Introduction
Employers often face significant investments of time and resources when hiring skilled workers from overseas and sponsoring their visa applications. These investments include various upfront costs such as license fees, sponsorship certificates, and Immigration Skills Charges. Moreover, employers may choose to cover expenses that are typically the responsibility of the sponsored worker, such as visa fees and Health Surcharge.
While these costs can be substantial, they are generally deemed worthwhile if the employee remains with the company for a reasonable period. However, what happens if the employment unexpectedly ends early, leaving the employer burdened with the expenses but no employee to show for it? To address this risk and safeguard their investment, many businesses are implementing clawback agreements.
These agreements enable employers to recover certain immigration expenses. Nevertheless, it’s important to acknowledge that these agreements come with their own set of risks and require careful consideration. Additionally, meticulous drafting is crucial to ensure fairness and enforceability.
This article delves into the crucial factors and risks associated with clawback agreements. It also provides valuable guidance on creating effective agreements for sponsored employees.
The Purpose of clawback agreements
Clawback agreements are put in place to protect your financial investment when sponsoring employees. These agreements require employees to repay certain immigration fees if they leave their job early. By having these agreements in place, you make sure that you don’t have to bear the full cost of sponsorship if an employee leaves shortly after getting their visa. The purpose of clawback agreements is to discourage employees from leaving too soon after getting their visa, whilst reducing the risks to your long-term investment.
The various costs of sponsorship
Getting a visa for a skilled worker can be expensive. The costs depend on factors including the size of the business, the type of visa, and how long the sponsorship is needed. Some costs are the responsibility of the employer, while others are usually paid by the worker applying for the visa, but the employer can choose to cover them. We have a comprehensive blog post that provides all the information you need to know about the costs associated with sponsor licenses. Here are the main points summarised.
Costs that must be borne by the employer
The Immigration Skills Charge is a good old fashioned government levy on each worker you sponsor. This will be either £364 or £1,000 per worker per year, payable upfront when you assign a certificate of sponsorship. The fee varies depending on whether you are classed as a ‘small’ or a ‘medium/large’ business.
The Immigration Skills Charge cannot be recovered from the worker. Home Office guidance states that the employer’s sponsor licence may be revoked if the charge is passed on to the sponsored employee.
Other fees
The sponsor license fee is either £536 or £1,476, depending on whether your business is classified as ‘small’ or ‘medium/large’. When assigning a certificate of sponsorship, the employer pays £199, which could potentially be recovered.
The visa application fee varies greatly, ranging from approximately £350 to £1,500, depending on factors like duration and visa-type. Additionally, there is normally an Immigration Health Surcharge of £624 per year of sponsorship, which is paid upfront. While the visa fee and Health Surcharge are usually paid when submitting the visa application, many employers choose to cover these upfront expenses. This could be done to attract the employee or because the worker cannot afford these fees. These costs can accumulate quickly, particularly if you decide to cover the visa-related fees.
Key considerations for clawback agreements
While clawback agreements may seem like a practical solution for recouping some or all of the costs of sponsoring overseas employees, it is crucial to exercise caution due to their inherent risks. You should consider the following factors to minimise or mitigate the risks:
Review Employment Contracts and Agreements
If you plan to claw back immigration fees, it’s essential to review your employment contracts and agreements to ensure that they include provisions that allow you to do so. If they don’t or are not properly drafted, you may not be able to claw back immigration fees.
Communicate clearly and transparently
Clawing back immigration fees can be a sensitive issue, and its crucial to communicate with employees clearly and transparently throughout the process. Explain the reasons for clawing back the fees and how it will work.
Employment Contract or a separate agreement
When deciding on a clawback obligation, it is important to determine whether it will be included in the employment contract or established as a separate agreement given to the employee after the employment contract is issued. If it is a separate agreement, it is crucial to ensure that the employee signs this document to establish a legally binding agreement between the employer and the employee.
Clearly define the terms of the agreement
The agreement should clearly outline the terms of the agreement, including the amount of the clawback, the timeframe within which it applies, and the circumstances under which it can be triggered. It’s essential to ensure that the agreement is not open to interpretation and that both parties understand their obligations under the agreement. The agreement should also specify that the employer has authority to make deductions from the employee’s salary payment for the clawback costs.
Consider the employee’s financial situation
When considering clawing back immigration fees, it’s important to consider the employee’s financial situation. If the employee has limited financial resources, it may not be reasonable to ask them to repay the fees in a lump sum. In this case, you may need to work out a payment plan that is affordable for the employee.
Make the agreement enforceable
The enforceability of repayment/clawback agreements is not always guaranteed. It may be void or unenforceable if the repayment obligations were deemed a penalty clause. If an employee challenges the clawback agreement’s enforceability, the employer may need to justify the repayment clause’s necessity and proportionality.
To mitigate the risk of unenforceability, it is crucial to ensure that the clawback agreement is proportionate to the loss suffered by the employer as a result of the employee leaving prematurely. Where such recoupment sought is proportionate to the amount of loss i.e., service from which the employer had not benefited, then such clauses are likely to be enforceable. Employers can achieve proportionality by incorporating provisions where the obligation to repay the fees decreases gradually (on a sliding scale basis) over a period of time and ultimately extinguishes. Alternatively, the employer can set out specific circumstances that would end the obligation to repay immigration fees. Usually, these clauses are for specific time only.
As noted above, employers are expressly prohibited from recovering the Immigration Skills Charge fee. It may also be difficult to justify recovering legal fees relating to the sponsorship of a given individual. It may also be hard to recover the licence fee itself, given that a licence is attached to the company rather than any individual being sponsored.
Ensure the clawback provision is non-discriminatory
Caution should be exercised when drafting and implementing a clawback clause to ensure that it is not drafted or implemented in a discriminatory manner. Care should be taken to ensure that the clause or its implementation does not treat employees of protected characteristics less favourably than others. As an example, in Walworth v Scrivens Ltd, the Tribunal found that the employer had treated an employee on maternity leave less favourably because of her maternity when the employer failed to include the maternity leave period towards the time left for repayment of a training clause.
It is worth noting that where a repayment obligation clause was to apply to everyone in the same way but impacts a particular group of people in a disadvantageous way then the clause will be indirectly discriminatory. However, if the employer can provide good reasons to justify the repayment obligation, then the risk of a claim for indirect discrimination can be mitigated.
When clawback doesn’t apply
The claw back agreement should incorporate a clause that sets out the circumstances where the repayment obligation will not apply. As it currently stands, the employee will not be obliged to make any repayment where the employer dismisses them for any reason other than one which entitled the employer to dismiss them summarily (for gross misconduct, for example) or for voluntary redundancy. Consequently, if an employee is dismissed for involuntary redundancy or performance, for example, they would not be required to make any repayment. Additionally, repayment obligation is unlikely to apply if the employer is in fundamental breach of contract and the employee resigns as a result. This clause is similar in effect to a limited implied term. However, having an express term provides greater certainty.
Conclusion
In conclusion, creating an effective clawback agreement for sponsored employees requires careful consideration and drafting to mitigate risks and ensure fairness. Employers must take into account the enforceability of the agreement, its proportionality, and its potential for discrimination. It is essential to tailor the agreement to the specific circumstances of the sponsored employee, including the reason for termination and the types of fees to be repaid.
Ultimately, clawing back immigration fees is a legal matter, and it is advisable to seek legal advice before taking any action.
Truth Legal – Sponsor Licence Experts
Truth Legal are experts in all areas of business employment and immigration law and in all matters relating to sponsorship.
If you need assistance preparing clawback clauses, contact us today.
Further Reading
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