Section A: Can an Umbrella Company Sponsor Workers?
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.
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 a 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”. This means businesses that need to hire migrant workers legally should consider sponsor licence directly.
The umbrella company cannot sponsor a migrant worker to supply them as labour to a third party. Under Appendix Skilled Worker and the Worker Sponsor Guidance, UKVI must have no reasonable grounds to believe the job amounts to: (i) the hire of the worker to a third party to fill a position with that party, or (ii) contract work to perform an ongoing routine role or service for a third party. The sponsor must control the worker’s duties and agree and pay the worker’s salary.
1. 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 and the Worker Sponsor Guidance, 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 Skilled Worker sponsor licence made by an umbrella company is highly 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.
2. 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.
Where a sponsor licence is revoked, any sponsored workers usually have their visas curtailed, with a 60-day window to find a new sponsor or leave the UK, unless their visa expires sooner. The company will also typically face a cooling-off period before being able to reapply for a licence. 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.
DavidsonMorris Strategic Insight
The UK visa sponsorship guidance is clear: sponsors must have direct control over their sponsored workers. Where this does not apply, visa sponsorship is not permitted.
On the basis that umbrella companies operate solely for payroll and tax purposes, and do not ordinarily exercise day-to-day oversight of workers, they would fall short of the criteria for sponsorship.
Organisations should approach umbrella arrangements with extreme caution and take professional advice before proceeding. The Home Office has broad powers to investigate at any time, and you will be required to evidence compliance with sponsor guidance. If enforcement action is taken, the licence can be revoked and the sponsored workers’ visas cancelled at short notice.
Section B: UK Visa Sponsorship Rules
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. A defined CoS will be needed for applications made from overseas, whereas an Undefined CoS will be needed for in-country applications.
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 relevant salary threshold or the ‘going rate’ for the selected occupation, whichever is the higher. In some cases, lower thresholds may apply through tradeable points, for example where the applicant is classed as a new entrant.
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. UKVI will also assess whether the role exists, whether the applicant is suitably qualified for it, and whether the role has been exaggerated or tailored to fit the candidate. 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.
UKVI can also carry out pre-licence compliance checks and site visits to verify that these requirements are being met in practice before granting a licence.
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, which must then be used within three months of being issued.
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, where this can be evidenced by passing a Secure English Language Test, by having a degree taught in English, or through an exemption if they are a national of a majority English-speaking country
- have savings of at least £1,270 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. Workers must also pay the Immigration Health Surcharge and the relevant visa application fee. Not all visa categories allow switching into the Skilled Worker route, and sponsors risk refusal and compliance action if they assign a CoS for a role that does not meet the rules on skill, salary or genuineness.
DavidsonMorris Strategic Insight
Visa sponsorship involves significant Home Office scrutiny. The licence application process is designed to test whether an employer is genuine and has the capability to manage sponsored workers to the required standards. Even after being granted a sponsor licence, your organisation has to remain audit-ready at all times. The Home Office is carrying out more audits and inspections than ever and will not hesitate to take enforcement action against sponsors that fail to meet the rules.
Section C: Risks of Misusing Umbrella Arrangements
Using umbrella companies to try to bypass the UK’s sponsorship rules carries serious legal and immigration risks. The Home Office has made clear that only the organisation employing the worker in a genuine role, with direct responsibility for their duties, salary and day-to-day management, can hold a Skilled Worker sponsor licence. Where an umbrella company is used as an intermediary to assign Certificates of Sponsorship but the individual in practice works for another business, UKVI is likely to treat this as an abuse of the system.
If UKVI identifies that an umbrella company or other intermediary is supplying sponsored workers as labour to third parties, the consequences can be severe. The company’s sponsor licence may be refused or revoked, with the result that any migrant workers employed under that licence will have their visas curtailed, usually with 60 days to find a new sponsor or leave the UK. Once revoked, the company will normally face a cooling-off period before being able to apply again for a licence. The reputational impact can also be significant, with the business flagged to UKVI as non-compliant.
For end-clients relying on workers supplied through umbrella sponsorship, the risks are equally high. Sponsored workers could be removed from projects with little notice if UKVI takes enforcement action. The sponsor licence duties require the sponsoring entity to keep attendance records, report non-compliance and co-operate fully with the Home Office. An umbrella company has no realistic way to discharge these obligations where the worker is controlled by a third party. This lack of oversight exposes both the umbrella company and the end-client to enforcement and disruption.
For migrant workers, misuse of umbrella arrangements can have long-term consequences for their immigration status. A refusal or curtailment can affect their ability to work in the UK and may impact future applications if UKVI considers that they were complicit in breaching the sponsorship rules. As the Home Office continues to scrutinise sponsored employment closely, attempts to disguise supply of labour through umbrella models carry a high likelihood of failure and legal consequences.
Both employers and workers should therefore avoid umbrella sponsorship arrangements and instead ensure that the genuine employer holds the necessary licence and meets its sponsorship duties. Where there is any uncertainty about compliance, professional legal advice should be sought at the earliest stage.
| Non-compliance issue | Consequence for sponsor | Consequence for worker |
|---|---|---|
| Umbrella company assigns CoS for worker placed at third party | Licence likely refused or revoked, potential cooling-off period before reapplying | Visa application refused or existing visa curtailed |
| Failure to supervise and manage sponsored worker | Compliance action by UKVI, including downgrade or revocation of licence | Loss of sponsored role, requirement to find new sponsor or leave the UK |
| Inability to meet sponsor duties (record-keeping, reporting, co-operation) | Civil penalties, site visits, loss of licence | Termination of visa, disruption to employment, impact on future applications |
| Use of umbrella sponsorship to disguise supply of labour | Treated as deliberate abuse of system, immediate licence revocation | Visa curtailed, 60 days to leave UK or switch routes if eligible |
DavidsonMorris Strategic Insight
Sponsorship under an umbrella arrangement risks exposing the sponsor and their sponsored workers to uncertainty and potential enforcement action. If the Home Office uncovers this kind of arrangement, the sponsor risks operational disruption and loss of their licence, while sponsored workers will usually be given only 60 days to leave the UK or switch to a new route. Workers linked to an umbrella arrangement may also find their immigration history tarnished, impacting future applications.
Section D: Visa Alternatives for Overseas Contractors
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 and some of which are outside the points-based system.
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:
- The Graduate visa allows international students in the UK to remain in the country after they graduate for up to two years (or three years after a PhD), during which time they have the flexibility to work unsponsored. The Graduate visa cannot be extended and does not lead directly to settlement.
- High Potential Individual (HPI) visa is for those who have been awarded a qualification by an eligible world-ranking university in the last 5 years. The HPI visa is granted for 2 years for a bachelor’s or master’s degree and 3 years for a PhD. It allows the visa-holder to work in any type of job role at any skill or salary level, including through recruitment agencies and umbrella companies. Like the Graduate visa, the HPI visa cannot be extended and does not lead directly to settlement.
- Global Talent visa is 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 route usually requires endorsement unless the applicant holds an eligible prize.
- Youth Mobility Scheme visas are available to eligible nationals aged 18–30, and for some nationalities up to age 35. This visa allows unsponsored work in the UK for 2 years, and in some cases 3 years, but it does not lead directly to settlement.
| Visa type | Duration | Settlement pathway | Work restrictions |
|---|---|---|---|
| Graduate visa | 2 years (3 years for PhD graduates) | No direct route to settlement | Can work in any job, any skill level, cannot extend beyond initial grant |
| High Potential Individual (HPI) visa | 2 years (bachelor’s or master’s) or 3 years (PhD) | No direct route to settlement | Can work in any job, any skill level, cannot extend beyond initial grant |
| Global Talent visa | Up to 5 years per grant, renewable | Eligible for settlement after 3 or 5 years depending on field and endorsement | No restrictions on type of work, endorsement usually required unless holding an eligible prize |
| Youth Mobility Scheme visa | 2 years (3 years for some eligible nationalities) | No direct route to settlement | Can work in most roles except professional sportsperson, age restrictions apply (18–30 or 18–35 depending on nationality) |
Other possible routes may include certain sponsored temporary work visas such as the Creative Worker visa or routes under the Global Business Mobility umbrella, depending on the nature of the work. While unsponsored visas offer flexibility for contractors, they are usually short-term and do not provide employers with a long-term solution to staffing shortages, since most do not lead to settlement.
DavidsonMorris Strategic Insight
The UK offers a number of work routes, many of which are unsponsored, although these are predominantly short-term solutions. If you are undertaking workforce planning, we can help you understand the visa options available and how these could support your needs. We provide guidance on the eligibility rules, costs and validity periods of different routes to inform long-term, sustainable and compliant recruitment planning.
Section E: Summary
Umbrella companies are a common feature of the UK contracting sector, but they cannot generally be used to sponsor Skilled Worker visa applicants. The Home Office’s sponsor licensing system is built on the principle that the sponsoring employer must have direct responsibility for the worker’s role, pay and day-to-day management. Umbrella companies, by design, act as intermediaries. They process payroll and manage tax and National Insurance contributions but do not recruit into genuine vacancies or supervise the worker’s performance. As a result, they are unable to meet the strict compliance duties that UKVI requires from licensed sponsors. Applications from umbrella companies for sponsor licences are therefore almost always refused, and any attempt to use umbrella arrangements to disguise the supply of labour will put both employers and workers at serious risk of enforcement action.
For contractors, there are alternative immigration options such as the Graduate visa, High Potential Individual visa, Global Talent visa or Youth Mobility Scheme. These routes offer flexibility to work without sponsorship but are usually temporary and do not resolve long-term workforce needs for UK employers. For businesses facing genuine skills shortages, the only secure route remains applying directly for a Skilled Worker sponsor licence and taking on the responsibilities that follow. Misuse of umbrella arrangements risks licence revocation, visa curtailment and workforce disruption. For both employers and workers, the safer path is to ensure the sponsoring entity is the actual employer and that compliance duties are fully understood and managed from the outset.
Section F: Need Assistance?
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.
Section G: Umbrella Companies & Visa Sponsorship FAQs
What is an umbrella company?
An umbrella company acts as an intermediary within the recruitment supply chain, employing contractors on behalf of agencies or end clients. Its main role is to process payroll, tax and National Insurance contributions, rather than to recruit or manage workers directly.
Can an umbrella company sponsor a visa in the UK?
Umbrella companies are not normally eligible to sponsor visas because they cannot meet the Home Office’s sponsorship requirements. A company must hold a Sponsor Licence to employ migrant workers under work visa routes such as the Skilled Worker visa.
Are there any umbrella companies that offer visa sponsorship?
Some umbrella companies claim to provide sponsorship, but employers and workers should be cautious. Many do not meet Home Office requirements, and using an unauthorised provider could lead to visa refusals or compliance breaches. Even if an umbrella company holds a licence, it cannot lawfully sponsor workers to be supplied as labour to third parties under the Skilled Worker rules.
What are the risks of using an umbrella company for visa sponsorship?
Employers who rely on an umbrella company for visa sponsorship could face compliance issues if the company is not an approved sponsor. Workers may also face visa curtailment or refusal of settlement applications if UKVI finds that they were not genuinely employed by the sponsoring company.
What should employers do if they need visa sponsorship?
Businesses that want to employ migrant workers should apply for a Sponsor Licence with the Home Office instead of relying on third parties. Seeking legal advice can help ensure compliance with immigration laws.
Can contractors on a visa work through an umbrella company?
Skilled Worker visa holders can only work for their licensed sponsor in the role stated on their Certificate of Sponsorship. If the umbrella company is not a licensed sponsor, working through them would breach visa conditions.
How can I check if an umbrella company is a licensed sponsor?
The UK government maintains a regularly updated register of licensed sponsors, listing only those organisations with an active licence. If an umbrella company is not listed, it cannot legally sponsor overseas workers.
Section H: Glossary
| Term | Definition |
|---|---|
| Umbrella Company | A third-party company that employs contractors for payroll, tax and administrative purposes, typically through recruitment agencies, but does not recruit or directly manage the work performed. |
| Visa Sponsorship | The process by which a licensed UK employer assigns a Certificate of Sponsorship to a non-UK national to support their work visa application. |
| Sponsor Licence | Permission granted by the Home Office allowing a company to sponsor eligible migrant workers under specific visa routes. |
| Skilled Worker Visa | A UK work visa that allows non-UK nationals to take up skilled roles with a licensed sponsor, provided they and the employer meet eligibility requirements. |
| Home Office | The UK government department responsible for immigration, visas, and sponsor licensing. |
| Right to Work | The legal status that permits an individual to work in the UK, which employers are required under law to verify before employment begins. |
| Compliance Risk | The legal, financial and operational risks faced by employers if they fail to meet immigration and sponsorship obligations, including penalties and loss of licence. |
| PAYE (Pay As You Earn) | The UK tax system under which employers deduct income tax and National Insurance from employees’ salaries. |
| HMRC (His Majesty’s Revenue & Customs) | The UK government body responsible for tax collection and enforcement of employment tax rules. |
| Indefinite Leave to Remain (ILR) | Permanent residency status in the UK, allowing a person to live and work without visa restrictions. |
| Contractor | A worker hired on a temporary or project basis, often through an agency or umbrella company. |
| Employment Agency | A company that places workers in temporary or permanent roles with client businesses. |
| Right to Work Check | A legal requirement for employers to verify an employee’s immigration status before hiring. |
| Register of Licensed Sponsors | The official Home Office list of companies authorised to sponsor migrant workers in the UK. |
| Visa Compliance | The requirement for employers to comply with UK immigration laws and Home Office sponsor duties when hiring and sponsoring migrant workers. |
Section I: Additional Resources and Links
| Resource | Description | Link |
|---|---|---|
| Register of Licensed Sponsors | Official UK government list of organisations currently authorised to sponsor migrant workers. | https://www.gov.uk/government/publications/register-of-licensed-sponsors-workers |
| Skilled Worker visa | Official guidance on eligibility, application process and requirements for the Skilled Worker visa. | https://www.gov.uk/skilled-worker-visa |
| Sponsor Licence application | Official Home Office page explaining how to apply for a sponsor licence, eligibility and supporting documents. | https://www.gov.uk/uk-visa-sponsorship-employers |
| Immigration Rules: Appendix Skilled Worker | Detailed Home Office rules governing Skilled Worker visa requirements. | https://www.gov.uk/guidance/immigration-rules/immigration-rules-appendix-skilled-worker |
| Sponsor Guidance | Official guidance for employers on sponsorship duties, compliance and licence management. | https://www.gov.uk/government/collections/sponsorship-information-for-employers-and-educators |
| Right to Work checks | Guidance for employers on conducting right to work checks to prevent illegal working. | https://www.gov.uk/check-job-applicant-right-to-work |
