What is a clawback provision?
A clawback provision, or clawback clause, is a term in an employment contract which allows an employer to attempt to recoup some of the costs associated with the visa application process in the event a sponsored employee resigns, is dismissed, or decides not to start the role after the visa fees have been paid.
The costs associated with sponsoring a migrant worker have increased over the past few years, and clawback provisions can be a useful way to try and limit the financial risk of sponsoring someone who then leaves their role shortly after.
What fees can be recouped?
It is common for clawback provisions to apply to visa application fees and the immigration health surcharge, and costs directly associated with the immigration process such as any relocation expenses.
However, it's particularly important for employers to note that not all costs associated with sponsoring an employee can be recouped. The Immigration Skills Charge, which is paid when assigning a Certificate of Sponsorship to the employee, must not be passed on. It must always be paid by the employer - this is explicitly set out in the Home Office Guidance.
It's also recommended that the fee associated with the Certificate of Sponsorship and the fee paid by an employer when making the sponsor licence application are costs that should be covered by the employer and should not passed on to the employee in a clawback clause.
As sponsored employees must be paid a minimum gross salary based on their job and the Immigration Rules, it is important that any clawback is made from net salary after tax to avoid breaching Home Office rules.
Top tips for drafting clawback provisions
Employers should be careful that clawback provisions are reasonable and fair to avoid potential challenges on enforceability. If poorly drafted, there can be a risk that a court could find a clawback provision to be like a financial penalty on the employee which restricts their ability to move jobs. The Home Office can also take enforcement action against an employer if the clause is found to be unlawful. It is therefore essential that clawback provisions are carefully drafted.
Key drafting points for employers to consider:
- Be clear on what circumstances activate the clawback provision;
- Be clear on what costs are being recouped;
- Consider the duration of the clawback provision - how long will the clawback arrangement apply for?;
- Consider using a sliding scale by reducing a percentage of the costs in line with the length of the employee's service; and
- Specify how the employee is required to repay any costs and how long they have to repay.
On 28 November 2024, the Home Office published a statement which refers to a crack-down on employers passing on "costs they were always supposed to pay" to international workers, indicating that this an area which may be subject to reform in the new Employment Rights Bill. Further detail on any proposed changes is yet to come.
Our team of experienced immigration and employment lawyers can advise and assist with drafting clawback provisions. If you would like to discuss how we can help you or your business, please let in touch with the Immigration Team.
