As of October 2024, over 120,000 UK organisations hold a sponsor licence. The licence enables businesses to recruit and retain international talent (i.e. non-British and non-Irish citizens) into skilled positions. But what happens when sponsored employment doesn’t work out and a settlement agreement is being considered?
In this blog, Noele McClelland, Head of our Employment and Immigration team and Accredited Employment Law specialist, and Jacqueline Moore, Partner and Accredited Immigration Law specialist, provide answers to some of the key questions that commonly arise.
What is a settlement agreement?
A settlement agreement is a confidential agreement between employer and employee. Its terms usually provide for payment by the employer of a sum of money to the employee. In return, the employee agrees not to bring a claim against the employer or undertakes to withdraw a claim or grievance already raised.
Settlement agreements are frequently used in contentious and non-contentious situations and by small and large businesses.
Can we offer a settlement agreement to a Skilled Worker?
The short answer is ‘yes’. For employment law purposes, a Skilled Worker is no different to any other employee and can agree to enter into a settlement with their employer. However, there are several additional logistical and drafting considerations which employers should take into account in order to comply with their duties as a sponsor licence holder.
Will the employee and their family have to leave the UK if their employment ends early?
This is the question employers ask us most frequently. Ending an employment relationship is not an easy decision and many employers are naturally concerned about what will happen to the employee and their family members.
Whether the employee has to leave the UK depends on their individual circumstances. Once the Home Office is notified that the employee is no longer sponsored, they will take steps to cancel their visa and the visas of dependent family members. However, the employee may qualify to apply for a new visa to stay in the UK. They may find a new sponsored role or be able to apply for a visa on another route, for example, a UK Ancestry route or a partner visa if they are in a relationship with a British citizen. They would need to make the new application within the time period that they are allowed to remain in the UK after they leave employment. This is usually 60 days from the date they are contacted by the Home Office.
What does the employer need to do when employment ends?
The sponsorship rules require employers to tell the Home Office when a sponsored worker’s employment ends. The employer must report the end of employment online through the Sponsor Management System within 10 working days of the last day of work. Once the employer makes the report, the Home Office will begin the process of cancelling the employee’s visa.
How will the employee receive notice of their cancellation from the Home Office?
Notice of the visa cancellation (known as ‘curtailment’) is usually issued by email. We recommend notifying your employee once you have told the Home Office about their employment ending so that they can monitor their inbox for communications. You should remind them to check their spam folder for any Home Office notifications. In our experience, notification times can vary widely and be anywhere between 1-2 months and 12 months. The employee will usually be given 60 days to leave the UK or make a new visa application from the date the Home Office contacts them.
What if the employee goes off sick or takes time off to consider the agreement?
Employers sometimes wish to give an employee some time off to consider a settlement or to take independent legal advice, which is required for the agreement to be binding. ACAS (the Advisory, Conciliation and Arbitration Service) recommend that employees should be given 10 calendar days to consider any written terms. In other circumstances, an employee may go on sick leave with stress during settlement discussions.
For Skilled Workers, employers need to be conscious of their reporting duties. Employers must notify the Home Office if a sponsored employee is off work without permission for more than 10 working days or if they are absent on reduced pay or without pay for longer than 4 weeks. If an employee goes off work during settlement negotiations, the employer may therefore need to make an absence report to the Home Office.
There may also be wider implications of giving an employee time off work in the lead up to the termination of their employment. We cover this further in the below section on garden leave.
Can we place a Skilled Worker on garden leave?
Employers sometimes wish to place employees on garden leave before the end of their employment. Garden Leave describes the period between the date they are given notice of termination of employment and the date on which their employment will actually end. This is particularly common for senior employees, where restrictive covenants are in place or where there is a lengthy period between agreeing settlement and the termination date.
As we’ve explained above, a Skilled Worker is not treated any differently to any other employee for the purposes of Employment Law. However, from an immigration perspective, the picture is more complex.
There is a risk that placing a Skilled Worker on garden leave could impact their immigration permission. This is because the Immigration Rules provide for a Skilled Worker’s immigration permission to be cancelled if the worker ‘ceases to work’ for their sponsor. The Rules also state that ‘work’ does not include a situation where an employee is subject to a contract of employment but is ‘not working’. This suggests that a Skilled Worker on garden leave could have their immigration permission cancelled, as they are not carrying out any work for the employer. This appears to be out of step with other aspects of the Skilled Work rules, which explicitly permit other instances of ‘not working’, such as maternity leave and sick leave. The fact that the Rules do not explicitly provide for garden leave is therefore perhaps an unintentional anomaly. Unfortunately, the Home Office has not clarified this point to date.
A change of work location report to the Home Office may also be required if the employee has not routinely worked from home during their employment.
We would recommend taking expert advice before placing a sponsored employee on garden leave.
Can a Skilled Worker leave the UK after we have notified the Home Office?
Until the Home Office notifies the employee that their visa has been curtailed, they will continue to hold immigration permission in the UK. They may assume (wrongly) that they can travel in and out of the UK as normal.
Once the employee knows that their sponsorship has been withdrawn (i.e. that their employer has contacted the Home Office), the basis for their presence in the UK no longer exists. The Home Office may view an attempt to enter the UK as misrepresentation or deception, which can lead to a 10-year ban on re-entering the UK. The individual could also be refused entry at the border or may be removed from the UK later. Any of these scenarios would have serious ramifications for the employee’s future immigration position in the UK.
Can the employer reclaim the costs of sponsorship from the Home Office or the employee?
An employer may be able to recoup some of the costs of sponsorship where a Skilled Worker leaves their role early.
If the employer has elected to pay the worker’s visa application fee or Immigration Health Surcharge, these costs can in some instances be ‘clawed back’. The right to claw back these costs should be set out in writing at the start of the sponsorship arrangement, either in the employee’s contract or in a separate written agreement.
In order to sponsor the Skilled Worker, the employer will also have paid for a Certificate of Sponsorship and the Immigration Skills Charge. Passing these costs onto the worker is strictly prohibited. It is considered a serious breach of sponsor duties by the Home Office which can lead to revocation of the sponsor licence. Even if the employee leaves the role early, the employer cannot seek to recover these costs from them.
Where sponsorship ends early, the Home Office will, however, grant a partial refund of the Immigration Skills Charge. The Home Office states that refunds are processed within 90 days of notification of the end of sponsorship to the Home Office.
Is there a risk of discrimination when negotiating settlement with a Skilled Worker?
Of itself, negotiating a settlement with a Skilled Worker is not discrimination. However, the reason behind offering a settlement agreement in the first place and any process followed could be discriminatory. There may be a genuine redundancy situation where the employee’s immigration status or race has no bearing at all. However, a risk of discrimination can arise either where the employee is being treated less favourably because of their race or nationality, or where the employer applies the same requirements to all its employees in a way that disadvantages a Skilled Worker – for example, in a situation where a settlement agreement is being considered due to performance concerns relating to preparing written reports, but this requirement is more difficult for the Skilled Worker because English is their second language.
Employment and immigration law are complex areas of law which are constantly changing and this article is not a substitute for tailored advice. If you are an employer looking for one-stop Employment and Immigration advice, please contact us on 03330 430350.
Thorntons Law offers fixed fee HR Packages covering both Employment and Immigration Law and can provide tailored Skilled Worker Settlement Agreement Support to cover both the employment and immigration considerations in respect of an early exit for a sponsored worker.
