'Scale-up' visa: is it worth it for the initial sponsor?

Out-Law News | 08 Sep 2022 | 8:04 am |

Maria Gravelle tells HRNews about the pros and cons of the new ‘scale-up’ visa
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  • Transcript

    The new scale-up visa is up and running but do the costs outweigh the benefits? It’s certainly flexible, so very useful for future employers of a scale-up worker, but what about the initial sponsor? Do they risk losing that person to another business six months in? We’ll consider that.

    The scale-up visa came into force on 22 August with the aim of allowing employers who are in a sustained period of high growth to recruit people to work in the UK in highly skilled roles. So, helping fast-growing employers to attract top international talent through a light-touch sponsorship route.

    Scale-up visas require international workers to be sponsored for an initial six-month period, after which they can continue working for their sponsor, change jobs or become self-employed without notifying the Home Office. But therein lies the problem - the ease with which individuals can switch away from the initial sponsor.

    The Home Office has now published its latest guidance on the scale-up visa so let’s get an update on that and get a view on the viability of this new route. Maria Gravelle is an immigration specialist currently helping a number of clients understand the pros and cons and she joined me by video-link from Edinburgh. I started by asking about that guidance:

    Maria Gravelle: “So, the Home Office have now released their caseworker guidance which is the document that Home Office caseworkers use to determine applications under the new scale-up route. So, it specifies really everything that we need to know about the route, the eligibility criteria, it specifies what businesses are going to be considered scale-up businesses, which is a very important factor, and I think that many people have been surprised at how restrictive some of these criteria actually are. So we knew that the scale-up visa was going to be a light-touch sponsorship-based route for companies who are experiencing growth in the UK, so many people envisage that this would be a very useful route for start-ups, for example, but one of the criteria that the Home Office have set for businesses is that they must have had at least 10 employees at the beginning of the three year assessment period, and then experienced over the course of that few years, a 20% growth in either turnover, or staff. So, the limit of having at least 10  employees is going to rule out most small businesses and particularly start-ups, because 10 employees is quite uncommon when you've just started trading. So, that is one criterion that many people are considering to be quite restrictive, which has now been confirmed in this new guidance. Other information that is released is how the Home Office are going to assess turnover and staff levels, and it's going to be almost exclusively by looking at HMRC records for VAT returns and for PAYE which means, again, that businesses are going to need to make sure that their records in these regards are up to date, that they don't have any gaps, that are no administrative errors and, as anybody who works in payroll or taxation is going to be aware, sometimes that's just not realistic. So, the guidance is very helpful, it certainly makes us more aware now of the specifics of what scale-up businesses are going to need to do to sponsor under this route and, unfortunately, it does mean that many businesses that we hoped would be eligible are not going to be.”

    Joe Glavina: “We know that a number of employers have doubts about whether the cost of the scale-up visa outweighs the benefits. Can you talk me through that one?”

    Maria Gravelle: “So, the cost of the scale-up visa is much cheaper than for the skilled worker visa in most cases. So, the application fee for the scale-up visa is £715. The applicant or their employer would need to pay what's called the immigration health surcharge which is £624 per year and this is envisaged as being a two-year visa from the offset. So, the immediate costs to an individual, or their employer, on the scale-up visa would be about £2,000. One of the key features that differentiates this route from the skilled worker is that there's no immigration skills charge which is an annual fee, again, which needs to be paid in a lump sum by the employer for skilled workers. If you’re sponsoring a skilled worker for five years and you're a large sponsor that cost can increase up to £5,000 so there is a very significant cost difference. However, I caveat that because the whole idea behind the scale-up visa is to give the individual more flexibility to work elsewhere after the first six months in the UK. So, somebody who's on a scale-up visa is permitted to change jobs without having to notify the Home Office after only six months on the visa. So, what that comes with is an increased risk for employers that individuals who are on these visas are going to leave after a very short time on the job and the costs of actually employing somebody, of training them, particularly if they're very good at what they do, if they have a very niche skill set, there is a risk of losing that person only after half a year in employment. I think that there are many employers who would rather meet those additional costs of the skilled worker visa, then run that risk. Certainly with the skilled worker visa, individuals can still leave their employment, but they have to apply effectively for a whole new visa if they do so. So, there's definitely a lot less incentive to do that if you have somebody who's sponsored as a skilled worker.”

    Joe Glavina: “Finally, Maria, if an employer talks all that on-board, weighs up the pros and cons, and decides they do want to take someone on via this route what do they need to do?”

    Maria Gravelle: “I think an important point to note is that all sponsors, whether you are a prospective sponsor or you are you already have a sponsor licence, are going to need to add this route to their licence from the beginning. So, nobody is automatically going to be a scale-up sponsor, you have to go through that process from the get-go and only once you are accepted by the Home Office as a scale-up business will you be allowed to sponsor individuals under this route. That process takes time so it's worth factoring in to business preparations if this visa is going to be suitable for you, definitely come and speak to us early to make sure that you factor in enough time to get the route added on to your licence or, if need to be, apply for a licence for the first time, and then only after that part of the process has been completed will businesses be able to look at sponsoring individuals.”

    Maria and the team have put together an article on this for Out-Law which looks at all of those points in some detail. That’s ‘Costs of UK’s new ‘scale-up’ visa to employers might outweigh benefits’ and is available from the Out-Law website. We have put a link to it in the transcript of this programme.

    LINKS

    - Link to Out-Law article: ‘Costs of UK’s new ‘scale-up’ visa to employers might outweigh benefits’