If you hold a sponsor licence, the way the Home Office assesses salary compliance has changed in a way that catches many HR departments off guard. It is no longer sufficient to demonstrate that a sponsored worker’s annual pay averages out correctly across the year. The rules now require the correct salary to be paid in every individual pay period – and a single shortfall, however brief, constitutes a reportable compliance breach.
What the Anti-Averaging Rule Actually Requires
The rule is codified in paragraph SW 14.3B of Appendix Skilled Worker and reinforced in the April 2026 sponsor guidance at paragraphs SK7.9 and SK7.10. SK7.9 states that you must pay the worker at least the applicable salary threshold in each pay period. SK7.10 is unambiguous: you cannot average the worker’s salary over a period of time to demonstrate compliance.
In practical terms, the rolling reference windows work as follows:
- Monthly or less frequent payment: the gross salary paid over any three-month period must equal at least one quarter of the required annual salary.
- Weekly or fortnightly payment: the salary over any 12-week period must equal at least 12/52 of the required annual salary.
- Variable hours: the salary over any 17-week reference period must equal at least 17/52 of the required annual salary.
What this rules out is a common payroll pattern: compensating for a lean month – perhaps reduced hours, an unpaid training period, or a delayed commission payment – by paying more the following month. Each rolling window is assessed independently. A compensating payment in month two does not remedy a shortfall in month one.
How UKVI Is Now Checking Your Payroll in 2026
From April 2026, the Home Office gained systematic access to HMRC payroll and earnings data. Discrepancies between the salary stated on a Certificate of Sponsorship and what PAYE records show are now flagged automatically – without a compliance officer needing to visit your premises. UKVI is also deploying AI-driven analytics to cross-reference immigration records with earnings data, which means the first indication of a problem may be a compliance notice rather than a visit you have time to prepare for.
The enforcement statistics reflect how sharply activity has increased. Compliance visits rose 51% in 2025 compared with the previous year. Licence revocations reached 1,948 between July 2024 and June 2025, and by the end of 2025 approximately 3,000 licences had been revoked – nearly ten times the number revoked in 2023. Administrative errors that might previously have passed without consequence – incorrect PAYE codes, unreported absences, or a missed salary update on the SMS – are now sufficient to trigger scrutiny.
What Counts as a Breach – and What Does Not
A breach occurs when the gross salary paid in a relevant pay period falls below the salary threshold associated with the worker’s Certificate of Sponsorship. The duration of the shortfall does not affect whether it constitutes a breach. Neither does the annual total appearing correct on paper. UKVI checks whether each rolling reference window meets the required threshold on its own terms.
There is an important distinction around what constitutes "salary" for these purposes. Only guaranteed basic gross pay should be included in the salary section of the CoS. Guaranteed shift allowances, pension contributions, accommodation supplements, and cost-of-living payments are excluded from the calculation – unless you hold a legacy Tier 2 (General) licence and the worker was granted permission before the rule change, in which case transitional arrangements apply until December 2026.
Deductions that reduce a worker’s net pay do not automatically constitute a breach, provided the gross salary remains at or above the CoS figure. However, any reduction in gross pay that takes the worker below the CoS threshold – even temporarily – is a compliance failure, not a technical footnote.
SMS Reporting Duties When Salary Changes
We advise HR managers to treat the Sponsor Management System as a live compliance document, not an annual housekeeping task. Under the current rules, the following must be reported promptly:
- Unauthorised absence: if a sponsored worker is absent without permission for more than 10 consecutive working days, report this within 10 working days of the tenth day of absence. The report must state whether salary deductions are being made and whether you intend to continue sponsoring the worker.
- Salary reduction: any reduction in the worker’s gross salary below the CoS figure must be reported. Do not wait for the next scheduled HR review.
- Role or working pattern changes: changes that affect the conditions of the CoS – including location, hours, or job description – must be reported through the SMS. In limited circumstances, a sponsor change of circumstances form is required instead.
Failing to report promptly – even where the underlying issue later resolves itself – is treated as a breach of your sponsor duties. It can result in your licence being downgraded from an A-rating to a B-rating, which carries its own reporting and cost obligations, and in serious cases can lead to suspension or revocation.
Practical Steps to Protect Your Licence
At Morgan Smith Immigration, we recommend that HR managers and authorising officers build the following checks into their payroll cycle:
- Run a per-period reconciliation before payroll is finalised. Compare each sponsored worker’s gross pay for the current period against the CoS salary divided by payment frequency. Flag any shortfall before it becomes a breach.
- Audit historical payslips going back at least 12 months. Identify any periods where pay fell below the CoS figure. Where gaps exist, take legal advice on whether a voluntary disclosure to the Home Office is appropriate before HMRC data surfacing the same issue does it for you.
- Update CoS records before implementing pay changes. Where a worker receives a pay rise or their terms change, update the sponsorship record to reflect the new position. Do not wait for an annual appraisal cycle.
- Integrate SMS reporting into your payroll calendar. Treat reporting deadlines as payroll obligations, not separate compliance tasks. A late report carries the same weight as a missed one.
The Home Office has made it clear through both updated guidance and enforcement activity that the anti-averaging rule is a substantive compliance requirement, not a procedural formality. UKVI can now verify salary compliance against HMRC data without setting foot in your building. For sponsor licence holders, the practical question is not whether your annual payroll total looks right – it is whether every rolling pay period meets the threshold independently.
