The government has announced the latest instalment in its ‘crackdown’ on illegal working by extending right to work checks to businesses hiring gig economy and zero-hours workers. In principle, this is logical and reasonable – prevention of illegal working should rightly apply to anyone working in the UK regardless of their worker status label. However, any change in the law must be supported by carefully-drafted guidance (which hasn’t always been the case in this area). Many businesses who fall foul of the UK’s complex right to work rules are certainly not ‘rogue’ employers, but just in dire need of clear guidelines on what they need to do.
Under s.15 and s.21 of the Immigration, Asylum and Nationality Act 2006, employment of an adult subject to immigration control who does not have permission to work or is working in breach of their visa conditions exposes the employer to a civil penalty (currently set at a maximum of £60,000 per person) and/or a range of other sanctions including an unlimited fine, business closure, director disqualification and potential prison sentence of up to 5 years. S.25(b) IANA specifies that employment for these purposes is “employment under a contract of service or apprenticeship, whether express or implied and whether oral or written”. UK businesses are therefore currently only at risk of sanctions in relation to employees working illegally but the Home Office has been trying to close this loophole for some time.
In September 2024, the Home Office updated its Right to work checks: an employer’s guide to state: “Where the worker is not your direct employee (for example, if they’re self-employed), you are not required to establish a statutory excuse, but you must still carry out these checks (and retain evidence you have done so) to comply with your sponsor duties.”
As this appeared to conflict with the provisions of IANA, we contacted the Home Office to clarify what this wording meant for organisations who do not hold a sponsor licence. Wording later on in the same guidance states that employers are strongly encouraged to carry out checks even on those workers who are not employees and on contractors and labour providers but stops short of imposing any obligations.
In February just gone, the same part of the employer’s guide was amended to read: “Where the worker is not your direct employee (for example, if they’re self-employed), you are not required to establish a statutory excuse. However, you must still carry out these checks (and retain evidence you have done so) if you are a sponsor licence holder and are sponsoring the worker to ensure compliance with your sponsor duties.” In other words, no checks are required on workers, other than in circumstances where they are sponsored.
The government’s latest announcement will require it to change IANA and given the specific reference to gig economy and zero hours workers in the announcement, it will also need to give some careful thought to the following:
- Will the changes only apply to gig economy and zero hours workers or to all other workers including agency workers and freelancers in any type of business? How do you define a ‘gig economy worker’?
- Will employers be required to carry out checks on existing workers or just those hired on or after the date of implementation?
- Will right to work checks apply to the genuinely self-employed and if not, how will employers, let alone the Home Office, differentiate them from workers? Dozens of decided cases around the gig economy, including at the highest levels within the UK legal system, have failed to come up with a definitive test for what separates a worker from the genuinely self-employed. There is also no definition at law of “gig economy”. So a business which uses outsourced labour faces a nearly impossible choice (maybe that’s the point — it’s hard to tell). It has to decide between (i) maintaining the line that its associates are fully self-employed and so their right to work compliance is not its responsibility on the one hand or (ii) doing the checks to avoid time at HM’s pleasure, so tacitly accepting that they are workers, which then pulls down upon itself all sorts of liabilities in relation to holiday pay, auto-enrolment contributions, minimum wage, etc., that it could perhaps otherwise have avoided. Damned either way, it seems.
- Could we end up with a requirement to carry out checks on anyone who provides any sort of service for payment regardless of status – your plumber, builder, taxi driver etc? No doubt the Home Office would laugh at the idea as patently silly, as indeed it is, but that is the logical extension of these new requirements unless and until there is the clearest line drawn in law between who is covered and who is not – just saying “workers and gig economy people” won’t cut it for that purpose as what is covered by one is still being litigated and the other has no definition at all. It is also unclear whether there will be any overlap in law or principle with the tax position – for example, if the supply to you of a particular contractor is caught by IR35 (in other words, he is deemed to be doing work akin to that of an employee), would that mean that these new duties apply? Or if he is a sole trader working in his own name, do these new obligations depend on whether he can show that you are just one of a number of customers for his trade or profession or on how much work he does for you in a week, a month or a year? Will we see a resurgence of the issue of economic dependency? This all sounds a bit shrill, but unless there is proper clarity attached to these extended obligations, operating them will be a nightmare for employers. The line between worker and fully self-employed is extremely thin and can depend on relatively minute facts, the relevance of which could easily escape the average employer. The only completely safe course will be to make as many of those workers into Schedule E employees as possible, so putting the obligation to do the checks beyond argument but at the same time imposing significant costs and loss of flexibility on businesses. It is of course government policy to push as many people as it can into tax-paying employment (hence the proposal to drop worker status altogether in due course) so this may be seen as consistent with that direction of travel. The issue will be how much of a mess is created for employers in the meantime, and in the absence of that very clear guidance, the answer to that seems likely to be “far more than could ever have been thought necessary”.
- Will the obligation still sit with labour providers to carry out checks on the employees it provides to its clients or will both parties need to carry out their own checks? If the latter, will both parties be liable for a civil penalty in the event of illegal working? We foresee some interesting contractual tussles over where that liability may fall as between the parties.
What action should employers take?
Although the planned changes appear to be aimed at employers which intentionally breach their immigration duties, all organisations with overseas workers are likely to be affected, since the Home Office has shown limited ability to distinguish effectively between the politically-essential “rogue employers” and those doing their best in a bewildering blizzard of law and guidance — compliance action and fines are often issued to well-intentioned and generally diligent sponsors which have unwittingly fallen foul of their increasingly byzantine immigration obligations. Of the hundreds of cases we have advised on (many of them for large, professional organisations), almost all arise out of a genuine oversight on the part of the employer, combined with an often understandable lack of awareness of the prevention of illegal working rules. Whilst ignorance is rightly not a valid defence to compliance, the UK immigration system remains complex and constantly changing. Employers should not assume for a moment that the stated focus on intentional breach will avail them in any way.
It’s not clear when the changes will be implemented but UK businesses which hire anyone who is not an employee should:
- Consider the extent of their non-employed work force and the checks that are currently done on them
- Review relevant right to work procedures and the resources needed to extend them to workers (and, potentially, the self-employed)
- Given the Home Office’s ongoing ‘crackdown’, ensure that their right to work procedures (for the entire workforce, including employees) are clear, robust and effective
The UK’s right to work rules are not straightforward, nor the penalties for tripping over them trivial – training and legal support is a worthwhile investment.