Sponsored workers: navigating benefit-in-kind and pay parity risks

As visa sponsorship rules tighten and immigration salary thresholds affect whether individuals can be sponsored to work in the UK, employers face two related risks. Paying immigration costs may create an unexpected benefit-in-kind ("BIK") tax liability, and may create or expose differences in pay between employees performing the same role.

A recent Employment Tribunal case highlights the latter issue. Taken alongside HMRC’s increased scrutiny of employer-funded visa expenses, it underlines the need for employers to consider immigration, tax and employment law together.

Key points for employers

Employer-funded immigration costs may be taxable. HMRC is advancing a broader interpretation of the BIK rules and seeking tax and National Insurance contributions where certain visa and sponsorship expenses have been met by employers on employees’ behalf.
Each cost must be considered separately. The tax treatment may depend on what was paid, who was legally liable, who benefited, the employee’s circumstances and whether an exemption or deduction is available. For example, employer-specific sponsorship costs such as the Certificate of Sponsorship ("CoS") fee and the Immigration Skills Charge ("ISC") must be borne by the sponsor and cannot be passed on to the worker, supporting the argument that they are the employer’s own regulatory costs rather than benefits provided to the employee. HMRC may, however, rely on the broad employment-related benefits rules to argue that the employee nevertheless benefits from the employer paying the CoS and ISC fees, as payment enables their sponsorship. The Home Office prohibition on passing the CoS and ISC fees to the worker does not, therefore, necessarily determine the tax position.
Tax relief may be available in some cases. The distinction between costs relating to an employee’s initial move to the UK and those arising on a subsequent visa extension can be particularly important.
Salary decisions made for immigration purposes should also be tested for discrimination risk. A recent Employment Tribunal case involved a non-sponsored employee who was paid less than sponsored colleagues performing the same support worker role. At the remedy hearing, the Tribunal awarded her compensation.
The risks are connected. Employers need to look at the complete remuneration and immigration support package, not simply whether the worker’s basic salary meets the relevant salary threshold required for sponsorship.

Immigration costs and the BIK risk

Employers commonly fund visa application fees and other immigration-related expenditure when recruiting or retaining sponsored workers. Historically, some businesses may have regarded those expenses simply as costs of employing international talent.

HMRC has, however, increased its scrutiny of employer-funded visa expenses and is advancing a significantly broader interpretation of the BIK rules, seeking to collect tax where an employer has met visa costs on an employee’s behalf.

The correct treatment is fact specific. Employers should establish:

what immigration or professional cost has been paid;
whether it relates to the employee, their family or the employer;
who is legally responsible for paying it;
who receives the underlying benefit; and
whether a specific exemption or deduction applies.

Employers should avoid treating every immigration expense in the same way. Even where a cost initially falls within the benefits regime, tax relief may be available for certain travel and related expenses when an individual comes to work in the UK. The employee’s circumstances, and whether the cost relates to their initial move or a later visa extension, may affect the result.

The analysis should therefore address three questions:

Does a taxable benefit arise?
Is an exemption or deduction available?
How should any taxable amount be reported?

In limited circumstances, certain visa costs incurred in connection with an employee’s (and potentially their family’s) travel to the UK may qualify for relief. This may be relevant where an overseas recruit or international assignee incurs visa-related costs as part of their initial relocation to the UK. By contrast, the position may be more difficult where an employee is already working in the UK and the employer pays for a later visa extension, as those costs may be less readily connected with the original journey to the UK. The availability of relief will depend on the particular facts and statutory conditions.

Visa application fees and the Immigration Health Surcharge* have generally been regarded as taxable benefits when paid on an employee’s behalf unless a specific exemption or deduction applies.

*Payment of the surcharge entitles the applicant to access NHS services during the period of their permission, broadly on the same basis as a UK resident, subject to standard NHS charging rules (for example, it does not cover prescription or dental charges that UK residents would also pay).

The wider cost of getting the tax treatment wrong

If an immigration expense is taxable, the employer must decide how it should be reported and who will bear the tax. Depending on the circumstances, this could involve payroll, benefits reporting or settlement through a PAYE Settlement Agreement ("PSA").

Employer National Insurance contributions may also be payable. If the employer has agreed to protect the employee against the additional tax liability, a tax gross-up could turn an already substantial immigration expense into a significantly larger cost.

The practical risk is heightened where different teams operate independently. Immigration may approve the expenditure, Finance may pay it and the Global Mobility team may manage the employee, without Payroll being told that a potentially reportable benefit has arisen.

Pay parity: can sponsored workers be paid more?

Tax is not the only issue. Where a sponsored worker must receive a particular salary to meet the requirements prescribed under the Immigration Rules, employers may find themselves paying that worker more than a non-sponsored colleague doing the same job.

This issue arose in the Employment Tribunal proceedings of Mrs G Gharabli v Cedar Hope Care Services Ltd (Case Number: 6009247/2024). Ms Gharabli worked as a support worker from February 2023. She discovered that overseas support workers with Skilled Worker visas were being paid £12.31 an hour, while she and other non-sponsored support workers received £10.50 an hour. Approximately 80% of the employer’s staff worked under sponsored visas.

Ms Gharabli’s pay was increased after she raised the discrepancy. Following further events and disagreements, she resigned with immediate effect in June 2024, citing discrimination on the basis of pay among her reasons. Her Tribunal claims included direct and indirect race discrimination, direct and indirect religion or belief discrimination, and whistleblowing. Only her indirect race discrimination and whistleblowing claims succeeded.

The Tribunal accepted that complying with the Skilled Worker minimum salary requirements was a legitimate aim. However, immigration compliance alone was not enough to establish that the resulting pay disparity was proportionate. In particular, the employer had not provided analysis or evidence showing why it would have been financially prohibitive to increase the pay of non-sponsored employees performing the same role.

At the remedy hearing, the Tribunal awarded her £14,174, which included £10,000 for injury to feelings and £2,237 for financial losses.

This case was a first-instance Employment Tribunal decision and is not binding on other tribunals. Nor does it establish a blanket rule that sponsored and non-sponsored employees performing the same role must always be paid the same. Focusing on indirect discrimination, the question will be whether any indirectly discriminatory pay practice can be objectively justified as a proportionate means of achieving a legitimate aim. Employers should therefore be cautious about the litigation risk where sponsored and non-sponsored workers performing the same role receive different rates of pay.

A discrimination issue?

If sponsored workers are predominantly of particular nationalities or racial groups, a policy of paying them more than non-sponsored colleagues may lead to race discrimination claims, particularly claims of indirect race discrimination.

The key point is that meeting an immigration salary requirement does not end the analysis. Salary-setting decisions made for immigration purposes should be tested through an equality lens. Employers should ask:

Are sponsored and non-sponsored employees performing the same or materially similar roles?
Is there a difference in pay?
What is the reason for that difference?
Has the rationale been recorded and reviewed by HR and employment legal teams?
Could the same immigration requirement be met without creating an unexplained disparity?

Looking at pay and benefits together

The two risks can pull employers in different directions.

A business may increase a sponsored worker’s salary to meet immigration salary thresholds, creating a pay disparity with existing staff. Alternatively, it may fund immigration expenses as part of the worker’s package, only to discover that the expenditure creates a taxable benefit and additional National Insurance costs.

Employers should therefore review the overall package, including:

basic salary;
visa and related immigration expenses;
support provided to family members;
any employee tax paid or grossed up by the employer; and
any other benefits provided because the employee requires sponsorship.

This combined review should identify both the employment tax consequences and any potentially problematic differences between sponsored and non-sponsored workers.

Wider immigration changes

These issues arise against the backdrop of continuing changes to immigration routes, salary requirements and sponsor obligations. Employers can read more in our article: The major immigration changes in 2025 and what to expect this year.

Key actions for employers

Employers with sponsored workers should:

Analyse immigration expenditure: identify all visa, relocation and associated professional costs paid for workers and their families.
Review the BIK treatment: determine who is liable for and benefits from each cost, and whether any exemption or deduction is available.
Review contracts and policies: identify whether contracts, policies or assignment letters require the employer to meet or gross up the employee’s tax.
Check reporting arrangements: confirm whether taxable amounts are being dealt with through payroll, benefits reporting or a PSA.
Audit pay differences: compare sponsored and non-sponsored employees performing the same or similar work.
Record the rationale: document why any difference in salary or benefits exists and assess it through a discrimination lens.
Review historic treatment: consider whether previous immigration expenses or pay arrangements require further investigation.
Join up internal teams: ensure immigration, HR, global mobility, finance, payroll, employment tax and legal teams share information effectively and apply a consistent approach.
Budget for the full cost: include possible income tax, employer National Insurance contributions and gross-ups when modelling the cost of recruiting or relocating sponsored talent.

Immigration compliance should not be considered in isolation. A decision that enables the business to sponsor a worker may still create an unexpected tax liability or an employment dispute about differences in pay. Reviewing both issues at the outset is likely to be considerably easier, and less expensive, than addressing them after HMRC or an employee asks probing questions.