

What this means for sponsored workers

While many employers pay for the entirety of the application fees, they’re under no obligation to have to pay the Immigration Heath Surcharge or the visa application fee. To an individual worker this can be several thousand pounds. In the main, companies cover the upfront cost, and then may decide to recover the cost from the employee over a period of time. This has been an increasingly popular option in recent years. However, passing the additional cost onto employees is not without downsides.

At the moment, a typical monthly clawback agreement for the costs of a five-year visa is £75, which is deducted from wages before tax. Under the new fee structure this will increase to £110 a month – quite an increase, especially at a time when household budgets are under so much strain.

To help mitigate this additional strain on personal finances, one potential option that businesses could use instead of a clawback agreement is a minimum service agreement, where the employee only needs to repay the costs if they leave within the validity period of their visa.

How HR can navigate this

Despite the confusing picture, employers have a range of tools available to them when it comes to managing the cost of visa applications. This will require careful consideration and planning.

Communicating the cost increase across the business is a good starting point. Visa fees are complicated and there are many misconceptions about what fees apply to particular employees, so the more knowledge stakeholders have the better.

Secondly, think carefully about how you want to spread the cost of visa application, both in terms of time and with the employee. There’s no one-size-fits-all model here as every scenario is going to be different. It is worth, however, considering any of the following:

• Rather than a single five-year application, offer an initial three-year visa followed by a two-year extension. This is slightly more expensive in the long run because you’ll have two visa application fees to pay. However, you’re spreading the cost into smaller payments.
• Think about how you want to share the cost with the employee. A clawback agreement or a minimum service agreement are the go-to options here, but the right course of action can only be determined case by case.

Finally, and this has always been important, think strategically about how and where you use the immigration system in your business. Unless you have very particular requirements, the starting point with recruitment should always be to look at who is available in the UK talent pool. If there is a shortage in the given field, or you need a specialist skillset that is only available in a particular country then the immigration system can be very useful.

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The government has not yet announced a timetable for implementing the fee increases. If you are planning on submitting an application within the next six months, now’s the time to do so.

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