Effective 6 April 2025, updated company size thresholds under the Companies Act 2006 have redefined employer classifications. These changes impact UK sponsor licence holders by altering the Immigration Skills Charge (ISC) and the UK sponsor licence application fees based on company size.
For Employers holding or seeking a UK sponsor licence under the Skilled Worker visa route or Global Business Mobility route, developing a deep understanding is necessary to stay compliant and for financial planning. This article outlines the revised definition for small employers, its impact and so forth.
New Update in Company Size
On 6 April 2025, the criteria for defining small employers under the Companies Act 2006 were updated. This change impacts the companies responsible for paying UK sponsor licence fees and Immigration Skill Charge (ISC) under worker routes.
Key Changes
The UK government has set criteria to determine the category of a business based on its size; large, medium and small. The guidelines for small businesses include:
- The annual turnover: £15 million or less (previously £10.2 million)
- Total assets: £7.5 million or less (previously £5.1 million)
- 50 or less employees.
To secure the small employer status, a business must satisfy at least two of the above criteria. However, it should be noted that the company must meet the relevant criteria for a period of two consecutive financial years.
In other words, compared to the previous figures, the turnover and balance sheet thresholds have increased, resulting in changes to the size classification of existing companies. For instance, those companies previously classified as medium-sized may now qualify as small-sized. The government anticipates that almost 14,000 companies will move to the small-sized category with the implementation of the new definition of a small employer.
Regarding fees, Part 2 of the UK sponsor licence guidance describes:
“S5.3. If you are a small or charitable sponsor, as defined in regulation 2 of the Immigration Skills Charge Regulations, you will pay the ‘small’ charge:
- £364 for any stated period of employment up to 12 months
- an additional £182 for each subsequent 6-month period stated on the CoS
S5.4. In all other cases, you must pay the ‘large’ charge:
- £1,000 for any stated period of employment up to 12 months
- an additional £500 for each subsequent 6-month period stated on the CoS”
Existing sponsors whose company size category has changed must submit a report to the Home Office through a Sponsor Management System (SMS) within 20 working days of becoming aware of the change. Once approved by the Home Office, the company becomes eligible to pay lower Immigration Skill Charge (ISC), when assigning a Certificate of Sponsorship (CoS).
Impact of this New Update
According to the previous Conservative Government’s Non-financial reporting review: impact assessment and the ruling Labour Government’s Non-financial reporting review: simpler corporate reporting, the changes will result in approximately:
- 113,000 companies and LLPs holding small employer status moving to the micro entity category.
- 14,000 medium sized companies moving to small
- 6,000 large sized companies changing their category to medium sized.
In simpler terms, a significant number of companies might change their existing category and qualify as small employers, leading to reduced requirements for audits and accompanying reports.
Final Thoughts
The changes to company size classification, effective from 6 April 2025, bring important implications for businesses engaging with the UK’s sponsorship system. The revised criteria affect not only how a company is categorised as small or large but also influence the fees payable and the obligations attached to holding a UK sponsor licence. It’s crucial for employers to review these updates in light of their current operations to ensure they remain compliant and financially prepared.
Organisations should take the time to assess their classification status under the new guidelines and make any necessary adjustments to their sponsorship records and procedures. Staying informed and proactive will help avoid potential issues with UK sponsor licence renewals, audits, or sponsor duties going forward. Being prepared is key to maintaining a smooth and compliant sponsorship process in the evolving immigration landscape.
