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Employment Law, Staff Management & Sponsor Licence

Business & Accountancy

Employment Law, Staff Management & Sponsor Licence 

Our Employment Law specialists have extensive knowledge not only of the relevant law, but also of practical know-how. We will assist you in all your employment needs, from recruitment process and employment administration matters such as Human Resources Management to Employment Law advice on Dismissal and Redundancy Procedures and assistance with preparation of Employment Contracts. Red Square London are also able to provide a payroll service, which will include monthly pay calculations, all relevant pay documentation and dealing with HMRC. Below you can find some important information on expenses usually incurred by employers in respect of their workers and also about Sponsor Licence for UK employers.

Tier 1 Entrepreneur Migrants: Job Creation, Pay and Tax Arrangements

As a holder of the Tier 1 Entrepreneur visa you will need to satisfy a number of immigration conditions attached to your immigration status. One of such conditions is the creation of two full-time jobs for persons settled in the UK.

Registration of your company with HMRC

Your company has to be registered with HMRC as an employer. When paying salaries, the company must take Income Tax and National Insurance contributions from the salary payments and pay these to HMRC together with the employer’s National Insurance contributions. It is important to know, that the immigration rules related to the visa Tier 1 Entrepreneur do not allow you to receive salary from the required investments made by you into the company. Incorrect organisation of salary payments and incorrect use of the required investment funds might become a reason of unsuccessful attempt at visa extension.

Wages

You, as an employer, will have to pay your workers at least the National Minimum Wage. Currently, it is £6.70 per hour but from April 2016 the amount will be raised to £7.20 per hour for workers age 21 and over.

How much does it cost to employ two workers?  

Employers are required to deduct tax (PAYE) and National Insurance Contributions (NICs) from employees’ monthly pay and to pay it to Her Majesty’s Revenue and Customs (HMRC). Apart from employees, also employers are required to pay a NICs of 13.8% of the employee’s salary over £8,112.

Let’s consider an example using the new National Minimum Wage which employers will have to pay from April 2016, i.e. £7.20 per hour. Assuming 8 working hours per day, 5 days per week, that would mean an annual salary of £14,976 per employee. That includes the minimum 28 days paid holiday per year, of which 8 are the recognised Public Holidays in the UK. That would be £947.23 per year or £78.94 per month for an employee on the National Minimum Wage or £1,894.46 for two employees per year. However, small businesses can claim the so-called “Employment Allowance”. It allows employers to reduce the amount of National Insurance contributions they pay for their employees by up to £2,000. Therefore, the liability of a small business for paying National Insurance Contributions in respect of two employees is zero. All you will need to pay is wages. Thus, having created two jobs with the wages not exceeding the National Minimum Wage, your annual expenses will amount to £29,952 excluding payroll handling costs and mandatory pension contributions which will have to be paid from July 2017.

Mandatory Pension Contributions

From July 2017 Employers will be required to make mandatory pension contributions for their employees – 2% in 2017-18 (Oct – Sep) and 3% thereafter. The Living Wage rate is planned to  rise each year so rate forecasts are approximate, but pension contributions will be something over £300 per person  in 2017 -18  rising to £450+ from October 2018.

How Much Does It Cost To Employ Household Staff?

Wages

From April 2016 employers will be required to pay a minimum of £7.20 per hour (the ‘living wage). Assuming 8 hours per day, 5 days per week, that would mean an annual salary of £14,976 per employee. That includes the minimum 28 days paid holiday per year, of which 8 are the recognised Public Holidays.

Employees Tax and National Insurance Contributions (NICs)

Employers are required to deduct tax (PAYE) and NICs from employees’ monthly pay and to pay it to Her Majesty’s Revenue and Customs (HMRC). For employers of few staff quarterly payment can be arranged.

Employers National Insurance Contributions

Employers are required to pay a NI contribution of 13.8% of the employee’s salary over. That would be £947.23 per year or £78.94 per month for an employee on the Living Wage (i.e. minimum wage). Employer’s NICs are paid to HMRC at the same time as Employee’s.

Overall Costs – 2 Employees

The annual cost to the Employer of two employees on the Living Wage would be £31,846.46 per year or £2,653.87 per month, excluding payroll handling costs.

Pension Contributions

From July 2017 Employers will be required to make mandatory pension contributions for their employees – 2% in 2017-18 (Oct – Sep) and 3% thereafter. The Living Wage rate is planned to  rise each year so rate forecasts are approximate, but pension contributions will be something over £300 per person  in 2017 -18  rising to £450+ from October 2018.

Sponsor Licence for Employers 

If you are an employer and would like to employ someone from outside the EU to work for you in the UK, you need to obtain a sponsor licence. Below we summarise the application process for obtaining the sponsor licence.

Your business

Your business has to be registered and be active in the UK. The age of your company is irrelevant as well as the sector in which it operates and the number of employees it has. It is possible to obtain a licence even for a start-up company. The main requirement is the demand for highly-skilled and experienced workers.

Human Resources and Recruitment systems

Before applying for the licence, you need to make sure that you have Human Resources (HR) and Recruitment systems in place. UK Visas and Immigration (UKVI) might visit your office to carry out their checks before or after your licence has been granted. This requirement might be difficult to meet especially if your company has only a few employees and it is unnecessary to employ someone exclusively for the HR function. If this is the case, you can outsource these services to us, your lawyers-representatives. The Home Office has confirmed that the outsourcing of HR management function is acceptable and there is no need to have an internal HR and Recruitment systems in place.

Your HR system should allow you to:

  • monitor your employees’ immigration status
  • keep copies of relevant documents for each employee, including passport and right to work information
  • track and record employees’ attendance
  • keep employee contact details up to date
  • report to UKVI if there is a problem, e.g. your employee stops coming to work

Key personnel

In your application form, you will need to provide names of your key personnel such as: authorising officer, key contact (your lawyers-representatives) and level 1 user. At the time of completion of the application form, level 1 user has to be a senior employee of your company. However, once you have obtained your licence, you can delegate day-to-day sponsorship activities in relation to management of your licence to us, your lawyers-representatives.

Sponsorship Management System

Management of the licence is carried out via Sponsorship Management System (SMS). As soon as you will have obtained your licence, you will also be granted access to SMS online platform. At this point, we, your lawyers-representative can take over your responsibility for day-to-day activities in regards to your licence maintenance. SMS is used, for example, to report administrative changes or to apply for your licence extension. You will also need to use it to assign certificates of sponsorship (CoS) to migrants who wish to come to, or stay in the UK to work, and to fulfil your reporting duties for your sponsored migrants. You must use your SMS account to report changes to your business structure, such as branches or sites, to report any court decisions made in relation to your company or directors/senior employees, sale of the whole or any part of the business, merger, takeover, liquidation or any other changes. It is also recommended to regularly check your SMS account to keep up with the updates.

Other requirements

There are other requirements which have to be satisfied in order to obtain and retain the licence. For example, in most circumstances, you will have to try to find candidates for the available vacancy among the workers who are already in the UK and have at least a permanent right to reside. What you need to show is that you have advertised the position, received applications, conducted interviews etc. However, if you are planning on employing a migrant who is in the UK on Tier 4 General Student visa and would like to switch to Tier 2 General, you might not have to advertise the vacancy.

It is important to remember that the future employee will have to be a highly-skilled professional and you, as the employer, will have to offer and pay an appropriate salary in accord with the Immigration Rules.

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