Tier 2 sponsor licences

13 November 2018

Tier 2 of the Points Based System enables organisations to sponsor skilled workers from outside the European Economic Area (EEA) to undertake employment in the UK.

In order to sponsor a non-EEA national to work in the UK, the company must first obtain a licence from the Home Office. An employer may also be required to obtain a sponsor licence where it merges with or takes over another business which already sponsors migrants under Tier 2.

Tier 2 migrants are sponsored to perform a specific role, in a specific location, for a specific sum, for a specific duration; all of which must be declared to the Home Office with updates made should any of these details change.

When an employer becomes a Tier 2 sponsor, in order to maintain its licence, it must comply with a number of sponsor licence duties and responsibilities and with the law generally.

How do I apply for a sponsor licence?

The Home Office will grant a sponsor licence to those organisations that are active and trading in the UK, can show a genuine need to sponsor a non-EEA national and can demonstrate their ability to comply with certain sponsorship duties and responsibilities.
An application is made online with supporting documents sent to the Home Office by post. It can be a lengthy process, often taking around three months to complete. However, in certain circumstances the Home Office will agree to expedite the processing of an application where there are strong business reasons for the application to be treated as urgent.

Supporting documentation

A minimum number of supporting documents (normally four) must be submitted with the Sponsor Licence application. The required documentation will depend on factors such as the licence being applied for and the type and size of the employer’s organisation. The documentation typically includes original or certified copies of the following documents:

  • the company’s latest audited accounts;
    employer’s liability insurance certificate for at least £5m;
  • evidence of registering with HMRC as an employer who pays PAYE & National Insurance;
  • proof of ownership of business premises or proof of lease of business premises;
  • certificate of VAT registration and the employer’s latest VAT return confirming the VAT registration number, if the company’s turnover is in excess of £64,000; and / or
  • evidence that the company has a current, corporate bank account with a bank registered by the Financial Conduct Authority in the UK (it is important to note that this evidence is mandatory if the company has been trading in the UK for less than 18 months).

Certain companies are not required to provide documents, for example those listed on the London Stock Exchange (main market).

In addition, if the company wishes to transfer existing employees working for overseas entities to the UK, it will need to provide evidence of the link between the UK company and those related overseas entities. This would normally be in the form of an affidavit, signed by a senior executive within the UK entity, identifying all of the entities linked by common ownership and control both in the UK and overseas.

Possible compliance visit

Once the application has been submitted, the Home Office will make any necessary checks and may request additional information and documentation.

The Home Office may also undertake a compliance visit in order to satisfy itself that the employer’s need is genuine and that it can meet the sponsor licence requirements. This may involve checking the organisation’s HR systems, policies and procedures currently in place. It is therefore vital that the employer has the appropriate systems in place prior to submitting the application.

Key personnel

An employer must allocate specific roles to staff who will, in turn, liaise with the Home Office. These individuals must be permanently based in the UK for the duration of their time in the relevant role and must be a paid member of staff or an office holder (for example a director).
There are four roles which need to be allocated:

  1. Authorising Officer: Has ultimate responsibility for the sponsor licence and immigration compliance so should be at a senior level.
  2. Key Contact: Acts as the main point of contact between the sponsor and the Home Office.
  3. Level 1 user: Conducts day-to-day sponsorship activities with full use of the sponsor management system (SMS), an online tool which enables an employer to manage or renew their license and apply for and manage Certificates of Sponsorship (CoS) (essentially work permits – see below) for employees that they wish to sponsor under Tier 2. A sponsor may have multiple Level 1 users.
  4. Level 2 user: Has partial use of the SMS in that they can only assign CoSs and report migrant activity to the Home Office for those CoSs that they have issued. A sponsor may have multiple Level 2 users.

A representative, such as Macfarlanes, can undertake the last three roles on behalf of the employer. However, a representative cannot be an Authorising Officer and the company must always have one employee / office holder who is a Level 1 user.  Consequently, a company must have at least one UK employee / office holder in place before it can apply for a sponsor licence.

What happens once you become a sponsor?

Provided that the application is successful, an employer will be awarded an “A-rated” licence valid for four years and will be granted access to the online Sponsor Management System (SMS). It will then be able to issue CoSs to non-EEA national workers, provided the workers and the role satisfy the relevant Tier 2 requirements. The workers can then use these CoSs to apply for the appropriate immigration permission to enable them to come and work for the sponsor in the UK in the job detailed on the CoS.

What are the sponsor obligations?

The obligations cover five key areas:

  1. Monitoring immigration status: All employers, whether sponsor licence holders or not, should be checking the right to work of each employee and tracking the expiry dates of those with time limited work permissions.
  2. Maintaining contact details: Current and past contact details of sponsored migrants must be recorded.
  3. Record-keeping: Each sponsored worker should have a file which contains the evidence that they are eligible for sponsorship (such as a CV or degree certificate) and other documents set out in the appropriate Home Office guidance (such as payslips, a contract of employment, evidence of a resident labour market test where one was required etc).
  4. Migrant tracking and monitoring: Each sponsored worker’s absences and annual leave should be recorded. Any changes in their employment circumstances (for example, a change in job role or salary or if they leave the sponsor) should be reported to the Home Office via the SMS.
  5. Recruitment and accreditation: Copies of any registration and / or professional accreditation documents and / or any confirmation letter the migrant is required to have in order to do their job should be kept on file. For example, where the migrant is a doctor, proof of registration with the General Medical Council.

The sponsor must have policies and practices in place to ensure that these obligations are met.

Why is compliance key?

The Home Office regularly undertakes unannounced audits at employers’ premises. Sponsor licence holders must therefore understand the duties and responsibilities of being a sponsor licence holder and the penalties for non-compliance.

Non-compliance can result in a downgrade to a “B-rating” or suspension followed by revocation of the sponsor licence. In the case of downgrading or suspension, the company would be unable to sponsor any new migrants. In the case of revocation, all existing sponsored migrants would have their visas cancelled.

In addition, if any worker, whether sponsored or not, was found to be working illegally a civil penalty of up to £20,000 could be issued per illegal worker.

Furthermore, it is a criminal offence to employ someone that the employer knows, or has reasonable cause to believe, does not have the right to work in the UK. Directors of the employer who were aware of the illegal worker may be barred from acting as directors and, in more serious cases, can be sent to prison and subject to an unlimited fine.

To minimise these risks, employers should seek legal advice in relation to compliance with the law on the prevention of illegal working and, if relevant, their duties and responsibilities as a sponsor.

Tier 2

There are two main sub-categories of Tier 2 and a single sponsor licence can cover both:

  • Tier 2 (Intra-Company Transfer) (ICT): Allows companies to temporarily transfer non-EEA nationals to the UK who have been working for a related overseas entity.
  • Tier 2 (General): Allows companies to sponsor non-EEA nationals to work in permanent positions in the UK with the potential for them to apply for Indefinite Leave to Remain (also known as permanent residence or settlement) after five years. There is an annual quota of 20,700 for one of the Tier 2 (General) categories.  Employers looking to sponsor an individual under that category must follow the restricted CoS procedure set out below.

Restricted and unrestricted CoS

A Tier 2 (General) CoS comes in two forms, “restricted” or “unrestricted”.

A restricted CoS is required for applicants who are subject to the monthly quota. They will either be based outside the UK or are currently in the UK as the dependant of a Tier 4 (General) migrant. In both cases they will be filling a vacancy attracting a total remuneration package of less than £159,600.

The employer must request a restricted CoS from the Home Office and a certain proportion of the annual limit is released each month, with any unused restricted CoSs being rolled over to the next month. Provided the request is successful, the employer may assign the restricted CoS to the non-EEA worker.

An unrestricted CoS may be assigned to all other non-EEA workers who are being sponsored to work in the UK who meet the Tier 2 requirements. There is no quota but, each April, sponsors must request an annual allocation of unrestricted CoS on the basis of the number they believe they will want to issue over the next 12 months. A further allocation can be requested at any time during the year, if required.

It is important to note that, in certain circumstances, before a restricted CoS is requested or an unrestricted CoS is assigned to an EEA national under Tier 2 (General),an employer will be required to conduct a 28 day Resident Labour Market Test (RLMT) to demonstrate that there are no local workers who are suitably qualified to undertake the role for which the employer wishes to sponsor a non-EEA worker.

What next?

Once an applicant has been assigned a CoS by an employer, the applicant must submit a Tier 2 visa application either to a British Diplomatic Post in their country of origin or residence or, if they are in the UK, directly to the Home Office within three months.  The applicant’s close family members (partner and minor children) may also apply for a visa as the Tier 2 migrant’s dependants.  This immigration status will enable them to live, work and study in the UK.

The future

The Migration Advisory Committee has recommended to the UK Government that EEA nationals should not receive preferential treatment under the UK immigration system once the UK leaves the EU, unless this forms part of a trade agreement.  It has also advised that the current Tier 2 system, with some modifications relating to skill level, the RLMT and the annual limit, should apply to EEA nationals post-Brexit.  This means that, in the future, UK companies who have never sponsored a non-EEA worker, but do employ EEA workers, may be required to obtain a Tier 2 sponsor licence.