Small firms bemoan ‘unrealistic’ cost of visa sponsorship

24 Feb 2020 By Elizabeth Howlett

New post-Brexit immigration fees could force companies to radically change their business models or close altogether, report suggests

Employers have raised concerns over the cost of the government’s post-Brexit immigration plans, as a report claiming many British workers are “unwilling” to fill current vacancies is released.

Half (48 per cent) of 1,083 small firms surveyed by the Federation of Small Business (FSB) said they would be unable to meet the immigration fees currently levied on employers hiring non-EU staff if extended to EU workers.

Under the current system, the cost of a Tier 2 visa sponsorship to a small employer exceeds £3,000, a fee the FSB has branded “unrealistic” were it to be carried across to the government’s new points-based immigration system. The report said the extra costs would mean one in 10 (11 per cent) small businesses would have to radically change their business model or close altogether.

The study recommended that the cost of hiring EU and non-EU staff be below £1,000 for small businesses, with exemptions for the smallest firms.

The report also found four in 10 (38 per cent) small employers had struggled to recruit the right staff over the past year, with more than a third (35 per cent) citing the unwillingness of UK citizens to work in their sector.

Mike Cherry, chairman of the FSB, said a points-based model could work for smaller businesses provided costs are kept down and systems made easy to navigate for small companies. “Against a backdrop of weak economic growth, record employment and an ageing workforce, it’s critical that we get this new system right, particularly when timeframes are so tight. Otherwise, we risk business closures,” he said.

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Cherry called for more support to be provided in next month’s budget for employers unable to meet current costs for non-EU staff, claiming that only a few were in a position to plug the EU skills gap with automation.

The Home Office said last week it planned to move the UK economy “away from a reliance on the immigration system”. Outlining details of its points-based immigration system, which will apply to both EU and non-EU citizens when rolled out in January 2021, the government told employers they needed to adjust to tighter immigration controls by focusing on improving retention and boosting productivity through technology investment.

Jonathan Beech, managing director of Migrate UK, said the number of UK organisations holding a Tier 2 sponsor licence had already increased to 31,000 and he expected this to continue to “rise considerably”. He also predicted the cost of employing foreign workers would continue to increase as the government attempted to keep migration in check. 

“With the new policy pointing towards a lowering of the required skill level, no need for a Resident Labour Market Test and the scrapping of the quota, we expect there to be measures to dissuade employers from relying on sponsorship,” he said. “We expect to see many updates to the points-based system in the coming years.” 

He added that this could lead to employers experiencing “difficulty in forecasting and planning – especially when it comes to finances for small businesses”.

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