In April 2024, the UK government implemented significant changes to the salary thresholds for the Skilled Worker visa route. The general salary threshold for these workers increased from £26,200 to £38,700, with additional rises to the various salary concessions, such as for new entrants and PhD holders. This is a major adjustment that also increased the ‘going rates’ for specific occupations, aligning them with the 50th percentile of the Annual Survey of Hours and Earnings, rather than the 25th percentile, as previously done.
While this aims to reflect higher wages and skills demand in the UK economy, it introduces potential legal challenges for employers—particularly around equal pay. Many companies, struggling to meet the new thresholds, are contemplating raising salaries for sponsored workers to retain overseas talent. However, doing so could raise concerns of pay disparity and potential claims under UK’s equal pay laws.
Understanding UK Equal Pay Laws
The UK’s equal pay laws, governed by the Equality Act 2010, are designed to prevent wage discrimination based on gender. Under this legislation, men and women performing equal work are entitled to the same pay. However, this raises a critical question: what happens when sponsored workers’ pay is increased simply to meet the visa salary threshold while their UK counterparts remain on lower salaries for performing the same role?
Equal pay applies to “equal work,” which can be defined in three ways:
- Like work – work that is similar or identical to another person’s.
- Work rated as equivalent – jobs that are different but rated as equivalent under a job evaluation scheme.
- Work of equal value – work that is different but considered equal in terms of the skill, effort, and decision-making required.
If an employer raises salaries for sponsored workers solely to meet visa requirements, this could create pay discrepancies within the organisation, particularly between resident and sponsored employees.
Do the New Salary Thresholds Raise Equal Pay Concerns?
The newly raised salary thresholds could put employers in a difficult position. To comply with the rules, they may have to offer higher salaries to sponsored employees, while resident employees in the same role receive less. While this might appear to open the door to equal pay claims, UK law only allows equal pay claims based on sex discrimination. This means that any claim would need to establish that the pay disparity exists between men and women doing the same work.
But what if equal pay laws are expanded beyond gender? Under a Labour government, which has proposed broadening equal pay laws to include race discrimination, the issue could take on a more complex dimension. Could it become possible for resident workers, particularly those from ethnic minority backgrounds, to challenge the pay disparity between themselves and sponsored workers, arguing that they are being treated less favourably due to their ethnicity?
Employer Defence: The Material Factor Defence
Even if an employee establishes that there is a pay disparity, the employer may be able to invoke the ‘material factor defence’ under UK law. This defence allows employers to justify a difference in pay if it is based on a legitimate reason, such as meeting the salary thresholds required for a Skilled Worker visa. Employers could argue that raising salaries for sponsored workers is necessary to retain crucial talent and that without these skilled workers, the business could suffer. This justification may be sufficient to defend against equal pay claims, provided that the employer can prove the pay increase was a proportionate response to a legitimate business need.
Looking Ahead: Labour Government’s Proposed Reforms
The Labour government has pledged to reform equal pay laws by extending them beyond gender discrimination to cover race and other characteristics. If these reforms are enacted, it could become easier for employees to bring claims based on pay disparities arising from the need to meet visa salary thresholds for sponsored workers. This might lead to an increase in equal pay claims, as employees from ethnic minority backgrounds could argue they are being unfairly treated in comparison to their sponsored colleagues.
What Should Employers Do?
The changes to the Skilled Worker salary thresholds leave employers with difficult decisions to make. They must balance the need to attract and retain overseas talent with the risk of potential equal pay claims. To avoid legal challenges, some employers may opt to raise salaries for all employees performing the same role, rather than just sponsored workers, which could increase payroll costs. Others may consider avoiding sponsorship altogether, which could lead to a shortage of skilled workers in crucial sectors like healthcare and technology.
The situation underscores the importance of seeking legal advice and ensuring that any pay discrepancies can be justified. Employers should also keep an eye on future legislative changes that may further complicate the landscape of equal pay and visa sponsorship.
Get in touch: For a comprehensive understanding of your options or queries on UK immigration matters, contact GigaLegal Solicitors at 02074067654 or click here to book a no-obligation consultation with an immigration expert.