UK Right-to-Work Changes from October 2026: What Employers Using Contractors and Agency Workers Need to Know

The Financial Risk Is Substantial

The maximum civil penalty is currently:

• £45,000 for each illegal worker for a first breach; and
• £60,000 for each illegal worker for a repeat breach.

Where the same failure affects several workers supplied through one agency or subcontractor, the total exposure can rise quickly.

A prescribed right-to-work check may provide a statutory excuse against a civil penalty. Under the expanded scheme, a business exposed through extended liability may also need to meet specific contractual requirements to obtain that protection.

The statutory excuse has limits. It will not protect an organisation that knows, or has reasonable cause to believe, that someone is working illegally. Knowingly employing an illegal worker can lead to criminal enforcement as well as commercial disruption, reputational damage and consequences for a sponsor licence.

The Home Office publishes separate guidance on checks, civil penalties and the statutory excuse.

Which Working Arrangements May Be Covered?

The new rules do not make every freelancer, consultant or business supplier subject to a right-to-work check. They do, however, make contractual labels less reliable.

Calling someone an independent contractor or self-employed will not determine the outcome. The written terms remain relevant evidence, but the Home Office will also consider how the arrangement works in practice.

A genuinely independent tradesperson serving several customers is different from an individual supplied to work inside a client’s organisation under its direction. Likewise, purchasing a defined project from an established company is different from obtaining a named person to fill a position.

Those distinctions are highly dependent on the facts. Employers should not treat any one Home Office example as a universal exemption.

Personal Service Companies Require a Closer Look

The use of a personal service company, or PSC, does not decide whether a right-to-work check is required.

The draft Home Office guidance gives an example of a graphic designer engaged through the designer’s own company for a defined project. The client in that example has purchased a service from the company rather than engaged the individual directly. The client is therefore outside the scheme for that arrangement.

The dividing line may be less clear where the client is effectively acquiring one person’s labour rather than buying an independently delivered service.

The following questions can help expose that difference:

• Is the supplier responsible for delivering an agreed service or for making a particular person available?
• Must the named individual perform the work?
• Does the company serve other clients and operate as an independent business?
• Who controls when, where and how the individual works?
• Is the individual integrated into the client’s team?
• Can the supplier provide a substitute in practice?
• Do the written terms match the way the parties actually work?

A substitution clause deserves particular attention. If the right exists only on paper, is tightly restricted or could not realistically be used, it may provide little evidence that the client has purchased an independent service.

Some of these facts also appear in employment-status and off-payroll-working assessments. That does not make the tests interchangeable. An IR35 determination addresses tax status; it does not decide whether an arrangement falls within the Right to Work Scheme.

Borderline PSC and business-to-business arrangements need individual legal review.

How Extended Liability Affects Labour Supply Chains

Extended liability matters because it can reach beyond the organisation that signs the worker’s contract.

It may arise where:

• a business agrees to provide work or services to a third party and engages another employer to supply the people needed to fulfil that contract;
• an online matching service introduces an individual service provider to a client or customer; or
• a worker’s contract allows someone else to perform the work as a substitute.

A business may therefore face exposure even when an agency, labour supplier or subcontractor directly engages and pays the worker.

This is particularly relevant in project-based sectors such as engineering and manufacturing recruitment, where workers may pass through several suppliers before reaching the end client.

Employers need a clear view of the entire chain:

• Who promised to provide the work or service?
• Who supplied the worker?
• Who contracts with the individual?
• Can another supplier be introduced?
• Can a substitute perform the work?
• Who receives and controls the work?

A payroll record will not answer all of these questions. The contractual structure and the way the service is delivered both matter.

Extended liability does not make every end client responsible for every worker supplied by another business. The result depends on whether the particular arrangement meets the statutory conditions. That is where legal review becomes necessary.

Supplier Contracts May Need More Than a General Compliance Clause

The draft guidance sets out contractual measures that may allow a business facing extended liability to establish a statutory excuse.

Depending on the arrangement, the contract may need to require the direct employer or service provider to:

• conduct prescribed checks on each individual performing the work;
• obtain written consent before subcontracting the work again;
• reproduce equivalent right-to-work obligations in approved subcontracts;
• allow the relevant business to audit compliance;
• support enforcement when illegal working is identified and no statutory excuse exists; and
• include equivalent provisions in the direct contract involving the individual worker.

A standard clause requiring the supplier to comply with applicable law may not be enough. The Home Office requirements address checking, subcontracting, audit access and enforcement separately.

Businesses entering or renewing labour-supply and service contracts from 1 October should have the relevant provisions reviewed by qualified UK counsel. Procurement and recruitment teams can identify the contracts involved, but the final wording and liability analysis are legal matters.

What Employers Need to Review Before October

Map the contingent workforce

Begin with the people actually performing work rather than the names of suppliers in the accounts system.

The review should cover agency workers, temporary workers, freelancers, individual subcontractors, consultants, platform workers, workers supplied through managed-service providers and anyone who may perform work as a substitute.

For each person or category of worker, record:

• who contracted to provide the work;
• who engaged the individual;
• who controls the assignment;
• whether further subcontracting is permitted; and
• which business ultimately receives the work.

Identify affected contracts

Review agreements that will be entered into, renewed or materially changed on or after 1 October 2026.

Contracts requiring attention may include:

• agency and temporary-labour agreements;
• managed-service-provider agreements;
• outsourced-service contracts involving named workers;
• individual subcontractor agreements;
• online platform arrangements;
• PSC engagements; and
• contracts containing substitution rights.

The review should cover audit access, subcontracting controls, record retention and the procedure followed when a worker cannot demonstrate a right to work.

Assign responsibility for each check

For every relevant arrangement, someone must own each stage of the process.

The organisation should be able to identify:

• who decides that a check is required;
• who conducts it;
• which checking method is used;
• when it must be completed;
• who retains the evidence;
• who monitors expiring permission;
• who contacts the Employer Checking Service; and
• who stops or escalates an assignment when the check cannot be completed.

If the answer is “the agency handles it,” the contract and process should confirm exactly what that means.

Where the same uncertainty affects vacancy approval, screening, interviews or onboarding, a broader recruitment-process review may reveal gaps that extend beyond right-to-work checking.

Train the people involved

Right-to-work compliance often crosses recruitment, HR, procurement, legal and operational management. A sound policy will still fail if the manager approving the start date never sees it.

Training should explain each person’s responsibility, the agreed escalation route and the limits of their authority. Recruiters and managers should not be expected to make immigration or contractual-liability decisions without qualified support.

How a Prescribed Right-to-Work Check Is Completed

The Home Office recognises three principal checking routes:

1. a manual document-based check;
2. a Home Office online right-to-work check; or
3. an approved digital-verification service where that method is available.

The appropriate route depends on the person’s nationality, immigration status and available documents.

In some circumstances, the employer must contact the Home Office Employer Checking Service. This may apply when a person has an outstanding immigration application, appeal or administrative review, or when their position cannot be confirmed using the standard routes.

Receiving a passport copy or share code is not the same as completing a prescribed check. The responsible organisation must follow the required procedure, verify that the person presenting the evidence is its rightful holder and retain the required record.

Where the person has time-limited permission, another check may be needed before that permission expires.

Checks Must Be Applied Without Discrimination

Wider checking duties create a risk that employers will over-correct by subjecting some candidates to closer scrutiny based on their name, accent, appearance or perceived nationality.

That would be the wrong response.

The Home Office’s October 2026 discrimination code says employers should apply their checking process consistently and should not check only people they believe may be migrants.

Employers should also:

• make selection decisions based on suitability for the role;
• give applicants a reasonable opportunity to prove their right to work;
• avoid treating someone less favourably because of the checking method available to them;
• use the Employer Checking Service when appropriate; and
• avoid rejecting a candidate simply because a digital check cannot be completed immediately.

An employer should not insist on one digital method where another prescribed route is available. An applicant may be unable to generate a share code because of a technical problem or may need the Home Office to verify an outstanding matter.

Recruitment and employment agencies also have obligations as employment-service providers under the Equality Act 2010 or the corresponding Northern Ireland legislation. Following a client’s discriminatory instruction would not remove the agency’s potential liability.

What Recruitment Agencies and Their Clients Need to Agree

An agency agreement should answer more than who sources the worker and what fee the client pays.

For workers potentially covered by the expanded scheme, the agency and client need to agree:

• how the proposed engagement will be classified;
• whether the individual must perform the work personally;
• whether substitution or further subcontracting is allowed;
• who conducts the prescribed check;
• what evidence is retained;
• whether the client may audit the agency’s process;
• how expiring permission is monitored;
• what must be complete before the person starts work; and
• who handles exceptions and suspected non-compliance.

A client should not assume that a check has been completed because an agency supplied the worker. An agency should not assume the client will handle the check unless the contract and agreed workflow make that responsibility clear.

The same principle applies further down the supply chain. Every handoff creates another opportunity for both parties to assume the other has completed the work.

Third-party recruitment support does not, by itself, transfer statutory liability. The contract must say what the supplier is required to do, and the employer must understand what has happened in practice.

Where Recruitment Support Fits

A recruitment provider can help organise candidate communications, onboarding handoffs, assigned responsibilities and reporting. An appropriately scoped Recruitment Process Outsourcing programme can also help apply an agreed process across multiple roles, suppliers or locations.

That operational support is not a substitute for legal analysis. Global Recruitment Experts does not determine immigration status, provide legal advice or decide whether a contract establishes a statutory excuse. Those decisions remain with the employer, the Home Office and appropriately qualified advisers.

Questions to Ask Labour and Recruitment Suppliers

Before the rules take effect, ask each relevant supplier:

1. Which workers on our account go through your right-to-work process?
2. Who conducts the prescribed check?
3. When is the check completed?
4. Which checking method is used?
5. Where is the evidence retained?
6. How are time-limited permissions monitored?
7. Can another supplier or substitute perform the work?
8. What controls apply to lower-tier suppliers?
9. Can we audit the process?
10. What happens when a check is delayed or inconclusive?
11. Who contacts the Employer Checking Service?
12. How is suspected illegal working escalated?

Compare the answers with the written contract and the process used in practice. A supplier questionnaire will not repair missing contract terms or an unreliable workflow.

Prepare the Process, Then Confirm the Legal Position

The October changes make informal assumptions about contractors and supplied workers risky. The answer is not to check every external person indiscriminately. It is to identify relevant working arrangements, trace the supply chain and assign responsibility before work begins.

Employers should now:

• identify potentially affected workers and suppliers;
• review relevant contracts entered into from 1 October 2026;
• establish who conducts and records each check;
• test the process with realistic cases;
• train the teams controlling recruitment, procurement and start dates;
• apply checks consistently and without discrimination; and
• refer uncertain classifications and contractual questions to qualified counsel.

A recruitment provider can help run an agreed process. It cannot decide how the expanded law applies to a disputed working arrangement.