Understanding the Immigration Skills Charge: What Employers Need to Know!

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The Immigration Skills Charge (ISC) is a levy introduced by the UK government in April 2017 as part of its broader strategy to reduce employers’ reliance on migrant workers and to encourage investment in the skills of the domestic workforce.

It forms part of the visa sponsorship process for employers who wish to hire (and sponsor) international skilled workers under the Skilled Worker route (previously known as the Tier 2 (General) visa category).

This blog post provides an authoritative guide on what the ISC is, its cost implications, potential exemptions, refund eligibility and the legal position on employers passing the charge onto employees.

How much will the charge cost?

The cost of the Immigration Skills Charge varies depending on the size of the sponsoring organisation and the length of employment. The ISC is levied per sponsored worker per year of sponsorship and must be paid upfront when the Certificate of Sponsorship (CoS) is assigned.

Medium or large sponsors: For medium or large sponsors, the Immigration Skills Charge is set at £1,000 per year for each migrant worker sponsored. Medium or large sponsors are typically defined as organisations with an annual turnover exceeding £10.2 million, if total assets are worth £5.1 million or more, and those employing more than 50 people. This classification ensures that larger organisations, which are presumed to have greater financial resources, contribute proportionally to the ISC.
Small and charitable sponsors: For small and charitable sponsors, the ISC is reduced to £364 per year for each sponsored migrant worker, which represents a significant saving. For example, if a small business sponsors a worker for a three-year period, the total ISC cost would be £1,092 (calculated as £364 per year for three years). Sponsors are usually small sponsors if at least two of the following apply: annual turnover is £10.2 million or less; total assets are worth £5.1 million or less; and have fewer than 50 employees. Charitable sponsors include registered charities, excepted or exempted charities, or ecclesiastical corporations established for charitable purposes, and the reduced ISC acknowledges their role in serving the public good while operating with limited resources.

The ISC is charged in addition to other costs associated with visa sponsorship, such as the Certificate of Sponsorship assignment fee, UKVI application fee, and the Immigration Health Surcharge. Employers must budget for these expenses when hiring skilled workers from outside the UK.

Are there exemptions to paying the charge?

While the Immigration Skills Charge is applicable to most sponsors, certain exemptions exist to alleviate the financial burden on employers in specific circumstances.

Specified occupations: Certain PhD-level occupations are exempt from paying the ISC, as are those being sponsored as clergy, sports players, and sports coaches, instructors and officials.
Global Business Mobility: Senior or Specialist Workers: EU nationals working for a linked business in the UK are exempt if they are being sponsored under the Senior or Specialist Worker route for up to 3 years.
When assigning a further CoS to an existing Skilled Worker, which does not extend beyond the end date of the previous CoS assigned by the same organisation, for which the ISC was paid in full
Switching to a Skilled Worker visa from the Student route: International students who have completed a course of study in the UK and are switching from the Student route into the Skilled Worker route will be exempt from paying the ISC. They will also be exempt when extending their permission to remain in the same role with the same sponsor.
Granted Tier 2 permission prior to 6 April 2017: if a worker has been sponsored as a Tier 2 (General) migrant / Skilled Worker continuously since 6 April 2017, they will be exempt from the ISC.
Those seeking entry clearance to the UK for less than six months

Employers should carefully review the criteria for exemptions and seek professional advice from business immigration solicitors if they are uncertain, as mistakes in determining eligibility could result in delays in processing visa applications or, in the event of non-payment, the refusal of visa applications.

Can employers get refunds on the charge?

Yes, employers can receive refunds on the Immigration Skills Charge under certain circumstances.

Visa refused, application withdrawn or CoS not used in a visa application: If the visa application is refused or withdrawn, or if the CoS is not used (for instance, if the prospective employee decides not to take up the job), the ISC paid for that worker will be refunded. The ISC will also be refunded if the worker’s visa application is successful, but they decide not to take up the post. The refund is usually processed automatically, but employers should keep track of such cases and follow up if necessary.
Early termination of employment: If the sponsored worker leaves their role earlier than expected, employers may be eligible for a partial refund. The refund is calculated based on the remaining period of the CoS for which the ISC was paid. For example, if a worker leaves after one year of a three-year sponsorship, the employer could be refunded for the remaining two years.
Overpayment: If a sponsor has overpaid, they may be eligible for a partial ISC refund.
Visa granted for a shorter period than requested on the CoS: If the worker is granted a shorter period of leave, the sponsor should receive a partial ISC refund.

It should be noted that refunds can take up to 90 days to be processed, so employers should factor this into their cash flow management. Employers must also ensure that they retain all relevant documentation to support their refund claims, and must familiarise themselves with circumstances when no refund of the ISC will be paid.

For example, no ISC refund will be made for the first year of sponsorship if the worker leaves their employment early, nor will a refund be due if a worker moves to another immigration route but remains employed in the same role.

Can an employer pass the charge onto the employee?

Home Office guidance makes it clear that employers must not pass on any of the ISC to a sponsored worker. In other words, sponsors cannot attempt to recoup the ISC from a sponsored worker.

If the Home Office discovers that a sponsor has attempted to recoup the ISC from a sponsored worker, they will likely take compliance action against the sponsoring organisation and will normally take steps to revoke the sponsor licence.

Understanding the costs, potential exemptions and refund options helps employers to implement effective financial planning and fully comply with immigration laws when sponsoring skilled workers. By staying well-informed, employers can also make better decisions about hiring practices and the potential benefits or drawbacks of sponsoring overseas workers.