On 1 October significant changes to the UK’s illegal working regime came into force, affecting businesses that use subcontractors, agency workers and other flexible labour arrangements.
The new regime expands the definition of a ‘worker’ for right-to-work purposes and could affect a wide range of business arrangements and supply chains.
Right-to-work liabilities will move beyond traditional employer-employee relationships and extend through certain labour supply chains.
The reforms represent one of the most significant expansions of the right-to-work regime since its introduction in 1997. Historically, illegal working penalties were largely associated with direct employment relationships. However, immigration compliance obligations will now increasingly interact with commercial contracting, procurement and supply chain management, requiring organisations to look beyond their own workforce and consider how labour is sourced throughout the wider business.
The government continues to publish updated guidance to clarify business obligations. What follows here is what the government has published at the time of writing. Regrettably, further updates are likely.
From this month, if an illegal worker is identified in a business’s supply chain, the business could be held liable even if it does not directly employ or engage the illegal worker.
Under the new rules, organisations must ensure – through updated contracts with relevant third-party suppliers and other measures – that right-to-work checks have been undertaken on all workers who fall within the new arrangements.
Organisations that use in-scope subcontractors, online matching services and contracts that permit substitution will need proportionate systems to periodically verify workers’ identities, such as identity cards, workplace passes, facial recognition technology or biometric attendance systems.
The government has said the extended provisions do not apply retrospectively. At the time of writing, it is still not entirely clear whether in-scope contractual arrangements entered into before 1 October, but which have workers commencing work under those arrangements from 1 October, will be caught by these changes.
Affected organisations should nonetheless review procurement processes, HR systems and supplier relationships. It should not be assumed that longstanding arrangements are compliant simply because they have operated without issue in the past. Existing supplier relationships, framework agreements and subcontracting arrangements may need reviewing to determine whether they fall within scope and whether additional protections are required. Businesses would benefit from holistic legal advice from immigration and employment lawyers.
This is not simply another HR requirement – it is a board-level risk and compliance matter. Businesses that fail to follow the rules could face fines of up to £60,000 for each illegal worker identified in their supply chain. They may be held criminally liable if they knew or had reasonable cause to believe that a worker did not have the right to work. That could lead to an unlimited fine and a prison sentence of up to five years.
For businesses that hold a sponsor licence and rely on sponsored workers, the risks may be even greater. A Home Office investigation which identifies failures in right-to-work compliance or contractual oversight could ultimately result in sponsor licence revocation.
The changes reflect the Home Office’s increasingly robust approach to immigration compliance. Businesses are expected to demonstrate effective governance, oversight and record-keeping across their operations.
Individuals who are genuinely self-employed and operating a business in their own right will generally be exempt from the new rules, such as an IT consultant engaged through their own company to deliver a specific project.
Consumers purchasing a completed service for their own benefit will also fall outside the regime, as will businesses purchasing work or services for their own internal operations. While the Home Office has published guidance and illustrative examples, organisations operating complex contractor, consultancy or platform-based models may still need specialist advice to determine whether particular arrangements fall within scope and what compliance measures are required.
Procurement, legal, contract management and leadership teams should now assess whether commercial arrangements will be affected and what changes are required before the new regime comes into force. Businesses should urgently map their workforce arrangements to identify which existing and future workers may fall within the scope of the new regime.
Where required, existing contracts with suppliers and contractors should be reviewed and amended, with appropriate legal advice, to clearly allocate responsibility for carrying out right-to-work checks, retaining evidence of compliance and providing information to the Home Office on request.
HR teams, managers, operations and procurement staff will be at the forefront of these changes. They will require training to understand what they must do differently to protect the business – from updating onboarding systems to identify workers within the scope of the new regime, to revising right-to-work policies and implementing identity verification measures where required.
Although attention has understandably focused on the substantial financial penalties for non-compliance, the reforms’ wider significance is the shift in responsibility they represent. Immigration compliance is no longer solely an employment issue; it could now also impact commercial decision-making.
Natasha Chell is senior partner and head of UK practice, Laura Devine Immigration
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