Home Office Draft Code of Practice on Preventing Illegal Working

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The Home Office has recently released a draft statutory code of practice setting out how it intends to determine the level of penalty that will apply. Once passed through Parliament, this code of practice will apply to right to work checks from 22 January 2024.  

How will an employer know if it is at risk of receiving a penalty? 

The Home Office will contact the employer and ask for information about the employee or former employee they believe is an illegal worker, giving the employer 10 days to respond and provide evidence of the right to work check they carried out (or any other relevant information). 

The Home Office will then review the evidence and decide whether to issue a civil penalty. If a penalty is imposed, the employer will receive a Civil Penalty Notice, including the reasons why a notice is being issued, the amount to be paid and the deadline for payment.  

Alternatively, the Home Office may issue a warning notice, or confirm that no action is being taken. 

How will the new penalties be calculated? 

The Home Office will start with the maximum amount and then following a step by step approach, it will apply discounts where appropriate. If an employer can evidence that it carried out a right to work check by the applicable guidance before employment began, then even though the employee is an illegal worker, the employer will have what is known as a “statutory excuse.” This means they will not have to pay any penalty for illegal working. 

Stage 1: Determining liability

Where an employer has been found to have employed someone with no right to work, the Home Office will first check if they have a statutory excuse* 

  • Yes: the Home Office will issue a “no action” notice. 
  • No, proceed to stage 2. 

*To establish a statutory excuse, employers must conduct the appropriate right to work checks before the employee commences employment. The 3 relevant checks and how to do them can be found here and in the more detailed guidance here. 

Stage 2: Determining the level of breach

Has the employer breached the Scheme (the prescribed checks and civil penalty provisions) within the past 3 years? 

  • Yes: proceed to Stage 3, repeat breach. 
  • No: proceed to stage 3, first breach. 

Stage 3: Determining the penalty amount

  • First breach (within the last 3 years) for employers: £45,000 per worker. 
  • Repeat breach (within 3 years) for employers:           £60,000 per worker. 

There are applicable mitigating factors which can reduce the penalty amount, dependent on the employer’s history of compliance with right to work checks:  

For first breaches: 

Mitigating factor 1 – has the employer already reported the suspected illegal working to the Home Office? If so, the penalty can be reduced by £5,000. 

Mitigating factor 2 has the employer co-operated with the Home Office in dealing with this matter? If so, the penalty can be reduced by £5,000. 

Mitigating factor 3 – does the employer have effective right to work checking processes? If so, a warning notice rather than a penalty will be given, meaning the employer will not have to pay a fine. 

For repeat breaches, only mitigating factors 1 and 2 will be applied. This means a penalty will be imposed in all repeat breach cases, whereas in first breach cases the employer may receive a warning notice (if all 3 mitigating factors apply). 

Can an employer object to a penalty notice? 

Yes, any employer that receives a penalty can object in writing within 28 days. If an employer objects to the notice they must give full and detailed reasons in writing, together with supporting documents.  Objections can only be raised if the business receiving the penalty is not the employer, they have evidence showing they did a proper right to work check or if they think the level of penalty is too high. 

If the Home Office disagrees with the objection, then an employer can appeal the notice to the County Court.  This will start a legal process and the employer must be aware that if they are not successful, they could be liable to pay the Home Office’s legal fees in dealing with the appeal.  

Is there a discount for early payment? 

Yes, if a business receives a Civil Penalty Notice it will explain when the penalty must be paid, and how the business can qualify for a 30% reduction to the penalty if they pay it in full within 21 daysThis ‘fast payment option’ only applies to the first penalty, and does not include payments in instalments.  

What happens if the penalty is not paid?

If the penalty is not paid, or the employer does not object or appeal and the employer fails to pay the penalty by the deadline, the Home Office will take enforcement action against them. This will have severe consequences for the business and its directors, including the inability to act as a director, and either the loss of a sponsor licence or the inability to apply for one going forward. 

What should employers do now? 

Employers should review their right to work checking processes and procedures to ensure that they are carrying out the right checks, and properly evidencing that checks have been done. Civil penalties can be avoided entirely if an employer has evidence of a proper right to work check, so the importance of doing this properly cannot be overstated! 

We will keep you updated on this subject, including news about our Breakfast Briefing on the topic – scheduled for early 2024! If we can help with any immigration advice or ensure your workforce is deployed legally, please get in touch.