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Sponsor Licence update: Key changes HR teams need to know and what to do about them

The Home Office has introduced several important changes to the Sponsor Management System (SMS) and sponsor compliance framework. Whilst many of the updates are designed to strengthen security, HR teams should take action now to ensure their sponsor licence remains compliant and that key personnel retain uninterrupted access to the SMS.

Mandatory Multi-Factor Authentication (MFA)

From 3 September 2026, MFA will begin to be introduced for Worker and Temporary Worker sponsors. MFA will require SMS users to enter a one-time passcode in addition to their username and password each time they log in. The passcode can be received via mobile phone or email.

Therefore, HR teams should review their SMS records now and ensure that:

•  Email addresses for all key personnel are up to date

•  Mobile telephone numbers for Level 1 Users are correct

•  Dates of birth recorded for Level 1 Users are accurate

•  All Level 1 Users can access the contact details registered on the system

Failure to maintain accurate contact information could result in difficulties accessing the SMS once MFA is activated.

Inactive SMS accounts may be removed

The Home Office has confirmed that it intends to deactivate inactive SMS user accounts. Sponsors are expected to review their user population and ensure details remain current. Organisations should therefore carry out an audit of their SMS users and check that:

•  Former employees no longer have access

•  Current users still require their existing permissions

•  Key personnel details remain accurate

Regular housekeeping has always been good practice, but these changes make it increasingly important from a compliance perspective.

Level 2 Users are being phased out

From 9 September 2026, sponsors will no longer be able to appoint new Level 2 Users. Existing Level 2 Users must either be upgraded to Level 1 User status (where eligible) or removed from the licence by 8 March 2027.  Employers should identify all current Level 2 Users and determine:

•  Whether they need ongoing SMS access

•  Whether they meet the requirements to become a Level 1 User

•  Whether alternative internal processes will be required if access is removed

Leaving this exercise until early 2027 may create unnecessary disruption, particularly for organisations with multiple users and complex sponsorship activity.

New Licence activity notifications

The Home Office is also introducing enhanced oversight for Authorising Officers. From 9 September 2026, Authorising Officers will receive email notifications when key changes are made to a sponsor licence. These notifications include:

•  Changes to Level 1 User details

•  Addition of new Level 1 Users

•  Changes to the Authorising Officer's email address

For many sponsors, the Authorising Officer will also receive notifications regarding Certificate of Sponsorship (CoS) assignments.

This is likely to increase accountability and make it easier to identify unauthorised activity on sponsor accounts.

Cyber security remains a priority

The Home Office has emphasised that sponsors should only access SMS through the GOV.UK website and remain alert to phishing attempts. Sponsors should never disclose passwords, one-time passcodes or other login credentials outside the SMS platform.

Key takeaway for HRDs

These changes represent the most significant update to SMS user management and security in recent years. The immediate priority for HR teams should be to review SMS users, verify contact details and plan for the removal of the Level 2 User role. Taking proactive steps now will help ensure uninterrupted access to the system and reduce the risk of compliance issues when the new requirements take effect.

We, of course, can assist with such audit and actions, so please do reach out to our Immigration team if support or advice is needed on this or any other immigration matter.

Government consults on revised tipping Code: what employers need to know

Background

On 19 August 2026, the Government launched a further consultation on a draft revised statutory Code of Practice on the Fair and Transparent Distribution of Tips.

The current regime, in force since 1 October 2024, requires employers to pass on qualifying tips without deductions, except those required by law. It also requires a written policy where tips are paid at, or are attributable to, a place of business on more than an occasional and exceptional basis.

What is changing?

The main change is a new requirement, introduced by the Employment Rights Act 2025, for employers to consult workers at their place of business when developing or reviewing written tipping policies. The draft revised Code says employers should consult recognised trade union representatives, worker representatives, or workers directly where no representatives are in place. Where a policy is reviewed, that review should take place at least every three years.

Consultation should be genuine, carried out in good faith and proportionate to the size and nature of the business. Workers should be given enough information and time to comment, employers should be able to show those views were taken into account, and an anonymised summary of workers’ views should be made available following a policy review.

Fairness remains central. The draft revised Code gives stronger guidance on which workers should generally be regarded as involved in providing the relevant service. This may include both customer-facing workers and those involved in preparing, handling or serving the relevant food, drink, hospitality or experience, depending on the circumstances.

Employers should also be cautious about arrangements that guarantee a fixed or minimum share of tips to particular individuals or groups, as the draft revised Code discourages arrangements that could unfairly affect other workers. Employers should consider the fairness of the tipping scheme as a whole, rather than focusing only on isolated examples.

The draft revised Code also highlights equal pay considerations when selecting factors for allocating tips, and makes clear that employers should not simply re-label service charges to avoid the tipping legislation. It also encourages, but does not require, employers to make tipping policies available to customers.

Key practical points

Employers should now check:

The consultation closes at 11:59pm on 29 September 2026. Subject to Parliamentary approval, the revised Code and the new consultation duties are expected to come into force later in 2026. For most employers, this is likely to be about tightening process rather than necessarily redesigning tipping arrangements. The key point is to be able to show that the policy is fair, has been properly consulted on and is supported by a clear paper trail.

Acas draft Code of Practice on disciplinary and grievance procedures: Proposed changes to watch

Acas has published a draft Code of Practice for public consultation. This is the first full rewrite of the Code since 2009, so employers may wish to familiarise themselves with the proposed changes and consider responding to the consultation.

The Acas Code of Practice sets out the basic standards of fairness that employers should follow when handling disciplinary and grievance matters. Employment tribunals can increase compensation by up to 25% where an employer has unreasonably failed to comply with the Code.

This article will summarise the key changes to the Code that employers should be aware of.

The proposed changes

Informal resolution

It has always been best practice to address concerns about misconduct or unsatisfactory performance informally before instigating any formal procedure. This is intended to support early resolution, avoid lengthy disciplinary or performance procedures and maintain positive relationships with employees. Somewhat paradoxically, Acas has included this informal stage in its draft Code of Practice. If it is included in the final Code, employers who fail to engage in this step may face a 25% uplift to compensation in any successful unfair dismissal claim.

Notably, the draft Code acknowledges that informal approaches may not be appropriate in every situation, such as gross misconduct or 'other serious issues', providing employers with a degree of flexibility depending on the circumstances.

Suspension

Suspension was previously often described as a neutral act. However, courts and tribunals have repeatedly emphasised that suspension is not neutral and should only be considered where it is genuinely necessary. Acas’ draft Code introduces a new necessity test for suspension, effectively codifying this position.

The Code suggests that suspension should only be considered where it is necessary to comply with a legal requirement, or where an employer reasonably believes that it would protect the investigation, the organisation, other staff, or the individual under investigation. Suspension should therefore only be used in limited circumstances.

Terminology

The draft Code has replaced references to 'employee' with 'worker' throughout. This broadens the terminology used in the Code and suggests that its principles may be relevant to a wider range of workplace relationships. However, the statutory power to increase compensation by up to 25% under the Trade Union and Labour Relations (Consolidation) Act 1992 remains limited to procedures concerning employees, rather than workers more generally.

New sections

The draft Code also includes new sections that are not in the current Code, including guidance on making reasonable adjustments for workers with a disability, the importance of manager training in handling workplace concerns, and the use of mediation or facilitated conversations for some issues.

Takeaways for employers

The draft Code is still under consultation, which remains open until 23 September 2026. For now, employers should continue to follow the current Code of Practice.

Employers should familiarise themselves with the proposed changes and consider whether to respond to the consultation. If you have any questions about disciplinary and grievance procedures, please contact a member of our Employment Team at Michelmores.

Q: Can we discipline an employee for breaching our dress code?

A: Yes, so long as the dress code is reasonable, proportionate and clearly communicated to employees. However, before taking action for non-compliance, employers should consider whether the requirement could adversely affect employees because of disability, religion or belief, sex, gender reassignment or another protected characteristic.