How M&A Activity Could Increase Your Skills Shortage

Mergers and acquisitions skyrocketed in 2021, but all this activity could leave some enterprises with skills shortages. Learn why and avoid the issue with these insights from Jonathan Beech of Migrate UK.

With mergers and acquisitions (M&A) breaking new records last year, the first six months alone saw deal value exceed US$1 trillion in every quarter for the first time in history, according to White & Case, with the tech, media and telecom (TMT) sector leading the way. Amidst the frenzy of this activity and with numerous tech companies still being acquired or merged, many IT businesses are also risking further skills shortages by focusing on valuations or sales contracts and forgetting one aspect of their due diligence paperwork – sponsor licence compliance.

But poor licence paperwork could risk increasing tech skills shortages even further and needlessly by preventing overseas talent from joining or continuing to work for a business due to the revocation of a sponsor licence for failing to meet a sponsor licence holder’s ‘duties’. The employer could also incur fines as a result, with the employment of illegal workers risking fines of up to £20,000 per employee, depending on the circumstances.

And while it’s not just the tech sector who is at risk, as we discovered from our own research of 1,000 UK companies which found that overall, 93% were in danger of having their sponsor licence revoked. But with tech one of the sectors with the most acute skills shortages, IT businesses would be affected by any loss of overseas talent by poor record keeping. This is especially important now as from 1 January 2021 (Brexit), a business needs to have a sponsor licence to hire most workers from outside the UK.

M&A Activity on the Rise, But You’ll Need a Sponsor Licence Too

But why is sponsor licence compliance so important? Quite simply, without a valid sponsor licence any business is not allowed to lawfully employ sponsored migrant workers. It also impacts the immigration status of your sponsored employees – compromising their right to stay and work in the UK. For some tech businesses this could mean an instant cut across a large part of a workforce and really damage a business’s operations.

Also, if a business’s sponsor licence is revoked it will not be allowed to recruit or employ any non-UK resident workers under the sponsor licence and it will be taken off the register of sponsors. It will also not be able to sponsor new workers or continue to employ current sponsored employees. Nor would it be allowed to reapply for another licence for 12 months from the date of revocation. While another damaging aspect of losing a sponsor licence is to the organisation’s reputation as an employer, with details available publicly.

While any sponsored workers at this time would have their leave to remain in the UK stopped at the date of revocation, giving them just 60 days to leave the UK, find sponsorship from a different employer, or apply for a new visa application under another category. And if any sponsored employee who was requested to leave the country and didn’t within the 60-day calendar period could be detained and removed from the UK – could result in a re-entry ban.

There are a number of key ‘duties’ of sponsors in order to meet Home Office requirements, key to these in terms of M&A deals are any changes to the business as a result. This includes company name – a licence can’t use an old name if a company has changed its name – along with any changes in employee numbers and address. The whole host of duties cover record keeping duties, reporting duties, general compliance and co-operation with the Home Office. While the most common situation we find being reported late is a change in share ownership. Depending on the ratio, it could mean a new licence is required altogether.

In our research, only a third of businesses knew what documents should be kept on file for sponsored overseas workers out of those holding a Tier2/Tier 5 licence and 93% of company sponsors were not reporting all the required changes in circumstances.

Jonathan Beech
Managing Director, Migrate UK


Act Now to Ensure You Have Access to Skilled Employees

But in our research, only a third of businesses knew what documents should be kept on file for sponsored overseas workers out of those holding a Tier2/Tier 5 licence and 93% of company sponsors were not reporting all the required changes in circumstances.

This is also an issue as The Home Office (UKVI) can undertake ‘spot’ check audits of any organisation with a sponsor licence at any time and while there was a temporary suspension of audits earlier during the pandemic, at the time of writing this has not happened again. The visits can occur at a pre-licence stage of the application, at any time during the four-year period of a licence, or after making an application to renew a licence. Many checks are also initiated online, with emails sent requesting documentation within a set deadline.

The UKVI also uses a range of systems to monitor sponsor licence holders for these spot check site inspections. During these visits they review all HR documents and system processes and interview employees to verify individual immigration compliance.

Compliance visits are also triggered when the UKVI emails the ‘Authorising Officer’ (AO) and requests any documents or information and the emails are ‘ignored’ – from our experience this is because emails to organisations often go to spam, or the AO has changed and no longer receives the emails.

The UKVI also now works digitally with other government departments so it can be alerted when something changes within a business, for example, a delay in payroll / fines issued by HMRC and share ownership changes via Companies House. If they approach the sponsor before their sponsor management system (SMS) is updated, it could also trigger a compliance visit. These ‘smart systems’ increasingly mean that it’s more likely any errors in updating company record keeping information on the sponsor licence are more likely to be identified even as a result of simple human error.

So while your business may be set for exponential growth in 2022 as a result of M&A activity, don’t let your workforce become unstuck as a result of a simple failure in sponsor licence compliance.


Jonathan Beech
Managing Director, Migrate UK

Jonathan guides industry journals and leading HR titles with insights on immigration trends and rule changes. Jonathan’s research has been published in The Independent and Financial Times, and he represent Migrate UK as an industry specialist with leading global television and radio broadcasters. He also advises government consultants, who have in turn gone on to influence employment policy, and hosts HR seminars, forums for business leaders, and workshops for UK-based businesses.