Sponsor pay compliance under pressure: complexity, enforcement and discrimination risk

The Home Office’s increasing focus on salary compliance continues to place sponsors under significant operational and legal pressure. Recent rule changes and case law developments have heightened scrutiny not only on whether minimum salary thresholds are met, but how they are achieved and evidenced in practice.

At the same time, emerging litigation highlights that compliance with immigration requirements does not protect employers from broader employment law risks – particularly discrimination.

This briefing explores the growing complexity of salary compliance, the challenges created by evolving rules and sponsor guidance, and the competing risks sponsors now face when structuring remuneration.

Increasing complexity in salary compliance

The March 2026 Statement of Changes to the Immigration Rules introduced significant reforms to salary compliance for Skilled Workers. In particular:

• Salary must be paid at least monthly (or as specified contractually)
• Pay in each pay period must meet the relevant hourly “going rate”; and
• Compliance is assessed across defined rolling periods (e.g. three months, 12 weeks or 17 weeks depending on pay patterns).

These changes are effective for Certificates of Sponsorship (CoS) assigned on or after 8 April 2026. This moves away from assessment of annual salary and sponsors can no longer assume that overall annual pay will cure a period of short term underpayment.

The rules are particularly difficult to apply where working patterns vary, for example, workers with irregular hours may need to be assessed over 17 week periods, with sponsors required to confirm working patterns via the Sponsorship Management System. More frequent pay cycles may require compliance to be monitored over rolling 12 week periods.

This raises difficulties in practice, as payroll systems are not typically designed to monitor rolling compliance periods. In addition, short term fluctuations (e.g. sickness, reduced hours or deductions) may create inadvertent breaches.

The High Court’s judgment in Southcroft Healthcare Lodge Ltd v SSHD—in which the Court dismissed Southcroft’s judicial review challenge to the revocation of its sponsor licence—was handed down shortly before the new sponsor guidance was issued. It confirmed that the Home Office is entitled to assess salary compliance over shorter, meaningful periods, rather than relying on annual pay. This aligns with the updated rules, reinforcing that sponsors must ensure pay meets the required threshold in each relevant pay period, not just in aggregate over the year.

A strict enforcement environment

The Southcroft decision also underlines the enforcement risk facing sponsors. The High Court upheld licence revocation where there were multiple breaches, including underpayment, an incorrect SOC code, weak monitoring systems, and failures to provide documents during a compliance visit.

The Court made clear that sponsors are responsible for compliance in all respects, including selecting the correct SOC code, ensuring salary thresholds are met and maintaining effective systems and records. Failures in governance or documentation alone may justify revocation.

Underpayment remains a key trigger for enforcement, leading to suspension or, in serious cases, revocation. Risk is heightened by the Home Office’s ability to cross check PAYE data with HMRC.

Discrimination risks arising from pay structures

In Gharabli v Cedar Hope Care Services Ltd, the Employment Tribunal considered a situation in which sponsored workers were paid more than what the Tribunal referred to as “domestic workers” i.e. those not requiring a sponsored visa, performing the same role in order to meet Skilled Worker thresholds. The Tribunal found that this disparity in pay placed domestic workers at a disadvantage, that reliance on immigration requirements alone was not sufficient justification, and that the arrangement could amount to indirect race discrimination.

The case underlines that complying with immigration requirements does not mean that sponsors do not need to comply with Equality Act obligations. Pay structures driven by sponsorship requirements will be scrutinised where comparable roles are treated differently.

In practice, sponsors are required to balance competing regulatory pressures. Increasing pay only for sponsored workers may give rise to discrimination risk, as in Gharabli. Increasing pay more broadly to maintain parity may prompt scrutiny that salaries have been artificially inflated to meet visa thresholds, which is a ground for licence revocation under the Home Office sponsor guidance.
This creates a difficult practical dilemma, particularly in sectors where market pay sits below Skilled Worker thresholds.

Practical tips for sponsors

1. Salary monitoring and compliance

Sponsors should adopt a proactive approach, including monitoring pay across relevant periods on an ongoing basis, ensuring alignment between payroll, contractual terms and sponsorship data, and maintaining robust systems and documentation.

2. Review pay frameworks

Sponsors should assess whether disparities exist between sponsored and non sponsored workers in comparable roles, and consider carefully whether any differences can be objectively justified. Where disparities are identified, it will be important to consider whether harmonisation is required.

3. Strengthen compliance systems

In light of Southcroft, governance is critical. Sponsors should ensure that systems are capable of monitoring compliance across rolling periods, that records are accurate and accessible, and that responses to Home Office requests are timely. Working patterns and salary rationale should also be clearly documented.

4.  A joined up approach

A consistent theme is the need for coordination. Immigration driven pay decisions should be tested through an equality lens, with HR, payroll and mobility teams working closely together and decisions supported by clear, evidence based rationale.

Other developments and emerging angles to watch

In addition to the above, sponsors should be alive to wider trends:

• Increased data led enforcement: The Home Office’s use of HMRC data is likely to drive more proactive identification of underpayment.
• Sector specific risk concentration: Sectors with variable hours and tight margins (e.g. care, agriculture, logistics) are particularly exposed.
• Interaction with wider employment law rights: Pay structures designed to meet visa thresholds may also impact other areas of employment law, including equal pay claims and potential whistleblowing in relation to compliance failures.

If you would like to discuss your organisation’s approach to sponsor pay compliance, or review your current arrangements in light of these developments, contact our immigration and global mobility team.