Sponsor Licence Revocation: Annual Salary Compliance Requires a Rounded Assessment, Not a Rigid Monthly Test

1. Introduction

The Court of Appeal held that, where sponsored workers work uneven hours, compliance with an annual salary commitment cannot be determined by mechanically requiring payment of one-twelfth of that salary every month. The Secretary of State must assess the available evidence in the round, including relevant explanations, permitted absences and remedial payments.

The judgment also confirms that grounds described as “mandatory” in sponsor guidance do not extinguish the Secretary of State’s residual discretion. Effective immigration control and strict sponsor duties remain important, but revocation decisions must still be fair, adequately reasoned and consistent with ordinary public law principles.

The appeal concerned Treal Care (UK) Limited, a supplier of care staff to the NHS, local authorities and clinical care groups. The Secretary of State appealed against the Administrative Court’s decision to quash the revocation of its sponsor licence. The Court of Appeal unanimously dismissed the appeal, while correcting two aspects of the first-instance reasoning.

2. Background and Regulatory Framework

The revocation decision

Treal Care obtained an A-rated sponsor licence in December 2021. By 2024, approximately 75 of its roughly 85 employees worked under Certificates of Sponsorship (“CoS”). Following a compliance visit, the Secretary of State suspended the licence in August 2024 and revoked it on 1 October 2024.

The revocation relied on two grounds:

• The salary issue: three sponsored employees allegedly received less than the salary promised in their CoS.
• The genuine vacancy issue: the roles assigned to those employees allegedly did not represent genuine vacancies.

Each relevant CoS specified a gross salary of £22,400 per year. The Administrative Court found that this represented an annual salary based on a 40-hour working week.

During the judicial review proceedings, the Secretary of State abandoned allegations concerning minimum wage compliance, certain earlier payment periods and unexplained deductions. The remaining justification rested on the employees’ hours and pay between May and August 2024. The genuine vacancy allegation was itself entirely dependent on the salary findings.

The Administrative Court quashed the decision in July 2025: [2025] EWHC 1797 (Admin). The Secretary of State appealed only in relation to the salary issue. The sponsor licence remained in place pending the appeal.

The relevant guidance

The sponsorship regime was governed by Workers and Temporary Workers: guidance for sponsors. Its provisions required compliance with applicable immigration salary thresholds, National Minimum Wage legislation and the Working Time Regulations.

Importantly, the Guidance allowed a CoS to state gross salary by reference to an hour, day, week, month or year. It also contained provisions addressing unpaid absences, reduced pay and associated reporting or sponsorship obligations.

Annex C1 contained grounds described as requiring mandatory revocation. Ground (aa) applied where:

“You pay a sponsored worker less than you said you would on the worker’s CoS”

and either the salary change had not been notified or the reduction was not otherwise permitted by the Immigration Rules or sponsor guidance. Ground (z) concerned reasonable grounds for believing that a sponsored role was not genuine.

The central interpretive question was whether an annual salary commitment necessarily imposed an equal minimum payment obligation in every individual month.

3. Summary of the Judgment

Lord Justice Peter Jackson delivered the principal judgment. Lord Justice Green and Lord Justice Fancourt agreed.

The Court of Appeal’s principal conclusions were:

1. No automatic monthly fraction rule: the Guidance did not require a worker with uneven hours to receive at least one-twelfth of an annual CoS salary in every month.
2. A contextual assessment was necessary: the assessment period had to bear a fair relationship to the period specified in the CoS, and the conclusion had to reflect all available information.
3. Monthly scrutiny remained permissible: officials could examine individual months, but could not disregard a wider payment history that changed the apparent picture.
4. Residual discretion survived: the description of a revocation ground as mandatory did not remove all discretion to consider explanations, mitigation or appropriate remedial action.
5. The established errors were material: the admitted underpayment of one employee did not establish that substantially the same outcome was highly likely despite the other defects.

All four appeal grounds failed, leaving the order quashing the revocation decision intact.

4. Legal Reasoning

4.1 The CoS supplied the relevant benchmark

The Court began with the language of the policy. Ground (aa) referred to paying less than the sponsor had promised in the worker’s CoS. Where that promise was expressed annually, the Guidance did not silently convert it into twelve inflexible monthly obligations.

The Secretary of State argued that monthly assessment was the only workable approach for monthly-paid workers. The Court rejected that proposition as an interpretation of the existing Guidance. A worker could work fewer hours in one month and correspondingly more in another without receiving less than the promised annual salary.

The distinction matters: an administrative preference for regular monitoring cannot itself create a substantive obligation absent from the published policy. The protective purposes of sponsorship control did not justify reading additional wording into ground (aa).

4.2 The assessment period remained a matter of administrative judgment

The Court did not require officials to wait until an employee had completed a full year before investigating underpayment. Nor did it prescribe a universal assessment period.

Instead, the Secretary of State retained a broad discretion, subject to ordinary public law standards, to select an appropriate period. That period had to bear a fair relationship to the period stated in the CoS, particularly where hours fluctuated or the employee had not worked for a complete year.

A four-month sample was accepted as appropriate in this case. Individual months could be examined within that sample. The crucial restriction was that the ultimate conclusion could not fairly rest on an isolated month when the wider evidence painted a different picture: paragraphs 49–51 and 57.

This is not permission to conceal sustained underpayment through selective averaging. It is a requirement to assess the actual salary commitment and payment pattern rationally.

4.3 Explanations and remedial payments formed part of the evidence

At paragraph 55, the Court described the normal approach where payment data suggested a shortfall:

1. seek an explanation;
2. where appropriate, provide an opportunity for remedial action;
3. consider that explanation and any remedy alongside the payment data; and
4. reach a rounded, adequately reasoned decision.

This formulation does not create an unconditional right to remedy every breach before revocation. Equally, a later payment does not automatically erase an earlier failure. The point is that relevant explanations and corrective action cannot simply be ignored.

4.4 “Mandatory” did not mean discretion-free

The Secretary of State contended that once an unreported and impermissible underpayment was established, revocation was unavoidable. The Court rejected that position.

A policy cannot lawfully operate so rigidly that it fetters the decision-maker’s discretion. The opportunity for a sponsor to explain or remedy an apparent failure would also have little practical purpose if any mathematical shortfall inevitably required revocation.

The Court identified the consequences of the Secretary of State’s interpretation: licences could have to be revoked for trivial shortfalls, or even where the Secretary of State considered revocation unfair or contrary to the public good. That was not a sensible reading of the Guidance.

The judgment nevertheless preserved the strict character of the sponsorship scheme. Residual discretion is not a general entitlement to leniency. Rather, the policy’s mandatory language does not eliminate the need to consider whether the circumstances justify a different response.

4.5 Broad regulatory discretion remained subject to legal limits

The Court acknowledged the Secretary of State’s expertise, the importance of effective immigration control and the need to protect migrant workers. It nevertheless emphasised that “a broad discretion is not the same thing as a free hand”: paragraph 54.

The court’s role remained supervisory, not a fresh merits assessment of the sponsor’s suitability. However, judicial supervision included determining the policy’s meaning and ensuring that the evidence was addressed fairly and rationally.

4.6 The later Immigration Rules amendment supported, but did not replace, the analysis

Paragraph SW14.3A of Appendix Skilled Worker, introduced with effect from 8 April 2026, expressly recognised working patterns involving uneven weekly hours and pay. For its specified salary-threshold purposes, it permitted averaging over a regular cycle of no more than 17 weeks and addressed unpaid rest weeks.

The amendment post-dated the revocation decision. The Court referred to it as recognition within the wider regulatory framework that uneven pay may require a broader assessment. It did not apply the amendment retrospectively or establish a universal 17-week period for assessing every alleged breach of ground (aa).

5. Application to the Three Employees

Important corrections to the first-instance reasoning

The Court of Appeal did not endorse every part of the Administrative Court’s judgment.

First, it disagreed with the suggestion that Treal Care had committed no act engaging the mandatory revocation framework. Ms L’s underpayment did engage that framework when the decision was made. Her subsequent repayment did not alter that historical fact.

Second, it did not accept that the Secretary of State was necessarily obliged to provide a further opportunity to respond simply because the remaining basis for revocation concerned Ms L alone. That proposition was unnecessary to sustain the result.

The judgment also establishes no numerical tolerance for breaches. The fact that the case concerned three workers among approximately 75 sponsored employees did not itself invalidate revocation. A properly established breach affecting one worker may still be sufficient; the issue is whether the decision is lawfully reached.

6. Precedents Cited and Their Influence

Mandalia v Secretary of State for the Home Department

[2015] UKSC 59; [2016] 4 All ER 189

The Court relied on paragraph 31 for the principle that the meaning of an administrative policy is a question for the court, not its author.

This supplied the foundation for rejecting the proposed monthly fraction rule. Although the Secretary of State possessed operational expertise, that expertise did not make the department’s interpretation legally conclusive. The Court distinguished authoritative judicial interpretation from administrative discretion in applying the correctly interpreted policy.

R (Lumba) v Secretary of State for the Home Department

[2011] UKSC 12; [2012] 1 AC 245

Paragraph 21 supported the established principle against unlawfully fettering discretion through rigid policy application.

Its significance was not that mandatory policies are inherently unlawful. Rather, the Secretary of State could not treat the policy as eliminating every possibility of considering exceptional circumstances. This directly answered the submission that any qualifying underpayment compelled revocation regardless of its explanation or significance.

R (Prestwick Care Ltd) v Secretary of State for the Home Department

[2025] 1 WLR 4671; [2025] EWCA Civ 184

This authority influenced the proceedings in several distinct ways.

• Regulatory latitude: the Secretary of State relied on its recognition of officials’ expertise and the permissibility of a relatively “light trigger” when addressing sponsor breaches. The present judgment accepted the importance of that latitude without allowing it to override policy wording or public law safeguards.
• No compulsory wider-impact assessment: Treal Care abandoned its separate challenge concerning the consequences of revocation for workers, families and care recipients because the earlier decision held that such an assessment was not required when considering mandatory revocation grounds.
• Residual discretion: paragraph 101 confirmed that the Secretary of State could nevertheless consider effects on the company, employees and wider community. That supported rejection of the claim that mandatory grounds removed all discretion.
• Dishonesty implications: paragraph 139 was invoked in connection with the genuine vacancy allegation. This helped explain why the original decision was materially different from one based solely on an isolated salary breach.

The present judgment therefore complements, rather than displaces, that authority: strict sponsor regulation coexists with residual discretion and judicial supervision.

R (Gathercole) v Suffolk County Council

[2020] EWCA Civ 1179; [2021] PTSR 359; [2020] WLR(D) 509

This case was cited concerning section 31(2A) of the Senior Courts Act 1981. It established that the statutory obligation to refuse relief where the required “highly likely” test is satisfied is mandatory and must have meaningful practical consequences.

The Court did not weaken that principle. It held that the particular evidence did not establish the statutory counterfactual necessary to refuse relief.

7. Why Section 31(2A) Did Not Save the Decision

Section 31(2A) requires the High Court to refuse relief where it appears highly likely that the outcome for the applicant would not have been substantially different without the unlawful conduct.

The Secretary of State argued that Ms L’s admitted underpayment independently justified mandatory revocation. On that basis, the errors affecting the other employees supposedly made no substantial difference.

The Court rejected that argument because the lawful counterfactual was materially narrower than the original decision:

• the decision had relied on two mandatory grounds, not merely salary underpayment;
• it concerned three employees, rather than one;
• it implied dishonesty through the genuine vacancy allegation;
• several supporting allegations had subsequently been abandoned; and
• the remaining underpayment involved strong compassionate circumstances relevant to residual discretion.

The decision letter’s assertion that its grounds operated “individually and cumulatively” did not resolve those difficulties. The Court could not conclude that substantially the same outcome was highly likely on the corrected factual and legal basis.

The respondent also identified additional consequences associated with revocation for non-genuine vacancies, including the compelling-evidence requirement on reapplication under paragraph C10.18. The appellate reasoning focused on the changed foundation of the decision and the unresolved exercise of discretion, rather than separately deciding that reapplication issue.

8. Complex Concepts Simplified

Annualised pay

Pay received over a shorter period expressed as an equivalent yearly amount. It can help assess an annual commitment, but the calculation must account for relevant circumstances.

Residual discretion

The remaining ability to consider whether particular circumstances justify departing from the policy’s usual outcome.

Fettering discretion

Treating a policy as an inflexible command that prevents genuine consideration of circumstances warranting a different response.

Irrationality and inadequate reasons

A decision may be unlawful where its conclusion does not rationally follow from the evidence, or where its reasons fail to explain material calculations or address significant explanations.

Quashing

Setting aside an unlawful administrative decision. It does not itself establish permanent compliance or prevent a fresh, lawfully reasoned decision.

The section 31(2A) counterfactual

The court asks what would probably have happened without the identified legal errors, and whether a substantially unchanged outcome was highly likely.

9. Practical Impact and Limits

For sponsors, the judgment makes coherent evidence essential. Rotas, leave records, payroll explanations and the timing of corrective payments may determine whether an apparent shortfall reflects genuine underpayment or a misleading snapshot.

It does not remove reporting duties. The respondent accepted that contemporaneous reports had not been made, but this appeal concerned the salary-based mandatory ground, not a separate revocation case for reporting failures under Annex C2 ground (a). Nor does the decision permit unrestricted unpaid leave or routine postponement of wages until year-end.

For the Home Office, monthly monitoring remains legitimate. Decision letters must nevertheless connect the chosen assessment period to the CoS commitment, explain calculations and address material evidence. Describing a ground as mandatory cannot substitute for consideration of residual discretion.

For future litigation, the judgment distinguishes three questions: whether a breach occurred, whether the response to that breach was lawful, and whether any established error warrants relief. Those questions should not be collapsed into an assumption that one proven shortfall inevitably validates the entire original decision.

Its broader significance lies in its insistence that strict regulatory schemes remain governed by published policy, rational assessment and fair decision-making. The Court’s reference to a structured and proportionate approach describes that contextual discipline; it should not be treated as establishing an unrestricted merits appeal against sponsor revocation.

10. Conclusion

The judgment rejects a mechanical equation between an annual salary commitment and identical minimum monthly payments for workers with uneven hours. Compliance requires a fair assessment period and consideration of the full payment history, explanations and relevant corrective action.

It also confirms that mandatory revocation grounds retain room for lawful discretion. The resulting balance is firm but contextual: sponsor obligations remain demanding, while revocation must rest on accurate evidence, adequate reasons and a genuine assessment of the circumstances.