Clawing back immigration fees

On 13 July 2023 the government announced that following the public sector pay review, visa fees and the Immigration Health Surcharge (IHS) will be increased. IHS for adults will rise from £624 per year of visa to £1,035, and the discounted rate for students and children will rise from £470 per year of visa to £776.  Fees for work and visit visa will increase by 15% and fees for study visas, certificates of sponsorship, settlement, citizenship, wider entry clearance and permission to stay applications and priority visas will increase by at least 20%.  It is not yet known when this increase will take place, although this is rumoured to be in the Autumn. 

Once the fee increase comes into effect, the visa costs for a family of four (parents and two children) applying from overseas for a 3-year work visa could be at least £4,700 more, with total visa application fees and IHS to likely be in excess of £13,000. This is in addition to any Immigration Skills Charge (ISC) that employers must pay which can be up to £1,000 per worker per year of visa. 

It is not uncommon for an employer to enter into a clawback agreement with an employee to seek to recover certain costs should the individual fail to start employment or if they resign or are dismissed. With the significant increase in visa fees and IHS, it is anticipated that employers will increasingly make use of clawback clauses. However, there are important wider issues to consider before doing so.

General

A clawback clause may be included in the contract of employment or in a separate side letter.  If it is not included in the contract, employers should ensure that they have authorisation to deduct the costs from any outstanding payments on termination so that it is not an unlawful deduction.  It is also important to ensure that the employee expressly signifies their consent to the arrangement and it is supported by consideration. 

ISC should be excluded from any clawback arrangements. If the Home Office considers that an employer has asked a worker to pay some or all of the charge, or it has recouped or attempted to recoup the same, this would be deemed a compliance breach and would normally lead to the employer’s sponsor licence being revoked.

Penalty

Employees may argue that any clawback clause is a penalty and therefore unenforceable.  While there are no cases on clawback of immigration fees, clawback clauses on training costs have been found to be enforceable where the amount to be paid back is proportionate to the actual loss suffered by the employer.  Each case turns on the facts including the circumstances of the termination and the amounts repayable by the employee which will determine if the clause is in fact a penalty. 

Employers should therefore bear proportionality in mind when designing clawback arrangements. They should consider tapering so that the amount repayable is reduced the longer an employee remains with the employer. Where the employee’s employment terminates for reasons which are not their fault e.g. compulsory (rather than voluntary) redundancy, it may not be appropriate for clawback to apply.

Restraint of trade

If the amount of the repayment has the effect of discouraging an employee from leaving, this may be deemed to be an indirect restraint of trade and therefore unenforceable.  This will depend on the particular circumstances of the case including the amount of salary the individual is on and the amount to be repaid. 

Discrimination

Employers should avoid making the repayment period too long because this may potentially indirectly discriminate against workers on the grounds of age, sex or disability, on the basis that more senior, female or disabled workers may be less able than younger, male or non-disabled workers (as the case may be) to remain in continuous employment for longer periods of time. 

In addition, if employers are tempted not to recruit employees from overseas to avoid these increased fees, they may be at risk of potential race discrimination claims under the Equality Act 2010. Employers should ensure that there is no blanket approach to rejecting applications from those who require visas.  Information on a candidate’s immigration status should be considered in the final stages of the recruitment process and not at the outset. 

Conclusion

Employers should consider the implications of the upcoming increase in visa fees and IHS. Where possible, visa applications should be submitted sooner rather than later. While immigration fee regulations are normally laid before Parliament at least 21 days before they take effect, this is a convention that can be departed from with justification, such as if the government considers there has already been sufficient notice given due to widespread media reporting.

While it is possible to include clawback clauses, it is important to seek legal advice beforehand to ensure the arrangement is likely to be enforceable. Employers may also wish to review their wider recruitment policies to ensure their compliance with the latest legal requirements, particularly in relation to potential discrimination issues.