Key Terms Employers Must Know Before Applying for aLicence sets the stage for understanding the complex language of UK immigration compliance. In this sponsor licence terminology guide, employers preparing to hire international talent must become familiar with more than just forms and fees—they need to be fluent in the key terms that underpin every stage of sponsorship. From understanding the difference between Defined and Undefined Certificates of Sponsorship (CoS) to recognising what action plans, Level 1 and Level 2 users, and the Immigration Skills Charge (ISC) truly mean in practice, mastering these concepts is the first step towards a confident, compliant application process.
Core Terminology Every Employer Should Know
1. Sponsor Licence (or Sponsorship Licence)
A sponsor licence is an authorisation granted by UK Visas & Immigration (UKVI) that allows an employer to legally employ overseas nationals under eligible work visa routes. Without a licence, you cannot issue Certificates of Sponsorship (CoS).
Licences may cover Worker routes, Temporary Worker routes, or both.
2. Certificate of Sponsorship (CoS)
A Certificate of Sponsorship is a virtual document (record in the system) that an employer assigns to a prospective migrant to enable their visa application.
However, not all CoS are the same. Two main types apply:
- Defined CoS
- Used when a worker is applying from outside the UK (entry clearance) under the Skilled Worker route.
- The employer must request each defined CoS from UKVI via the Sponsorship Management System (SMS); they are not automatically available.
- The licence must be A-rated to assign a defined CoS.
- Undefined CoS
- Used for workers inside the UK who are switching visas or extending under certain routes.
- Employers allocate a pool of undefined CoS when applying for the licence (estimating how many will be needed in the first year).
- They do not require individual requests to UKVI—once allocated, they are available to assign via SMS.
Understanding the distinction is vital: assigning the wrong type (or lacking enough undefined CoS) can lead to refusals or non-compliance.
3. Plan (or Formal Action Plan)
In cases where a sponsor is found to have compliance deficiencies, UKVI may issue an action plan. This plan outlines specific corrective steps the sponsor must take within a timeline to remedy breaches.
If a sponsor fails to meet the action plan, they risk downgrading, suspension, or revocation of their licence.
4. Ratings: A-Rating / B-Rating
Once granted, a sponsor licence is assigned a rating:
- A-rating: indicates full compliance and that the sponsor is in good standing.
- B-rating: suggests concerns or compliance issues; B-rated sponsors may be limited in their CoS allocation and face closer scrutiny.
Sponsors with a B-rating often must submit proactive evidence to regain A-status or avoid sanctions via action plans.
5. Sponsorship Management System (SMS) & User Levels
The SMS is the online platform used by licensed sponsors to manage CoS issuance, reporting duties, and communication with UKVI.
Within SMS, users are assigned levels with different permissions:
- Level 1 users: have full control over sponsorship tasks (issuing CoS, reporting changes, adding users).
- Level 2 users: have more limited permissions; they may perform fewer tasks and require oversight by level 1 users.
Understanding which user level handles which task is essential to maintain compliance and avoid internal permission errors.
6. Immigration Skills Charge (ISC)
The Immigration Skills Charge is a levy that employers must generally pay when they assign a CoS to a Skilled Worker or Senior/Specialist Worker.
- How much?
Amount depends on organisation size and CoS duration (e.g. small/charitable sponsors pay lower rates). - When payable?
The ISC is a fee paid when a CoS is assigned. - Exemptions
Some job codes and certain categories (e.g. researchers, higher education teaching roles) are exempt from ISC.
Sponsors must not pass the ISC cost to the migrant worker. Doing so is considered a breach and may lead to licence revocation.
Other Common Terms
| Term | Meaning / Relevance | Why It Matters? |
| Key Personnel / Authorising Officer / Key Contact / HR / Nominated Officer | These are the roles individuals in your organisation take to manage sponsor licence duties. | UKVI checks “key personnel” for honesty, reliability, and appropriate assignment. |
| CoS Allocation | The number of undefined CoS a sponsor requests for the first year. | Underestimating may limit your ability to assign CoS later. |
| Reporting Duties | Requirements to report events (e.g. employee ceasing work, salary change) within SMS. | Non-reporting is a common compliance breach. |
| Downgrade / Suspension / Revocation | Actions UKVI may take if the sponsor does not maintain compliance. | These put your licence (and ability to sponsor workers) at serious risk. |
| Premium / Priority Services | Optional faster processing routes (e.g. for licence decision or CoS allocation). | Must be handled carefully and comply with UKVI rules. |
Practical Examples
Example A: Defined vs Undefined CoS in Use
Imagine your company hires a software engineer from India who will apply for a Skilled Worker visa from abroad. You must obtain a defined CoS for them and request it via SMS to the Home Office before you can assign it.
Simultaneously, a developer already in the UK on a different visa wants to switch to Skilled Worker status. In that case, you use an undefined CoS from your pre-allocated pool.
If you run out of undefined CoS mid-year, you may face a delay or inability to sponsor future in-UK switches.
Example B: ISC Calculation and Responsibility
You assign a CoS to a migrant for 18 months under the Skilled Worker route. If you are a “large” sponsor, your ISC cost might be £1,000 for the first 12 months, then £500 for the additional 6 months.
You cannot charge the worker for that ISC — doing so risks licence revocation.
If later you find the worker is exempt (due to their job code), you may apply for a refund or adjustment.
Example C: Action Plan Trigger and Response
Suppose during a compliance audit, UKVI finds you missed reporting a worker’s change in role, and you have lax record-keeping. They issue you an action plan. You must respond and implement the plan within the specified timeframe (often weeks).
Failure to remedy may lead to downgrade, suspension, or revocation of your licence.
Tips for Employers Before You Apply
- Build your internal glossary
Ensure HR, legal, payroll, and IT staff understand these terms, especially who is Level 1 vs Level 2, and action plan responsibilities. - Forecast the undefined CoS needs carefully
Underestimating may disrupt your pipeline of internal switches. - Classify roles correctly against ISC exemptions
Misclassifying a researcher or academic may cost you unnecessarily. - Map responsibilities to key personnel
Assign duties clearly (e.g. Authorising Officer, Key Contact, Level 1 user). Ensure continuity in case of staff changes. - Maintain robust documentation systems
Have logs, audit trails, and reports ready for UKVI inspections or action plan reviews. - Budget for fees and ISC in advance
Licence fees, CoS fees, and ISC can add up, especially in scaling organisations. - Review usage of premium/priority services
Use only when justified and within allowable rules. Be cautious about recouping costs from workers. - Plan for compliance audits
Prepare a mock internal audit to test your understanding of reporting duties, CoS usage, and compliance obligations.
Final Thoughts!
Before applying for a sponsor licence, mastering the language around sponsorship is essential. A clear understanding of these key terms builds confidence, reduces costly errors, and ensures your organisation can meet its compliance duties from day one. For ongoing guidance, expert breakdowns, and the latest updates in UK sponsorship, follow Sponsor Licence Hub — your trusted source for everything employers need to navigate the sponsor licence system successfully.
