Legal changes, taking effect from 1st October 2026, are coming regarding penalties for engaging illegal workers. These changes will extend the risk of potential civil penalties beyond traditional employment relationships in certain circumstances. It will be important to consider whether these extensions apply to you and, if so, start preparing accordingly. If they do apply and you want to rely on a statutory excuse to avoid a civil penalty, there are new prescribed steps you will need to take.
What is changing?
From 1 October 2026, liability for engaging an illegal worker will no longer be confined to those that you directly employ. Thanks to new extended liability provisions you could potentially be fined for engaging an illegal worker under a worker contract or as an individual sub-contractor. You could also potentially be liable to a civil penalty where an illegal worker is found somewhere within a complex sub-contract chain. There are also implications for those operating in the gig economy or offering online job matching services.
To work out if and how these changes apply to you, we look at some of the examples given in the updated draft guidance for employers which can also be accessed here.
Examples of when the new rules will apply and how
Contracts of employment
Nothing is changing here. You should already be carrying out right to work checks on everyone you employ and keeping appropriate records. If you are unsure if you are meeting existing legal obligations here, get in touch. The civil penalties for getting it wrong are hefty, up to £60,000 per illegal worker!
Worker contracts
Not everyone you engage may be taken on as an employee. If they are not an employee but not truly self employed they may be a worker, with certain worker rights. If you are not already doing so you need to start checking that they have the right to work in the UK.
Where you use agency workers, however, it will remain the agency’s primary obligation to carry out these checks. Liability for any civil penalties if those checks are not completed will likewise also remain with the agency.
Sub-contractors
For many it is the extended liability provisions being introduced for sub-contractors and outsourcing that is likely to cause businesses the most headaches.
There are several examples given in the draft guidance here which it would be helpful to consider.
The first refers to a gig economy platform used by delivery drivers, allowing them to log on when available for work, accept delivery requests and get paid for those completed. The online platform will become responsible for ensuring the drivers using their platform have the right to work in the UK. So far, straight forward!
The second involves a construction company engaging others through a chain of sub-contracts on a new build site. Further down that chain, so not engaged directly by the construction company itself, are one or more individual sub-contractors. Whilst the construction company itself does not have primary responsibility to check these individual(s) have the necessary right to work, it could become liable under the new extended liability provisions to pay a civil penalty if one is found to be working illegally. To avoid this there are prescribed steps you will now need to take.
The third example is a logistics company contracted by a retailer to provide warehousing and distribution services. They in turn outsource this work to a third-party company. Whilst the third-party company will have primary responsibility to carry out right to work checks on those they engage, the logistics company could still find themselves liable to a civil penalty if an illegal worker is discovered unless they take certain prescribed steps.
In both the second and third examples you have a layered supply chain. The guidance, however, is clear that if you are purchasing a service from a business for your own use, you will not automatically risk being liable if the company you engage uses illegal workers to fulfil that service. The guidance gives the example here of a retailer engaging a facilities management company to provide cleaning services at its retail premises.
The guidance also provides an example involving agency workers supplied to a manufacturing business to meet increased production demand. As the manufacturing company is simply obtaining workers for its own operations and is not responsible for providing services onwards to a third party through a contractual chain, the extended liability provisions do not apply. Responsibility remains with the employment business that employs the workers.
Online job matching services
The draft guidance gives the example of an online service matching homeowners and local cleaners. The online matching service will become responsible for ensuring any individual cleaners registered with them has the right to work in the UK.
Where it is a cleaning business, rather than an individual cleaner, who is registered on the platform, responsibility for checking their own employees / workers right to work will remain with cleaning business. However, the online matching service could still become liable to a civil penalty under the new extended liability provisions if they do not comply with new prescribed requirements.
Substitution arrangements
It is not uncommon in independent contractor arrangements for there to be provisions around the use of a substitute if, for example, the main sub-contractor is unwell or on holiday. If that substitute is found to be working illegally, you may become exposed to a civil penalty, even though you have not engaged them directly. To avoid this certain prescribed steps will need to be taken.
What arrangements remain outside the new rules?
Importantly, the extended liability provisions do not apply to every contractor arrangement.
The guidance confirms that genuinely self-employed individuals operating an independent business, whether in their own name or through their own company, and contracting directly with clients to provide goods or services, will generally remain outside the extended liability regime.
For example, engaging a self-employed plumber who advertises their services to the public to fix a water leak would not ordinarily trigger these extended obligations.
Likewise, a graphic designer offering their professional services via a personal services company, engaged to fulfil a specific project, would fall out of scope of these new rules.
Contracts for the supply of goods only are also not caught by the extended liability provisions.
Does this mean businesses must carry out checks on everyone?
No.
The primary obligation to carry out right to work checks remains with the employer or organisation that has the direct contractual relationship with the worker and is legally responsible for conducting those checks.
However, businesses can become exposed to liability through the new extended liability provisions if new prescribed steps are not taken.
The draft guidance currently suggests that extended liability will most likely be triggered where the Home Office cannot clearly identify which business has the direct contractual relationship with the worker in question, and therefore primary responsibility to have carried out the right to work checks.
What prescribed steps do businesses need to take?
If the above applies to you it will be important to seek further guidance on the prescribed steps you should be taking. As just an example of what these prescribed steps include:
Having written terms in place before work starts
These will need to include the following.
- A requirement on the direct employer, contractor or service provider to carry out compliant right to work checks, confirmation that such checks have been completed and records maintained;
- Provisions prohibiting further subcontracting without prior consent;
- A requirement that equivalent right to work obligations are passed down through any subcontracting chain;
- Include compliance monitoring, audit rights and the obligation to co-operate with any Home Office investigation;
- Include the right to suspend or terminate contracts for non-compliance; and
- Ensure that any contractual right of substitution cannot be exercised, or the substitute carry out any work, until the substitute individual’s right to work has been checked and verified.
Identity verification
Have systems in place to ensure those who carry out the work are the same person to those whose right to work has been checked. The draft guidance issued identifies five examples of the steps businesses could take to meet this requirement such as the issue and use of ID cards and workplace passes, the use of facial recognition technology, biometric or attendance management systems, checks against records or licences, and re-verifying ID at particular points.
Clearly this is no longer just a HR issue and businesses will now need to consider their commercial contracts (including existing contracts) to be sure that their suppliers and service providers are complaint or taking the necessary steps to comply with these requirements. If you would like guidance from either our employment or commercial teams please do not hesitate to get in touch.
Find out more about employment services from Lightfoots Solicitors: www.lightfoots.co.uk/services/employment-law-employers
Find out more about commercial services from Lightfoots Solicitors: www.lightfoots.co.uk/services/corporate-and-commercial
This alert is intended as general guidance only and does not constitute legal advice. Specific advice should be sought in relation to your particular circumstances.