News & Insights

Claw back clauses for immigration costs

Employers may be able to recover some of the costs they incur in employing migrant workers.

The process of employing a migrant usually bears significant costs. While the costs are often covered by the employer at the outset, there are options to include clauses in the employment contract, often referred to as claw back clauses or repayment clauses, to recover some of the costs.

To employ a migrant without indefinite leave to remain, the UK employer usually requires a sponsor licence, so as to issue the migrant with a certificate of sponsorship. In addition to obtaining and maintaining a sponsor licence, there are other costs incurred, including visa application fees, skills charges, and a health surcharge.

Repayment clauses in an employment contract can cover different scenarios and can be adjusted to suit the individual requirements for the employment in question. They are most commonly used in connection with training costs.

Standard clauses usually do not include

  • costs in relation to the sponsor licence itself, as these relate to the company and not the migrant;
  • fees to issue a certificate of sponsorship, as these are relatively low; and
  • the Immigration Skills Charge (ISC), which must not be passed onto the migrant. Refunds/partial refunds by the Home Office are possible.

Note: the Immigration Health Surcharge (IHS) is usually refunded by the Home Office directly to the payment card in the case of an early termination of the visa. Whether the IHS is covered by the employer in the first place usually comes down to a commercial decision.  We are seeing many employers cover this cost, because the fees can be quite considerable at £624 per year of visa.

If the employer is to cover additional fees, such as English language certificate fees and priority processing fees, these may be covered by a repayment clause in the employment contract.

As mentioned above, repayment clauses can be constructed in various ways to suit the circumstances. One option is to divide them into three parts:

  • Repayment of immigration fees (or part thereof) – if the employee leaves within a particular timeframe after the commencement of employment.
  • Sliding scale of repayments – reflecting the benefit the employer receives if the employee stays longer with the company. The amount of repayment in relation to the timescale will be important to determine whether it may be a penalty clause (and therefore void!).
  • No repayment – setting out the circumstances in which there will be no repayment obligation, such as termination of the employment under certain circumstances, in order to provide greater certainty.

Deductions from wages can be made by the employer, provided that they are

  • authorised by a statutory provision or a relevant provision in the employee’s contract; and
  • the employee has previously consented in writing to the deduction.

Keep in mind

It is important to note that the clause should not be construed as a penalty clause as these are generally unenforceable. A penalty clause constitutes a “secondary obligation”, imposing a detriment on a party in breach of contract that is out of all proportion to any legitimate interest of the innocent party.

When considering a repayment clause, it is also important to keep in mind whether it could be interpreted as an indirect restraint of trade, as the clause may discourage the employee from leaving the company. Additionally, the employer should always make sure that the clauses are drafted in a non-discriminatory way.

FSP can advise you on all aspects of employment and immigration law, and will keep you up to date with the latest developments as they are released from the Home Office.

If you require our assistance, please contact our Head of Immigration, [email protected].