Overview of the changes
With effect from 1 October 2026, the rules in respect of the prevention of illegal working regime were expanded significantly.
Firstly, businesses now need to carry out right to work checks not just on their employees, but also on all other directly engaged staff, including workers and individual subcontractors, where they commenced work on or after 1 October 2026. In some cases it may also be necessary to undertake checks where the individual is engaged via a personal service company. Companies may face civil penalties of £60,000 per illegal worker if they fail to establish a statutory excuse by carrying out a fully compliant right to work check before the individual commences work. There are also a few changes to the way in which these checks must be conducted, with an increased focus on the need for checking a person’s identity via an imposter check.
Secondly, arguably the more radical change, is the new extended liability provisions. In certain contractual arrangements, liability for payment of a civil penalty for illegal working may extend beyond the ‘employer’ who has the direct contractual relationship with the individual. Under the extended liability provisions, organisations higher up a labour supply chain may be held liable in certain circumstances where illegal working is identified further down the contractual chain. These new rules apply where the relevant contractual arrangements were entered into on or after 1 October 2026. For example, where a service provider subcontracts part of the services that it is providing to an end-user client, that service provider could find itself issued with a civil penalty under the extended liability provisions if a member of staff engaged by the subcontractor is found to be working illegally.
Further, if an organisation contracts with an individual to provide work or services where that contract permits the individual to use a substitute, the organisation may be issued with a civil penalty if the substitute is found to be working without immigration permission.
From 1 October 2026, online matching services that match a service provider or individual with a client to provide work or services may also be liable for a civil penalty if the individual providing the services to the end user client is found to be working unlawfully. Online matching services should ensure they are undertaking the checks required and that they update their terms and conditions.
Employment businesses supplying temporary agency workers will also need to ensure they are undertaking compliant right to work checks, even if they do not employ the agency worker themselves.
To be able to establish a statutory excuse under the extended liability provisions, businesses will need to ensure they take certain steps:
- One of these is to include certain prescribed contractual terms in the commercial contracts relating to right to work checks and the prevention of illegal working.
- Businesses will also need to have substitution controls and identity verification procedures in place.
- Additionally, organisations will need to ensure “appropriate arrangements are in place and operating effectively in practice, and that they have taken reasonable and proportionate steps to satisfy themselves that right to work requirements are being met.”
For many organisations, including employment businesses supplying temporary agency workers and online matching services, and businesses that engage workers, contractors or outsourced services, have complex supply chains, or are service providers that subcontract services to others, this is a fundamental shift from an HR compliance issue to a broader organisational and commercial risk involving procurement, legal, operations and contract management functions.
The immediate priority for businesses should be to map all categories of labour used across the organisation and review contracts with agencies, labour suppliers, clients, outsourcing providers and subcontractors. Businesses will also need to ensure, where applicable, that any contracts or other commercial arrangements entered into on or after 1 October 2026 contain the required immigration, audit, compliance and indemnity provisions. Existing right to work procedures should be reviewed to ensure they cover all directly engaged individuals and comply with the latest guidance, and that robust evidence of compliance can be produced if challenged by the Home Office. Training on the prevention of illegal working should be extended beyond HR to legal, procurement, operations and business leaders responsible for outsourced services.
Sponsor licence implications
Further, if an organisation holds a sponsor licence, it’s worth remembering that the Home Office may revoke, suspend or downgrade the sponsor licence if the organisation is not complying in full with the latest guidance on the prevention of illegal working. This is the case even if the organisation has never been issued with a civil penalty.
Separately, changes are expected to be made to the Immigration Rules later this year in relation to earned settlement which will have a significant impact, including for employers which sponsor overseas migrants. Businesses which hold sponsor licences should keep a careful eye on developments and be prepared to react quickly once the details are announced.
