UK: The Immigration Quota - Employment Law Issues Facing Sponsors

Last Updated: 29 July 2010
Article by Anthony Fincham, Sarah Ozanne and Caron Pope

The introduction on 19 July of an interim quota on applications submitted under Tier 2 (General) of the Points Based System means that employers who are sponsors are likely to face some new employment law challenges. Employers will have less flexibility in recruitment and there may be difficult decisions to make in order to comply with the quota, which is likely to be lower than many employers would ideally like. For background information please refer to our Law-Now dated 20 July available by clicking here.

Managing the allocation

The most difficult issue in practice will be managing the allocation so that the business needs are properly met while employment law risks are minimised. Employers will need to assess the need for current migrant workers to continue working for them (and so extend their permission to work in the UK) while maintaining a sufficient allocation for new workers. Employers may be put in the difficult position of being unable to extend a migrant worker's permission to work in the UK because it has no certificates of sponsorship left under its quota or because it has decided to extend the permission to work of another migrant worker in preference.

If an employer does not extend a migrant worker's permission to work in the UK, so the worker has no right to work in the UK, continued employment will be unlawful. The employment will therefore need to terminate, as any continued employment would amount to illegal working under the Immigration, Asylum and Nationality Act 2006. Employers need to be aware that they commit a criminal offence if they knowingly employ an individual who does not have the appropriate permission to undertake the work for which they are employed. The penalty is imprisonment for up to two years and/or an unlimited fine. Until now the UKBA has tended to focus on civil penalties when enforcing sanctions but criminal prosecution is a real possibility where the employer has deliberately allowed permission to lapse.

Employers therefore need to consider how best to terminate employment in circumstances resulting from the introduction of the quota. This is a new and untested area and employers will need to tread carefully. Although it is a potentially fair dismissal to dismiss a worker who would otherwise be working illegally, the main difficulty is that any such dismissal is arguably one of choice for the employer, if it could have made an application for the employee to continue to work legally. Therefore it is vital that employers have legitimate business reasons for making their decision. Even where there is a sound reason for making the dismissal it is still important to follow a fair procedure.

If employers are faced with selecting one employee from a number of migrant employees in order to free up the allocation then the selection process must be carried out objectively and in good faith and the employer must be careful not to discriminate against workers (for example because of race or sex). Although it will ultimately be for an employment tribunal to decide whether the selection is fair, criteria for selection may include attendance, time keeping, disciplinary record, performance / appraisal grade, skills and experience.

Although the Acas Code on disciplinary and grievance procedures will not apply an employer must behave reasonably and have regard to natural justice so a fair procedure is likely to include consultation and a proper consideration of all the options. Employees may make unfair dismissal or discrimination claims if they consider that they have been selected for dismissal unfairly, for example because other migrant workers should have been selected in preference to them. It may be possible that redundancy is the real reason for the dismissal and in those circumstances redundancy procedures should be followed.

Employment documentation

As employers may have to terminate the employment of some employees to manage the quota requirements they should, as far as possible, ensure that their employment documentation gives them as much flexibility as possible to decide whether individual permissions to work in the UK should be extended. For new employees the offer of employment and any employment documentation concerning the initial application for permission to work in the UK should make it clear that the employer has no obligation to continue the employment on the expiry of the permission to work in the UK and it is in its absolute discretion whether or not it applies for an extension. Employment contracts should incorporate these terms and it may be that employers decide to offer fixed term contracts to coincide with the original duration of the permission to work so that there is no obligation to consider an extension at all.

There is a limited amount that employers can do where migrant employees are already working and employment contracts have already been agreed. This is because contractual terms and conditions cannot be easily varied without the employee's consent. However there may be opportunities to make contractual changes, and insert terms giving the employer flexibility about extensions to permissions, for example, in conjunction with annual pay reviews when terms are often changed in the normal course of the employment relationship.

Transfers of employees under TUPE

The automatic transfer of employees to an employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may bring additional difficulties for employers trying to manage tight quotas. Under TUPE all the employees of the transferor employer assigned to the relevant undertaking or services transfer to the transferee employer. This necessarily includes migrant employees with permission to work in the UK. This acquisition of migrant employees could put a real strain on a transferee employer's quota allowance. The July 2010 sponsor guidance states that the transferee employer can use the sponsorship management system to apply for an increase in its current allocation of certificates of sponsorship, if it already has a sponsor licence and the change means that it may need to recruit more migrants in the future. It is not clear what criteria would be applied in these circumstances although the Addendum published in conjunction with the guidance suggests that applications for additional certificates of sponsorship will be assessed under "exceptional consideration" criteria and warns "most requests will be unsuccessful". It is hoped that a pragmatic view of allocation will be taken as any dismissal in connection with a TUPE transfer is automatically unfair and so dismissing migrant workers in these circumstances will cause real difficulties for employers.


The interim quota is the first step in the coalition government's plan to have a permanent annual cap on non-EU migration. The interim period runs until 31 March 2011 and the first full annual limit on non-EU migration will be implemented in April 2011. Although allocations are expected to be reviewed in October 2010 and again in January 2011, employers are now likely to find it increasingly difficult to recruit non-EU migrant employees. Employers will also face difficult decisions (as outlined above) during the employment relationship and we understand that there will not be any UKBA guidance to assist employers. Employers therefore need to urgently assess their business requirements and employment documentation so that any problems resulting from the quota system are minimised.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 28/07/2010.

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