Right to work reforms create new risks for employers

Why right to work requirements are being extended

For many years, an employer's right to work obligations focused primarily on individuals employed directly in a traditional employment relationship under a contract of employment (including apprenticeships). However, the UK's labour market has changed significantly, with businesses increasingly relying on agency workers, contractors, subcontractors, platform-based workers and other flexible labour models.

In response, the Home Office has introduced reforms intended to close gaps in the existing framework and strengthen efforts to tackle illegal working. The changes are being introduced under Section 48 of the Border Security, Asylum and Immigration Act 2025, which expands the scope of the UK's Right to Work Scheme beyond traditional employees to cover a wider range of working arrangements. It amends the right to work scheme within the Immigration, Asylum and Nationality Act 2006 and sets out the specific contractual arrangements to which liability has been extended. There is a draft Code of Practice on preventing illegal working and the Right to Work Scheme (dated June 2026) which is expected to be finalised and come into force on 1 October 2026. 

The reforms are designed to ensure that right to work compliance keeps pace with modern business practices. Under the new rules, right to work responsibilities can extend into supply chains and contractual arrangements where businesses may not have a direct employment relationship with the individual carrying out the work. 

The government's objective is to reduce opportunities for illegal working, which it says can undermine the immigration system, expose individuals to exploitation and create unfair competition for compliant employers. At the same time, the reforms recognise that businesses increasingly rely on complex networks of suppliers, subcontractors and service providers to deliver work.

For employers, the significance of these changes cannot be overstated. Organisations that previously sat outside the scope of right to work liability may now find themselves exposed to civil penalties if appropriate processes and safeguards are not in place. Businesses will therefore need to understand not only who works directly for them, but also how labour is sourced and managed throughout their contractual arrangements.

The key right to work changes

The new rules will require organisations to comply with the provisions in relation to any relevant engagements commencing on or after 1 October 2026 as well as any follow up right to work checks for existing workers required from that date. The rules represent one of the most significant reforms to right to work compliance in recent years.

However, the rules are far from straightforward. Whether a business and the services it utilises fall within scope will depend on a detailed assessment of its operating model, contractual arrangements and the practical reality of how services are delivered. Employers and HR leaders should therefore be cautious about making assumptions and ensure they understand how the rules apply to their specific circumstances.

Where a direct contractual relationship with the worker cannot be identified then the risk for the businesses within the supply chain is likely to be higher and extended liability (and compliance) in respect of the checks will fall under the spotlight.

Extended liability applies in non-direct contractual relationships 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 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 or
• An online matching service provides details of a service provider to a client/customer and the service provider enters into a contract with a client/customer

The organisation further along the supply chain contractually in these cases may be treated as employing the individual who personally provides the work/services (for example the employer receiving a substitute’s services, but who is not in a direct contractual relationship with that substitute).  The statutory excuse to defend any illegal working will be required (see below for the prescribed requirements which are different for direct and non-direct contractual relationships).

In summary, key changes include:

• The extension of right to work requirements and checks beyond employees to include certain individuals from zero hours workers, agency workers, individual consultants (where the individuals are not genuinely self-employed), individual subcontractors and to some commercial arrangements where individuals personally provide services. Certain online matching services and gig economy platforms may become responsible for right to work compliance where individuals are obtaining work through intermediaries. New "extended liability" provisions may expose businesses to penalties even where they do not have a direct contractual relationship with the worker concerned
• Businesses that contract with other organisations to provide labour or services may need to implement specific contractual protections and compliance measures
• Where substitution of workers is permitted, businesses must have processes in place to verify the right to work of substitute workers before they undertake the work. Businesses must maintain appropriate identity verification procedures to ensure the individual carrying out the work is the same person whose right to work has been checked. Organisations relying on digital identity verification services are recommended to use Home Office-recognised certified Right to Work Digital Verification Service Providers (RtW DVSPs).

Civil penalties remain substantial, with fines of up to £45,000 per illegal worker for a first breach and up to £60,000 per illegal worker for repeat breaches. There are additional wider sanctions that might be applied too, including the closure of the business and criminal proceedings leading to a fine and/or imprisonment.

Which business models are most likely to be impacted by the right to work reforms?

While the changes could potentially affect a wide range of organisations, some operating models are more likely to feel their impact than others. 

• Businesses in sectors where work is delivered through multiple contractors, subcontractors or labour suppliers are likely to face the greatest compliance challenges. Examples of where extended liability provisions will bite include:
• Businesses operating through multi-tier subcontracting chains, where services are delivered through successive contractors and subcontractors – for example, a property developer using a chain of subcontractors to fulfil a construction contract. The property developer may be treated as the employer of the individuals carrying out work personally within the chain and may be liable for payment of a civil penalty if an individual is found to be working illegally unless the developer has complied with the new requirements in relation to the contractual arrangements and can rely on  the statutory excuse (see below).
• Businesses whose operating models depend on outsourced service delivery through complex contractual supply chains – for example, a company that wins a contract to provide maintenance services across a local authority estate and then outsources different elements of the work, such as electrical, plumbing and grounds maintenance services, to a network of subcontractors.
• Businesses that are contractually responsible for delivering services to a third party and outsource all or part of that delivery to another organisation – for example, a logistics company contracted to provide warehousing and distribution services that outsources warehouse operations to another provider. The logistics company may be treated as the employer of any individual who personally carries out the work through the contractual chain and if that individual is working illegally, the statutory excuse needs to be established and the prescribed requirements complied with by the logistics company.
• Businesses that rely on labour substitution arrangements, where workers are permitted to send substitutes to carry out work on their behalf – for example, food delivery platforms that permit substitute couriers.
• Online matching and marketplace platforms that connect clients or customers with service providers – for example, platforms that connect households with cleaners, tradespeople or other service providers.

Scenarios which are likely to be outside of the scope of the extended responsibilities include: 

• Traditional agency worker supply arrangements, where workers are supplied to support a business's own operations rather than to fulfil a service delivery contract (for a third party) – for example, a warehouse at Christmas or a hotel using additional temporary agency staff to help it meet increased demand over the summer holiday period. (Right to work responsibilities remain with the agency as the employer of the temporary staff.)
• Businesses purchasing services for their own use – for example, a retailer engaging a cleaning contractor for its own premises or appointing a facilities management company to manage its own estate. The cleaning contractor and facilities management companies are the responsible employer (of the cleaners etc). The retailer is not providing those services onwards to a third party so is not responsible under the extended duty.
• Contracts for the supply of goods rather than the provision of labour or services – for example, a hairdressing salon purchasing products from a manufacturer, which the salon may use itself or sell on to its customers. If the manufacturer uses temporary workers to produce the hairdressing products supplied by an employment business, the manufacturer is supplying finished goods to the hair salon and not providing work or services. The manufacturer is using temporary workers to support its own operations. The employment business is supplying workers (not work or services) and is responsible for the checks of those workers and the prevention of illegal working.
• Genuine self-employed contractors operating an independent business and contracting directly with customers or clients – for example, a self-employed plumber advertising services directly to the public. The plumber is not employed within the scope of the Right to Work scheme.
• Engagements through a personal service company, where the client contracts with the company rather than the individual providing the services – for example, a marketing consultant providing services on a project through their own limited company, with the client contracting directly with that company rather than with the consultant personally. It is a business-to-business services arrangement rather than employing an individual directly within the scope of the Right to Work Scheme.

The employer’s guide to right to work checks published by the Home Office lists useful examples which can help provide an initial indication whether particular business operations are likely to fall within the scope of the extended rights. 

When are new right to work checks required?

The fundamental principle remains unchanged: right to work checks must be carried out before an individual begins work. Employers can establish a statutory excuse against civil penalties by carrying out the prescribed right to work checks before employment or engagement commences and retaining appropriate evidence of those checks. 

Under the expanded regime, employers should pay close attention to situations where follow-up checks are required as well. These are generally necessary where an individual has time-limited permission to work in the UK. In these circumstances, a further check must be completed on or before the date that permission expires if the organisation intends to continue the engagement.

Where an individual can demonstrate continued permission to work, the employer should retain evidence of the renewed check in accordance with Home Office requirements.

Importantly, follow-up checks are not required for workers who have a permanent right to work in the UK, including those with settled status under the EU Settlement Scheme or indefinite leave to remain, provided the original check was carried out correctly.

Where there are direct contractual arrangements, the direct employer remains responsible for carrying out the prescribed right to work check; however, if the employer cannot be identified by the Home Office, for example, then the penalty may be imposed on someone else upstream in the chain of contracts. This is where the prescribed steps set out below become particularly important and are scrutinised (although compliance is required regardless).

How to establish a statutory excuse against extended right to work liability

While businesses can, from October, face liability in certain circumstances even where they do not employ a worker directly, the legislation also provides a defence, known as a statutory excuse, for organisations that can demonstrate they have taken the prescribed steps to prevent illegal working within the relevant contractual arrangements.  

The exact requirements will depend on the nature of the arrangement, but the Home Office guidance identifies three key areas (i.e. the prescribed requirements) that businesses should address before work commences:

Written contractual terms and controls
Where services are delivered through a supply chain, businesses should ensure that contracts contain appropriate right to work provisions and these should be in place before the work commences. These contracts may include obligations on contractors and service providers to carry out prescribed right to work checks on all individuals performing the relevant work, restrictions on further subcontracting without approval, rights to audit compliance, and requirements to cooperate with any Home Office investigation. Ultimately, provisions for enforcement action where the statutory excuse has not been established would be included too. Organisations should also ensure they can demonstrate that these requirements operate effectively in practice rather than existing only on paper. 

Substitution controls
Where workers are permitted to send substitutes to carry out work on their behalf, businesses must have processes in place to ensure that no substitute begins work until their right to work has been verified. Organisations should be able to demonstrate that they have appropriate procedures for authorising substitutions, maintaining records and taking action where non-compliance is identified. 

Identity verification
Businesses must also have proportionate measures in place to ensure that the person carrying out the work is the same person whose right to work has been checked. Reasonable steps must be taken by the business to satisfy itself that the systems are effective. Depending on the nature of the work and the level of risk involved, this could include identification checks, workplace passes, biometric attendance management systems, verification against relevant training, digital identity verification technology and/or periodic re-verification of workers' identities. 

What the changes means for employers and HR leaders

For employers and HR leaders, the reforms represent both a compliance challenge and an opportunity.

The challenge lies in understanding where potential liabilities may arise and ensuring that systems, contracts and processes are robust enough to meet the new requirements. Businesses with complex supply chains, outsourced services or flexible workforce models may need to undertake a detailed review of their current arrangements.

Many organisations will need to work closely with procurement, legal, HR and operational teams to map workforce arrangements, identify areas of risk and update contractual documentation. In some cases, supplier onboarding processes, due diligence procedures and audit rights may also require revision.

The changes reinforce the importance of maintaining clear, accurate records demonstrating the steps they have taken, as the Home Office has indicated that contractual terms alone may not be sufficient if they are not supported by effective compliance arrangements in practice. 

Organisations must also ensure they apply right to work procedures consistently across the workforce, continuing to balance compliance obligations with their duties under equality legislation and avoid making assumptions about an individual's right to work based on nationality, ethnicity, accent, name, appearance or, length of residence in the UK.

Viewed positively, however, these reforms provide a timely opportunity for businesses to strengthen workforce governance and reduce broader operational risks. Reviewing contracts, onboarding procedures and verification processes now can help organisations gain greater visibility over their workforce arrangements and improve overall compliance.

For many employers, this will be an opportunity to ensure that appropriate right to work checks are being carried out, documented and retained across all relevant working relationships, rather than only within traditional employment structures.
With the new regime due to take effect from 1 October 2026, organisations should not delay preparations. Businesses that rely on subcontracting, outsourced service delivery or other non-traditional workforce arrangements should take particular care to understand where the extended responsibilities may apply. 

If you are uncertain about your obligations under the new rules, seeking legal advice now could help identify potential areas of risk and ensure appropriate safeguards are in place before the new regime comes into force to reduce the risk of costly penalties and disruption later. Contact Megan O'Hara, or a member of our Employment team on 020 8290 0440 to arrange an appointment.
 

This article is for general information purposes only and does not constitute legal advice. Specific advice should be sought for individual circumstances.