How to avoid discrimination in recruitment involving sponsorship costs

Shireen Shaikh and Vikki Wiberg outline the implications for employers grappling with the UK’s new immigration system

How to avoid discrimination in recruitment involving sponsorship costs

Anyone familiar with the case law on whether 'costs alone' can justify discrimination could be forgiven for thinking that this is a game of semantics crossed with 'spot the difference'. The answer, according to a recent Court of Appeal decision, confirms that cost alone cannot be relied on. 

While previous Employment Appeal Tribunal (EAT) cases have held that a 'costs plus' approach is required, this phrase is to be avoided. Why? It makes the exercise too mathematical. Better, says the Court of Appeal, to ask: “What is the whole story?”   

In Heskett v Secretary of State for Justice, the employer was found to be justified in discriminating against younger employees (people under 50) when from 2011 it reduced the rate of pay progression that could be achieved within a certain timeframe. The result for Mr Heskett was that it would take him 23 years to reach the top pay band, versus eight years previously.  

The provision, criterion or practice (PCP) applied to him was discriminatory on grounds of age. To justify such discrimination, the employer needed to identify a legitimate and justified aim. In Heskett, the employer relied on its need to save costs, against the backdrop of a public sector pay freeze. 

Deciding the employer had a legitimate aim not based on costs alone, the court found that absence of means is not the same as cost-cutting. They were constrained to cut pay, effectively reducing staff costs to balance the books. In future, a public sector employer might argue it has less choice about reducing staff costs, and therefore a greater argument of justification, than a private sector employer. 

The court accepted that the slim distinction between cutting costs (costs alone) and being constrained by circumstances to cut costs (costs plus) may be hard for most employers with real-world financial pressures to discern in practice. How can employers confidently tread on the right side of the line? Or, to put it in Heskett terms, is the “whole story” more than just costs?

Heskett is likely to be of immediate interest for employers grappling with their UK recruitment policies in light of the Home Office's revised UK immigration points based system (PBS). From 1 December 2020, the PBS expanded to cover sponsorship for EEA nationals transferring to the UK from 1 January 2021. 

At the same time, the Home Office simplified and removed some barriers to sponsorship. This includes lowering the mandatory skilled worker skill level, reducing salary requirements, and removing mandatory prior advertising of roles to UK workers prior to a visa application. 

These changes will delight many employers frustrated by the bureaucracy of the PBS. The advertising requirements have long created significant administrative work and delays to the sponsorship process. However, is it all positive? Not necessarily. 

Employers considering applications for lower skilled roles for example, management training positions may, for the first time, see these roles fall within the minimum PBS skill threshold. Such roles often come with lower salaries and below degree entry skill level. They can attract hundreds of applications. 

Visas attract expensive Home Office fees linked to the size of the sponsoring organisation. A five-year visa can cost up to £10,000, a cost employers may hesitate to spend. However, as we have seen from Heskett, a costs alone decision not to recruit someone is unlikely to protect an employer from a discrimination claim. 

We also know, from the 2012 EAT decision in Purohit v Osborne Clarke Services, that it is not possible for a company to prevent someone who requires visa sponsorship from applying for a role, even where the company is able to fill the role from the resident workforce. 

Unless the Home Office issues further guidance compelling companies to continue to look to the resident workforce before sponsoring a visa, companies will need to consider all applications for junior roles equally and on their own merits regardless of whether the cost of sponsoring a visa is prohibitive. 

Having clear records of decision-making will be important in the event a decision is challenged. If cost is a concern, applicants who need visa sponsorship may be able to apply for another type of visa, for example, the new Graduate Route visa for Tier 4 students graduating from summer 2021. Time, and the employment tribunal, will tell how this position will develop. 

Shireen Shaikh is a senior professional support lawyer and Vikki Wiberg is a senior counsel at Taylor Wessing