Right to work checks move into the supply chain: implications for commercial contracts following the draft Employer’s guide

The Home Office's Draft Employer's guide to right to work checks, due to come into force on 1 October 2026 (the guidance), significantly expands the UK's right to work regime. Reflecting provisions introduced by the Border Security, Asylum and Immigration Act 2025, it extends right to work obligations to a broader range of working arrangements and explains the operation of new extended liability provisions. While there will be an overhaul of employment/immigration laws, the most significant impact may be on commercial contracts. Businesses that rely on outsourcing, managed services, staffing agencies, contractors or subcontractors will need to revisit how immigration compliance responsibilities and risks are allocated through their contractual arrangements. As with anti-bribery, sanctions, anti-tax evasion and modern slavery compliance, customers are increasingly expecting suppliers not only to comply with legal obligations themselves but also to demonstrate robust controls across their workforce supply chains. The consequences of getting it wrong are substantial; civil penalties can reach £45,000 per worker for a first breach and £60,000 per worker for a repeat breach. We examine some of the key changes and implications of the guidance on commercial contracts below.

Definition expansion

The objective of the new regime appears to be to address gaps where labour is supplied through complex contractual chains rather than traditional employment structures. While the final scope of the legislation will depend on the finalised guidance and accompanying Codes of Practice, businesses can no longer assume that immigration compliance is solely an issue for direct employers. For right to work purposes, the legislation captures a broader range of arrangements than traditional employment relationships, including certain worker, subcontracting and online matching service models. In these circumstances, an “employer” can establish a statutory excuse by carrying out a prescribed right to work check on the person carrying out the work, before the work starts.

Extended liability

The guidance signals a significant broadening of liability beyond direct employment relationships through the introduction of a new section entitled "Application to non-direct contractual arrangements: Extended liability". Extended liability now applies where:

• A person is under a contract to provide work or services to a third party and enters into a contract with another employer providing workers to fulfil that contract
• An online matching service provides details of a service provider to clients or customers, and the service provider enters into a contract with a client or customer, or
• An employer employs an individual to provide work or services, and the contractual arrangements allow the individual to substitute their work or services to another individual.

This extended liability regime operates to catch instances where the employer cannot be identified, or where the prescribed requirements in the guidance are not met. Importantly, where the Home Office cannot identify a direct employer, in scope businesses may be liable for a civil penalty unless a statutory excuse is established. 

Statutory excuse 

Any person seeking to establish a statutory excuse against liability for payment of a civil penalty must comply with the prescribed requirements relevant to the contractual arrangements before the work commences and be able to provide evidence of that compliance if requested.

Two scenarios are dealt with in the guidance. The first, applies to where there is subcontracting delivery of services, or where the business operates an online matching service. A written statement must be in place before the work or service commences. The statement, which in practice will need to be baked into (as boilerplate terms) the contractual relationship, needs to cover the following: 

1. Require prescribed right to work checks on individuals performing the relevant work or services.
2. Prevent further subcontracting without prior written consent and require equivalent right to work obligations to be flowed down into any permitted subcontracting.
3. Permit the conduct of audits of the employer or service provider.
4. Allow enforcement action, including suspension or termination, where illegal working is identified and no statutory excuse exists.
5. Require co-operation with Home Office investigations relating to illegal working by providing prescribed information.

The second scenario where a contractual relationship between an employer and a worker permits substitution, the employer will only establish a statutory excuse against extended liability for payment of a civil penalty where they have implemented, before the work or service commences, processes that ensure that:

• A prescribed right to work check is carried out on any substitute.
• Responsibility for the check is not delegated to the worker.
• The substitute does not start work before their right to work is verified.
• The worker and any registered substitute are the same individuals in respect of whom checks have been carried out.

The Home Office will consider whether substitution processes were implemented and maintained in a “reasonable and proportionate manner”, including where “there is evidence that the substitution controls do not reflect how the working arrangements operate in practice”.

Exclusions

The guidance provides examples of contractual arrangements that are not in scope. Businesses that purchase services or workers for their own operations, supply finished goods rather than providing work or services, or provide technology or ordering services only without engaging the underlying workforce will generally not be caught by the regime. Using a personal service company or describing an individual as “self-employed” is not conclusive and is subject to examination of the practical reality of the arrangement.

Why this matters for commercial contracts

The practical reality is that contractual provisions will become one of the primary methods of allocating and managing risk under the expanded regime. Many existing agreements rely on standard wording requiring compliance with applicable laws; those provisions may no longer provide sufficient protection. Customers are therefore likely to seek express obligations requiring suppliers to:

• Carry out compliant right to work checks.
• Maintain appropriate records and evidence.
• Comply with Home Office guidance and Codes of Practice.
• Notify customers of compliance failures.
• Allow auditing and maintain suitable policies and procedures.

Suppliers may increasingly be required to ensure that equivalent right to work commitments are imposed on subcontractors, labour providers and other organisations further down the supply chain. Warranties and indemnities to mitigate customer exposure might further be sought. Where right to work failures have the potential to expose a customer to legal or reputational risk, compliance breaches may be elevated to material contractual defaults triggering termination or suspension rights. The detail of these obligations may vary depending on the nature of the services and the extent to which labour is central to the contract.

Existing contracts

The prescribed contractual provisions must be in place before work commences. Consequently, organisations may need to review and amend existing arrangements where workers start carrying out work on or after 1 October 2026, even if the underlying contract was entered into before that date. In practice this means that existing subcontracting or in scope arrangements may need to be updated (by side letter or addendum for example) in order to comply. 

What should businesses be doing now?

Although the guidance remains in draft form, businesses should not wait until the final version is published before beginning preparations. Businesses might consider the following actions to mitigate exposure under the new regime:

• Identify where they use: agency workers, contractors, subcontractors, outsourced services, labour providers, substitute workers, or a matching service provider model to understand where labour is being supplied through contractual chains.
• Audit contractual frameworks now – review standard terms and existing contracts to determine whether they contain adequate provisions dealing with the prescribed terms set out in the guidance.
• Strengthen supplier due diligence and governance – Businesses might consider incorporating right to work compliance into existing supplier assurance programmes. This may include reviewing onboarding processes, compliance questionnaires, governance procedures and escalation frameworks so that immigration compliance is assessed alongside other supply chain risks such as sanctions, anti-bribery and modern slavery compliance.

We discuss preparation for implementation further in our previous article here: Significant changes in relation to right to work checks and extended liability: preventing illegal working – what businesses need to know.

Conclusion

The draft guidance signals a significant shift in the UK's approach to illegal working. What was once largely viewed as an employment and immigration law issue is increasingly becoming a supply chain governance and commercial contracting issue. Organisations that utilise outsourced or subcontracted labour should begin reviewing their contractual frameworks now. While the final form of the guidance may change, contractual drafting, supplier oversight and compliance governance are all likely to become increasingly important components of managing immigration risk.