For small businesses in the UK, ensuring that potential employees have the right to work in the country can be a complex and challenging task. There are numerous steps that small businesses must take to comply with Home Office regulations. If these steps are not correctly followed – in line with 2022’s Code of Practice on Preventing Illegal Working – the consequences could be severe, and especially damaging for smaller organisations.
It is therefore crucial for all small businesses operating in the UK to understand the penalties associated with employing illegal workers, and the measures they should take to avoid these penalties. Only by doing so can they ensure they always stay in full compliance with business immigration law.
Understanding The Civil Penalties
If a small business is found to be employing individuals without the proper right to work in the UK, it could face a civil penalty. This penalty can be as high as £20,000 for each illegal worker, which can cause significant financial strain for a small business. However, this penalty can be reduced if it’s a first-time offence, or if the business can show mitigating factors, such as having an effective system for right to work checks, proactively reporting illegal working to the Home Office, and cooperating with the Home Office investigation.
Moreover, if a small business holds a sponsor licence to employ migrant workers, the Home Office may impose ‘special measures’, or even decide to suspend or revoke the licence. This could cause significant difficulties for both the business and the sponsored migrant workers.
If a business has multiple sites, with each site handling its own recruitment, the organisation would only be considered a repeat offender if Home Office investigators determine that illegal working represents a systemic issue with the company’s recruitment practices. If your organisation acquires a new company and employees are transferred under TUPE, there will be a 60-day grace period to ensure all employees are legally employed.
It is crucial to seek legal advice if your business receives a notice of a potential civil penalty, whether you plan to try and mitigate the penalty or challenge it. If you can prove your company was not liable or had a valid statutory excuse, it may be possible to appeal against the penalty; it is also possible to request leniency if the penalty would be too high for the business to reasonably afford. As such, a well-supported notice of objection could save a business thousands of pounds.
The Potential Criminal Sanctions
In addition to civil penalties, a small business could face criminal sanctions if found to employ a disqualified person. However, these are less common, with only one prosecution recorded between July 2019 and September 2021. To establish guilt beyond reasonable doubt, the Crown Prosecution Service must demonstrate that the employer knowingly or had reasonable cause to believe that an individual was working illegally.
A conviction could result in an unlimited fine, a confiscation order, and up to five years in prison if the case is handled in the Crown Court in England and Wales. If the case remains in the Magistrates’ Court, the business could face a fine of £5,000 and up to six months imprisonment. The sanctions are similar in Scotland.
Determining Who Is Liable
Typically, the employer who directly hires a worker under a contract – whether written, oral or implied – is responsible for ensuring there is no illegal working. Any person who holds a position of responsibility in a corporate body, partnership or as a sole trader – including a director, manager or company secretary – can potentially face criminal proceedings in these cases.
However, when a small business engages self-employed individuals under a contract for services, this creates a question of whether the organisation will still be held liable if it fails to conduct the relevant checks of the individuals concerned.
In our opinion, the answer is yes. This is because the immigration rules broadly define ’employment’ to include paid and unpaid employment, work placements as part of a course or period of study, self-employment, and engaging in business or any professional activity.
Ensuring Your Workers Have a Right To Work In The UK
For small businesses using external contractors supplied by another organisation such as an agency, there is no legal liability. However, it is considered best practice to confirm that your contractors conduct regular right-to-work checks, in line with regulations. In this instance, the responsibility lies with the agency or organisation supplying the labour.
A business might also use an external Identification Document Service Provider (IDSP) that uses Identification Document Validation Technology (IDVT) to verify the rights of British and Irish citizens. In this case, a positive check from the IDSP provides the employer with a statutory excuse under the civil penalty scheme, allowing for a limited sharing of responsibility.
In conclusion, this is a complex area where careful planning, robust procedures, and taking responsibilities seriously can yield significant benefits. It’s all too common for small businesses to treat immigration checks as an afterthought – but given the significant costs associated with doing so, employers would be wise to take this responsibility seriously.
Written by Gary McIndoe, managing partner at Latitude Law.