In the final article in our three-part series on sponsor licence compliance, we look at how HMRC payroll information can affect an employer’s sponsor licence and why accurate employment records are so important.
If you hold a sponsor licence, the salary stated on a Certificate of Sponsorship (CoS) cannot simply be forgotten once the worker’s visa has been granted.
The Home Office can check HMRC information to assess whether sponsored workers are being paid appropriately. This means discrepancies between your CoS, payroll, employment contracts and Sponsor Management System (SMS) records can potentially expose your business to compliance action.
How Does HMRC Data Matching Affect Sponsor Licences?
Employers operating PAYE provide payroll information to HMRC through Real Time Information (RTI).
For sponsors, this makes accurate payroll particularly important. If the salary actually being paid does not correspond with the salary declared for sponsorship purposes, you need to understand why.
Common areas of concern include:
- salary being lower than the amount stated on the CoS;
- incorrect salary information on the original CoS;
- unreported salary reductions;
- changes to contracted hours;
- payroll or administrative errors;
- deductions affecting pay; and
- periods of unpaid or reduced-pay absence.
Not every difference will necessarily amount to a breach. There may be a legitimate explanation, including certain types of permitted absence. However, an unexplained difference between your sponsorship and payroll records is a compliance risk.
Why Do Salary Discrepancies Matter?
Salary is fundamental to Skilled Worker sponsorship.
You need to ensure that the worker continues to satisfy the applicable immigration requirements and that information held by the Home Office accurately reflects the worker’s employment.
A problem can therefore arise where your CoS says one thing but your payroll says another.
If a sponsored worker’s salary, hours or employment arrangements change, consider the immigration implications before implementing the change.
Depending on the circumstances, you may need to report the change through the SMS, assess whether the worker continues to meet the relevant salary requirements or consider whether a new CoS and immigration application are required.
An ordinary HR or payroll decision can therefore become a sponsor licence issue if immigration compliance is overlooked.
It Is Not Just About Salary
HMRC data is only part of the wider compliance picture.
The Home Office may also consider whether a sponsored worker is genuinely performing the role for which they were sponsored, whether their actual duties remain consistent with their job description and whether the occupation code remains appropriate.
Working hours must also remain consistent with salary arrangements, and relevant changes to employment must be reported where required.
Accurate payroll will not protect your sponsor licence if the worker’s actual role is materially different from the position for which they were sponsored.
What Happens If the Home Office Identifies a Discrepancy?
A payroll discrepancy does not necessarily mean that the Home Office will immediately take enforcement action.
However, it can lead to further enquiries or a Home Office compliance visit.
If that happens, you should be able to explain the discrepancy and produce supporting records, which may include:
- payslips and payroll records;
- employment contracts;
- Certificates of Sponsorship;
- job descriptions;
- working-hours records;
- attendance and absence records;
- right to work documentation; and
- evidence of relevant SMS notifications.
There is an important difference between an isolated administrative error that can be clearly identified and explained, and a pattern of underpayment, inaccurate reporting or inadequate compliance systems.
Depending on the circumstances and seriousness of the issue, sponsor licence action can include downgrading of the licence, an action plan, suspension or revocation.
If you identify a payroll discrepancy affecting a sponsored worker, investigate it promptly rather than treating it solely as an internal payroll issue.
What Should Employers Do to Maintain Compliance?
The most effective approach is to bring payroll, HR and immigration compliance together.
1. Check Payroll Against the CoS
For each sponsored worker, regularly compare the salary stated on the CoS and any subsequent salary notifications against their employment contract, contracted working hours and actual gross basic pay.
Relevant deductions, unpaid or reduced-pay absences and information held on HR systems should also be reviewed.
If something does not match, establish why and document the explanation.
2. Review Salary or Hours Changes Before Implementing Them
Payroll should not implement a reduction in salary or material change in hours without considering whether it affects the worker’s sponsorship.
Similarly, HR or line managers should not materially change a sponsored worker’s role or duties without considering the immigration implications.
Build a sponsor compliance check into your internal approval process for changes affecting sponsored workers.
3. Make Sure HR and Payroll Communicate
One of the easiest ways for sponsor reporting obligations to be missed is for different parts of the business to operate independently.
HR, payroll, recruitment, line managers and those responsible for the SMS should understand when changes involving sponsored workers need to be escalated.
The person managing your SMS cannot report a change they do not know has happened.
4. Investigate Discrepancies Immediately
If payroll does not match the CoS or employment records, employers should establish what caused the discrepancy, when it arose and what the worker has actually been paid.
They should also consider whether the relevant sponsorship requirements continue to be met, whether an SMS report is required and whether corrective action is necessary.
Keep a clear record of your investigation and any action taken.
5. Audit Your Sponsor Licence
Regular sponsor licence audits can identify problems before they attract Home Office scrutiny.
Your audit should compare payroll and CoS information, check that salaries and working hours remain compliant and confirm that workers’ actual duties and work locations are consistent with their sponsorship records.
It should also review right to work documentation, absence monitoring and whether reportable changes have been notified.
Frequently Asked Questions
Can the Home Office check HMRC payroll data for sponsored workers?
Yes. Employers should operate on the basis that salary information for sponsored workers may be checked against HMRC information as part of Home Office compliance activity.
Does every payroll discrepancy mean I have breached my sponsor duties?
No. A discrepancy may have a legitimate explanation.
The important point is whether you can identify the reason, establish that the relevant sponsorship requirements continue to be met and take any necessary compliance action.
How often should I check payroll against the CoS?
Employers should carry out regular checks rather than waiting for a Home Office compliance visit.
For businesses with sponsored workers, incorporating payroll-to-CoS reconciliation into the normal compliance cycle can help identify discrepancies before they become more serious.
How We Can Help
HMRC data matching means employers should not approach sponsor compliance as something that matters only when assigning a CoS or preparing for a Home Office visit.
Regular checks of payroll and employment records can help identify discrepancies and ensure that sponsorship requirements continue to be met.
At Ison Harrison, our business immigration team can support employers with sponsor licence compliance audits, payroll-to-CoS reviews, salary and working-hours compliance, SMS reporting, sponsored worker file reviews and preparation for Home Office compliance visits.
We also provide ongoing sponsor licence compliance support to help employers manage their responsibilities and address potential issues.
To find out more about how we can help you stay compliant, contact us on 0113 2845120 or email Arif.Khalfe@isonharrison.co.uk.
