What options do companies looking to expand their business in UK have to employ overseas workers, and what complexities may arise? Joanna Hunt, director and head of immigration at Fieldfisher, explores the issues.
For companies looking to expand into the UK, one of the initial problems to solve is how to get workers into the country to help build out the business. If a company does not have, or does not yet want a UK-based entity to employ these workers, what options are available, particularly if they will need work visas in place?
Employer of Record
In the last couple of years, more complex employment relationships have emerged. These triangulate the employment relationship: the worker carries out their day-to-day work under the supervision of a company (the client company) but their employment contract sits with a third party – an Employer of Record (EoR). The client company contracts with the EoR to receive the benefit of the worker’s services while the EoR carries the general HR responsibilities for the worker such as tax and payroll.
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For companies looking to expand their business into the UK, using an EoR allows a company to transfer a team member or hire someone in the UK, without needing to incorporate an entity. They avoid some of the usual HR costs and logistical headaches, which are outsourced to the EoR. On paper it is a neat solution; however, the model is not without risks. We tend to see EoRs being engaged to help companies initially explore a new market or where the growth plan only involves one or two hires. A large majority of companies transition out of an EoR within 18 months or so. The pandemic has fuelled a boom in the market for third-party EoRs – their market share is set to increase markedly by 2028.
From a UK immigration perspective, problems arise when it comes to obtaining a work-based visa for the individual a company wants to transfer to the UK. The main work-based visa, the Skilled Worker route, requires a UK-based entity to act as a sponsor for the worker. This entity must apply for and secure a sponsor licence and sign up to myriad reporting and record-keeping duties in respect of the workers they sponsor. The worker then applies for a visa, which allows them to work in a specific role for the sponsor detailed on their application.
The sponsor must have responsibility, at all times, for the “duties, function and outcomes or outputs” of a worker’s role while they are working in the UK. This isn’t usually a problem when the worker is carrying out tasks and is under the exclusive supervision of their registered employer, but becomes much more problematic when a sponsored worker is in reality working for a company other than their sponsor.
The Home Office could revoke the EoR’s sponsor licence. This would lead to all the workers on the licence having their visas curtailed”
A sponsored worker can work on a contract basis with a third party but only if a number of stipulations are met. First, the contract for the work must be time limited, so the worker is not fulfilling an ongoing routine role. Secondly, the sponsor must, as mentioned above, retain oversight or responsibility over what the worker is doing day to day.
EoRs that take on the role of sponsor for overseas workers, and go on to outsource them to client companies could be in breach of sponsorship duties and could face serious consequences. The Home Office could revoke the EoR’s sponsor licence. This would lead to all the workers on the licence having their visas curtailed. The companies they actually work for will face a race against the clock to set up a UK entity, and put in place UK employment contracts and a payroll service, to take over the sponsorship relationship to maintain their stay in the UK.
Alternatives? The UK expansion worker route
The apparent simplicity of using an EoR is clearly tempting for a company looking to expand into the UK, but the risks associated with using them, not least for sponsorship visas are significant. It is worthwhile considering other visa routes that offer more stability and security.
The Global Business Mobility-UK Expansion worker visa (GBM), launched last year, allows overseas companies to send a team of up to five workers into the UK to help set up a UK entity. Although the end goal is the setup of an entity, the company using this route will only need an “intention” to set one up at the time of application, and be able to show a UK footprint, either in the form of registration at Companies House or a UK-based office address. A business plan may be needed to demonstrate why there is a business need to expand into the UK but setup does not need to be complete to secure the initial GBM visa of two years for the workers concerned.
The workers will need to meet certain eligibility requirements to obtain the GBM visa. They will need to be taking on roles in the UK that are at degree-level and meet the salary threshold of £44,400 or the going rate for the role if they have worked overseas for the company for 12 months or more. If they have worked for less time then they will need to be earning above £73,900 in the UK.
Some progression with expansion is required. The route envisages that the UK entity will be set up within the two-year period allowing the workers then to move on to the skilled worker visa, which offers the possibility of indefinite leave to remain after five years.
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For businesses with UK expansion plans and visas to source, EoRs offering sponsorship support should be approached with caution. The UK expansion worker route is certainly more involved. However, a number of the tasks, such as creation of a UK entity are not particularly onerous and provides security for the company and the worker that they are not going to fall foul of immigration law later down the line.
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