Small businesses relying on overseas talent may need to rethink hiring and retention strategies ahead of planned immigration reforms, according to analysis from Kadmos Immigration.

Proposals from the Home Office would replace the long-standing assumption that migrants can apply for indefinite leave to remain after five years with a more selective, contribution-based system. Under the proposed “earned settlement” model, the standard qualifying period is expected to extend to 10 years, with shorter or longer pathways depending on factors such as earnings, English language ability and wider contribution to UK society.

While public debate has largely focused on the implications for migrants, advisers said the changes also carry significant consequences for employers, particularly smaller firms with limited in-house legal or HR capacity.

Helena Sheizon, an immigration expert at Kadmos Immigration, said many businesses had built workforce plans around the existing five-year pathway. “For SMEs, this is not just an immigration issue. It is a hiring and retention issue,” she said. “If settlement becomes more complex and takes longer, employers may need to think much earlier about how to retain staff and how attractive the UK remains as a long-term destination.”

The reforms could present several challenges for smaller companies, including greater difficulty retaining international employees, increased pressure on salary structures where pay influences immigration outcomes, and higher administrative and compliance demands for sponsors.

The changes come as new requirements are already being introduced. In March 2026, the Home Office raised the English language threshold for settlement applications from GCSE to A-level equivalent, while higher standards had already been applied to most work visa routes earlier in the year.

Advisers said the evolving framework would require employers to take a more proactive approach to workforce planning. “Immigration advice is no longer something to consider only when a visa is about to expire,” Sheizon said. “It needs to form part of broader business strategy.”

The impact is also expected to extend beyond traditional employment. Self-employed migrants, founders and freelancers could face additional uncertainty under a system that places greater emphasis on measurable and consistent income, even where individuals are contributing economically through business creation.

Kadmos Immigration urged businesses to review which employees may be affected, assess whether pay and progression structures need to change, and monitor further updates from the Home Office as the policy develops.

“The direction of travel is clear,” Sheizon said. “Settlement is moving towards a more selective model. For businesses, the risk is not just regulatory but commercial. Those that plan early will be better positioned than those that react late.”