New Illegal Working Rules Risk Punishing Compliant Businesses

The ALP has warned that government plans to extend Right to Work legislation could impose disproportionate financial risks on thousands of compliant UK businesses, while failing to meaningfully tackle illegal working.

In a consultation response submitted to the Home Office, the ALP raised serious concerns about proposals within the Border Security, Asylum and Immigration Act 2025 that expands civil and criminal penalties to a wide range of working arrangements, including agency workers, gig economy contractors and self-employed subcontractors. Fines could reach up to £60,000 per worker for breaches.

The extension, set out in clauses 14A and 15A, requires businesses to treat individuals across complex supply chains as employees for the purpose of Right to Work checks – even where no direct contractual relationship exists. The ALP said this means employers could become liable even if they were unaware a worker was operating on their site.

“This has a very significant impact on businesses hiring people under these contractual arrangements as they will for the first time be covered by the civil penalty scheme,” the ALP stated, highlighting that the Home Office impact assessment admits the scale of affected businesses is unknown.

The ALP estimates that the change could affect 1.6 million agency workers, half a million gig workers and 1.9 million freelancers, as well as 700,000 construction subcontractors.

One of the most contentious requirements introduces a legal responsibility for employers to prevent “impostor switching”– where a legitimate worker is substituted by another person without the legal right to work. The ALP said this requires employers to monitor worker identity on an ongoing basis, potentially every shift.

“Even the most diligent employers cannot always prevent such impostor fraud… It cannot be right for compliant employers to face penalties of up to £60,000 per worker for matters beyond their control.”

The legislation also makes businesses responsible for the right to work of workers supplied by other organisations in their supply chain, although it is not clear what form this responsibility will take.

The ALP argues that the burden will fall heavily on small businesses, warning of risks including increased liquidation, sham self-employment models, avoidance behaviour by online platforms relocating overseas, and more criminal exploitation.

The ALP also criticised the lack of consultation on the drafting of the legislation and the complexity of interpreting legal responsibility within multi-tier supply chains.

While supporting strong action against illegal working, the ALP says current enforcement tools are inconsistent and ineffective, citing low recovery of existing civil penalties – only 22% of £30,000 fines issued in early 2019 had been paid by September 2023.

The ALP is urging ministers to work collaboratively with industry when drafting secondary legislation and to provide clear guidance defining what exact due diligence is required to constitute a defence against penalties.

“Without reform it risks punishing the compliant while leaving space for rogue operators to thrive,” the submission said.

In meetings with the ALP, the Home Office has confirmed that it is not their intent to penalise compliant businesses, and that they will work collaboratively with employers to provide clear guidance.