In April 2024, the UK government significantly increased salary thresholds for the Skilled Worker visa route. The general threshold jumped from £26,200 to £38,700, alongside increases for other categories like new entrants and PhD holders. Now, applicants need higher-than-average salaries to qualify for skilled worker sponsorship, putting pressure on businesses to raise wages for sponsored workers.
But this raises a key question: Does this create an equal pay issue?
💼 Equal Pay Laws in the UK
Under the Equality Act 2010, equal pay laws in the UK focus on ensuring that workers of different sexes receive the same pay for doing equal work. However, equal pay doesn’t just mean identical roles—it could also apply if the jobs are rated as equivalent or are of equal value in terms of effort, skills, and job demands.
If a company decides to increase the salaries of sponsored workers while keeping pay for resident workers the same, could this lead to potential claims under UK equal pay law?
📈 What’s the Risk for Employers?
While raising salaries for sponsored workers might be necessary to meet visa requirements, employers may face challenges. Resident employees doing the same job at lower pay might wonder if this violates equal pay principles. However, under current laws, a successful equal pay claim would require the employee to prove that the pay difference is due to sex, which could be difficult if the increase is solely to meet immigration thresholds.
Employers could use a ‘material factor defence’, arguing that the pay difference is a proportionate response to a legitimate business need, such as retaining key international talent.
⚖️ Potential Changes Under a Labour Government
The Labour government has indicated it may broaden equal pay protections to include race discrimination. This could make things more complicated for employers if salary differences between sponsored overseas workers and resident employees are perceived as discriminatory.
A race-based equal pay claim would be harder to establish, as the resident workforce often includes diverse ethnicities. However, the mere risk of such claims—combined with the costs of defending them—might make businesses wary of sponsoring overseas talent altogether.
💡 What Should Employers Do?
Employers now face tough choices:
• Raise wages for all employees in a role to avoid pay disparity.
• Justify pay differences for sponsored workers to retain essential skills, risking potential legal claims.
• Opt out of sponsorship altogether, which could harm their business by losing access to global talent.
With equal pay claims potentially on the rise and the new salary thresholds here to stay, businesses will need to stay informed and consider their next steps carefully.