Although the UK left the EU on 31 January 2020, the rules relating to EU membership including ‘free movement of workers’ have continued to apply under the transition period. This ended on 31st December 2020. After this date, EU Nationals who were resident in the UK before 31 December 2020 can continue to work in the UK provided they apply for settled or pre settled status before 30 June 2021. However, employers will need a sponsorship licence to employ EU Nationals who come to the UK after 31 December 2020. Details are set out below.

EU Settlement Scheme

EU Nationals who were resident in the UK before 31 December 2020 and who wish to remain in the UK after the transition period need to apply for settled or pre-settled status before 30 June 2021. Those who have been resident continuously for five years will be granted settled status. Those who have been resident for less than five years will be granted pre-settled status and will be eligible for settled status once they reach five years.

Settled or pre-settled status entitles EU Nationals to live and work permanently in the UK and access to benefits.

The application is a relatively simple process via a mobile app and is free of charge.

The Scheme does not apply to Irish Nationals who have the right to live and work in the UK without restriction.

Sponsorship Licence Scheme

From 1 January 2021, if employers wish to employ non-EU Nationals who are not eligible for settled or pre-settled status, then they will need to employ them under the Sponsorship Licence Scheme. This was required previously to employ non-EU Nationals. After 1 January 2021, EU and non EU Nationals will be treated equally.

However, the Sponsorship Licence Scheme is only available to employ skilled workers under the new Skilled Worker route with minimum salary levels and other criteria. It does not apply to low paid workers.

The government has made various changes to the new Sponsorship Licence scheme which has reduced some of the more onerous requirements which previously applied.

The main changes are as follows:

  • The minimum skill threshold is being lowered from graduate occupation to occupation roughly equivalent to A level.
  • The general salary threshold is being lowered from £30k to £25,600 per year. Sponsors must pay their skilled workers a salary which equals or exceeds this threshold and the ‘going rate’ for the occupation, whichever is higher.
  • It is possible to pay Applicants less than the minimum salary or going rate for the job if they qualify for enough other ‘tradable points’. For example by holding a Phd in a relevant subject to the role or performing a shortage occupation role.
  • The cap which applies under Tier 2 (general) is being suspended meaning that there is no limit on the number of individuals that can obtain a Skilled Worker visa.
  • There will no longer be a requirement for sponsors to undertake a resident labour market test. However, employers may be required to satisfy the Home Office that the recruitment process is genuine.
  • The £35,800 salary threshold for settlement applications (permanent residence) is being removed. Instead, sponsors must be paying their skilled workers a salary which equals or exceeds £25,600 per year and the going rate for the occupation.

Various other schemes exist for shortage occupations, health and care workers and seasonal workers which would also be relevant for EU Nationals.

Applying for a sponsorship licence and Fees

If an employer already has a sponsorship licence this can be used under the new Skilled Worker Scheme. Employers who do not have a licence and intend to employ non-UK nationals will need to apply for a sponsorship licence from the Home Office and will need to satisfy the Home Office that the company is financially viable together with various other requirements.

Different rates apply for sponsorship fees depending on whether the company is large or small (less than 50 employees) and/or a charity. In addition to the Sponsorship Licence application fees (£1476/364), employers also have to pay a Skills Charge (£1000/364 per year) and £199 for each certificate of sponsorship. There is also a health surcharge for each sponsored employee (£624 per year) and employee visa application fees, usually paid by the employer are between £610 to £1,408 depending on the length of visa.

There are some exemptions and reduced fees for certain categories including shortage occupations.


Any current EU employees who have not yet applied under the EU Settlement Scheme should be encouraged to do so and there would then be no restriction to employing these individuals long term from June 2021.

Whilst the new Sponsorship Licence scheme is an improvement from the current scheme and less restrictive, it remains unnecessarily complicated and expensive. Any employer who is likely to employ non-UK Nationals in 2021 and does not have a sponsorship licence should start the application process now to avoid delays.

Disclaimer – This update is intended to provide readers with information on recent legal developments. It should not be construed as legal advice or guidance on a particular matter.

For more information, please contact: