The Skilled Worker visa — previously the Tier 2 (General) work visa — is the primary immigration route for UK businesses to hire foreign workers. However, as any business must first be approved by UK Visas and Immigration (UKVI) to sponsor this category of worker, this raises the question whether an umbrella company is allowed to apply for a Skilled Worker sponsor licence.
The following guide looks specifically at whether a Tier 2 / Skilled Worker umbrella company can be set up or used to act as a UK sponsor for skilled migrant workers, together with the rules and requirements in the context of both Skilled Worker licences and visas.
Can an umbrella company sponsor workers under the Skilled Worker visa?
An umbrella company is a business often used by recruitment agencies to pay workers sourced by the agency to undertake work for an end-client, typically in the short-term.
However, where an umbrella company is used, it is that company that technically employs the worker and pays their wages, rather than either the recruitment agency or the agency’s end-client. The umbrella company will not be tasked with finding the work for an employee to do, as this will be undertaken by the agency. Equally, it will not be responsible for managing the work found, as this responsibility will rest with the client for whom the work is being carried out. Accordingly, the umbrella company will simply act as an administrative body through which the worker’s wages, tax and National Insurance (NI) are paid via PAYE.
When it comes to sponsoring an individual under the Skilled Worker route, the sponsor would ordinarily be the company or organisation providing the actual work assignment to the proposed new recruit, having actively recruited an overseas national to fill an essential skills gap in its workforce. As such, when it comes to whether or not an umbrella company can sponsor foreign workers on the Skilled Worker route, the short answer is usually “no”.
Are there any exceptions to using a Skilled Worker umbrella company?
The only exception to the prohibition against an umbrella company sponsoring a migrant worker is when that worker will be directly employed by the company in connection with the running of that business. The umbrella company cannot sponsor a migrant worker to supply them as labour to someone else, regardless of any genuine contractual arrangement between the parties. This is because the only company or organisation that can sponsor a migrant on the Skilled Worker route is the one for whom the work will be undertaken, where there are a number of reasons under the rules that lead to this conclusion.
Specifically, under Appendix Skilled Worker of the UK’s Immigration Rules, it provides that the UKVI caseworker deciding the application for a Skilled Worker visa must not have reasonable grounds to believe the job the applicant is being sponsored to do amounts to:
- the hire of the visa applicant to a third party who is not the sponsor to fill a position with that party, whether on a temporary or permanent basis, or
- contract work to undertake an ongoing routine role or provide an ongoing routine service for a third party who is not the worker’s sponsor, regardless of either the nature or length of any arrangement between the sponsor and third party.
These prohibitions essentially mean that when an applicant applies to UKVI for a Skilled Worker visa, their application will almost certainly fail once it becomes apparent that the applicant will be working for a company other than the sponsoring company. Equally, when the umbrella company applies for a sponsor licence to enable it to assign a sponsorship certificate to allow a new recruit to apply for their visa in the first place, UKVI will almost certainly form the view that the company is not capable of offering suitable employment.
Equally, an application for a sponsor licence made by a Tier 2 / Skilled Worker umbrella company is also likely to fail on the basis that the applicant company is not capable of carrying out its sponsorship duties. Under an umbrella arrangement, the ‘employer’ will be supplying the services of the worker to a recruitment agency who, in turn, will supply that individual to an end-client. Consequently, the umbrella company will have little or no supervision and control over that worker and their performance, meaning they would be incapable of meeting the duties associated with sponsoring a migrant, including:
- keeping up-to-date records of all migrant workers
- tracking and recording their attendance at work
- reporting certain activities, such as non-attendance or non-compliance
- co-operating with the Home Office, such as during site visits or in providing any additional documentation that may be requested
- complying with the law, such as carrying out right to work checks on employees to ensure that they are entitled to be in the UK.
It is also worth noting that the end-client would also struggle to apply for a licence to sponsor a migrant worker referred to them through a recruitment agency, where the wages of that worker are being paid by an umbrella company. This is because the sponsor must not only be responsible for deciding all the duties, functions, outcomes or outputs of the job the migrant worker will be doing, but also for agreeing and paying the migrant’s salary. The umbrella company will act as an intermediary in this context, responsible for dealing with all payroll aspects of the working arrangement, including collecting payment from the end-client, and then deducting tax and NI contributions, before paying the worker.
Requirements for a company to sponsor Skilled Workers
There are various strict requirements that must be met to be able to sponsor Skilled Workers, where it is only once a company has been approved for a licence that it can then assign a Certificate of Sponsorship (CoS) to a foreign worker to enable them to apply for a Skilled Worker visa. First and foremost, the company must be able to offer a suitable job role that meets the minimum skill and salary requirements of the Skilled Worker route.
When it comes to the minimum skill requirement, a Skilled Worker must have a job offer in an eligible occupation as set out in Appendix Skilled Occupations of the Immigration Rules. The job role must also meet the Skilled Worker salary requirements, where the salary must either meet the general salary threshold of at least £26,200 per year or the ‘going rate’ for the selected occupation, whichever is the higher.
The job role must be genuine, where UKVI must be satisfied that the role has not been created mainly so that the foreign worker can apply for entry clearance or permission to stay in the UK. It must also not amount to the hiring of a worker to a third party who is not the sponsor, either to fill a position or to undertake routine contract work with that party.
To be approved for a licence on any route, but including the Skilled Worker route, a company must also show that it meets each of the following basic requirements:
- it is a genuine organisation that is operating lawfully in the UK
- it is honest, dependable and reliable, having regard to any owners, co-owners, directors and those responsible for the day-to-day running of the business, where these people must not be engaging or have engaged in behaviour not conducive to the public good
- it is capable of carrying out its sponsorship duties, having regard to the company’s HR systems and recruitment practices currently in place.
Requirements when applying for a Skilled Worker visa
In broad terms, to be eligible to apply for a Skilled Worker visa, a foreign worker must have an offer of a genuine job role from a UK licensed sponsor that meets the relevant route-specific requirements before they can make a valid application to enter or stay in the UK on this route. The sponsor will confirm this by assigning a CoS to the migrant worker.
To be eligible for a Skilled Worker visa, in addition to having a valid Cos containing information about a suitably skilled and salaried role, the foreign worker must also:
- be able to speak, read, write and understand English to at least Level B1 on the Common European Framework of Reference for Languages (CEFR) scale
- have savings of at least £12,70 to show that they can support themselves on their arrival in the UK or instead have their UK sponsor certify maintenance on their CoS.
When it comes to the maintenance requirement, the foreign worker will only need to show funds or have their sponsor certify maintenance if applying for entry clearance to come to the UK or, alternatively, if applying to switch into this route from another route where they have not been in the UK for a minimum period of at least 12 months.
Immigration risks for umbrella companies
An umbrella company or other intermediary, including an employment agency, who obtains a sponsor licence and uses that licence to supply foreign workers as labour to a third party, runs the risk of having that licence revoked. Given that UKVI will not ordinarily grant a licence for intermediaries to sponsor workers on behalf of third parties, any company offering sponsorship to migrants who then go on to work for another company will almost certainly be construed as a deliberate attempt to disguise the way in which they operate.
Once a sponsor licence is revoked, this means that any sponsored assignments will be prematurely terminated. For the end-client, this will mean losing valuable members of their workforce at short notice, with the associated cost of temporary cover and recruiting the worker’s replacement. For the foreign worker, this will not only mean the loss of their job and income, this could also mean they are forced to leave the UK, unless they are able to switch to a different immigration route for which they meet the route-specific requirements.
For any company or foreign worker facing an investigation or action by UKVI, expert legal advice should be sought immediately from an immigration specialist. Expert advice should also be sought to explore all available immigration options, both from the perspective of the worker, as well as companies based in the UK looking to recruit foreign workers.
Visa options to hire foreign workers in the UK
The UK immigration system for foreign workers has been subject to wide-ranging reform since the UK left the EU. Many routes now exist for overseas nationals to come to the UK to work or for business, some of which do not require sponsorship or some are not assessed by points.
The availability and suitability of these immigration routes will depend on the specific circumstances, and taking professional advice is recommended to ensure you proceed with the most suitable route. These could include:
- High Potential Individual (HPI) visa for those who have been awarded a qualification by an eligible world-ranking university in the last 5 years or the Graduate visa for those who have recently graduated from a UK university. Both the HPI and Graduate visa are short-term visas, with validity periods of just 2/3 years depending on the applicant’s level of qualification, but will allow the visa-holder to work in any type of job role at any skill or salary level. These individuals could even find work through recruitment agencies and umbrella companies.
- Global Talent visa for those who are leaders or potential leaders in one of the fields of academia or research, arts and culture or digital technology. On this highly flexible route, a successful visa-holder can live and work in the UK for up to 5 years at a time. There is also no limit as to how long a visa-holder can stay in the UK in total. A Global Talent visa-holder may be able to apply for indefinite leave to remain to settle in the UK after either 3 or 5 years, depending on which field they work in and how they apply. This will give the foreign worker the right to live and work in the UK for as long as they like, without any immigration restrictions and without ever needing to be sponsored.
DavidsonMorris are UK immigration law specialists with specific expertise in helping UK employers hire global talent. We can assist if you have any queries relating to the UK’s sponsorship licence rules and application process, including guidance on eligibility to sponsor skilled workers; speak to our experts today for advice.
Umbrella companies & visa sponsorship FAQs
Can an umbrella company sponsor a visa?
Sponsoring a visa applicant on behalf of a third party who is not the licensed sponsor is prohibited. This means umbrella companies cannot sponsor skilled worker visas to supply the services of the sponsored workers to recruitment agencies or end-clients.
Does Home Office sponsor Tier 2 visa?
The Tier 2 (General) work visa has been replaced by the Skilled Worker visa, where a UK-based employer must be approved to sponsor this category of workers to be able to recruit any skilled overseas national subject to immigration control.
Which UK companies are sponsoring UK Tier 2 visa?
A current list of companies authorised to sponsor Skilled Workers can be found on the Home Office's register of licensed sponsors.
Can an agency sponsor Tier 2 visa UK?
A recruitment agency cannot usually sponsor a Tier 2 visa, now called a Skilled Worker visa, except where the applicant will be directly employed by the company in connection with the running of that business, for example, as a manager.
Last updated: 4 July 2023