Third-party right to work checks risk

Employers are required to carry out right to work (RTW) checks on all employees. When done correctly, RTW checks establish a statutory excuse against liability for a civil penalty if it’s later discovered that an employee has lost their right to work. Establishing a statutory excuse is the main reason most employers carry out right to work checks, yet many businesses aren’t as well protected as they think.   

Many employers, including NHS Trusts, universities and high street brands outsource their right to work checking processes to well-known third-party companies. They do this to save time and because they believe the companies are better placed to ensure their right to work checks are being completed correctly. However, these employers are unaware that, other than checks undertaken on British and Irish nationals, third party checks provide no statutory excuse and no protection at all in the event of an illegal working finding. 

Guidance from the Home Office has highlighted significant implications for employers who rely on third-party providers for these checks. 

Understanding the Issue

Home Office guidance explicitly states that employers cannot establish a statutory excuse if a right to work check is performed by a third party, except when using an IDSP for checks on British and Irish citizens with valid passports or a passport card (Irish citizens).

This means that any check undertaken by a third-party leaves employers vulnerable to civil penalties for illegal working.

Role of Third-Party Providers

A third party is any person or organisation other than the direct employer. This includes all IDSPs, such as Trust ID and Experian. While third parties can support employers by providing technical knowledge or specialist equipment to prevent illegal working, they cannot provide a statutory excuse for checks on overseas nationals.

Why This Matters

The consequences of employing individuals without the legal right to work are severe. 

Employers found to be in violation face a civil penalty ranging from £45,000 to £60,000 per illegal worker. 

Additionally, the Home Office will publish the finding of illegal working, which could lead reputational damage. 

Employers may also lose their sponsor licence, resulting in the cancellation of all visas held by their sponsored workers.

While more serious consequences apply when a breach is deliberate, inadvertent failures to secure a statutory excuse by using third-party providers can still result in significant penalties.

High-Risk Circumstances

The highest risk arises when employing individuals with time-limited visas. These employees may have the right to work at the commencement of their employment but could lose this right during their employment. 

Case study 

A high street fast food chain employs the holder of a student visa. 

Prior to commencement of employment, they ask a third-party provider to undertake a right to work check. The check is undertake using the third-party provider’s app based service. The student visa holder provides a share code and an identity document. They also provide evidence of their term time dates for the duration of employment. 

The third-party provider undertakes the check on the employer’s behalf, and confirm that the student visa holder has a right to work, is limited to working for 20 hours a week during term time, and unlimited hours outside term time. The employer undertakes a likeness check, checking that the person presenting themselves for work is the same person as pictured on the online check, and proceeds to employ the student. 

As is very common, the student visa holder has leave to remain for an extended period beyond the end of their studies. In principle, the student would be permitted to work full time during this period. However, their education provider has reported the completion of their studies to the Home Office, as they are required to do. The Home Office then cancels the student’s leave to remain, leaving them with no right to work. The employer isn’t informed. 

The employee is now working illegally. The Home Office undertakes a check of HMRC records for the employee. They note ongoing employment, undertake an investigation, and issue a notice of liability for a civil penalty to the employer for £45,000. If this was a second penalty, the maximum penalty would be £60,000. 

Had they not used a third party, they would have a full defence to the civil penalty. 

As the employer hasn’t undertaken the compliant right to work check themselves, they have no statutory excuse, no defence, and must pay the civil penalty. Not only do they have to pay the penalty, but their business name will be published on a publicly available illegal working report, and they could lose their sponsor licence if they receive two or more penalties. This would be a disaster for the employer as all sponsored workers employed by them could no longer be employed.

Expansion of right to work checks in the gig economy

Currently, the duty to undertake right to work checks applies to employers who employ staff under a contract of employment, service or apprenticeship. It does not apply to workers who are not a direct employee, for example where they are self-employed. 

This distinction has meant that most gig economy companies, such as couriers, taxi service providers, and food and goods delivery services, have not been subject to the civil penalty regime, and have been left to regulate themselves. Unsurprisingly, this has led to gig economy companies becoming a haven for illegal work. During random checks two years ago, the Home Office found that two in five delivery riders who were stopped were working illegally. Much of the opportunity to undertake illegal work is created by the availability of substitution clauses. These clauses are used by gig economy companies to allow drivers and riders flexibility to appoint a substitute if they wish. They are however openly used to allow people with no permission to work in the UK to work illegally.   

The App Drivers and Couriers Union recognises the issues arising from a lack of regulation in the sector, saying “Unfortunately there is this loophole that allows some bad people to come through. They are not vetted so they could do anything”.

In an important proposal within the Employment Rights Bill, the Government proposes to regulate the use of substitutes in the gig economy by requiring company directors of relevant companies to keep a register of all dependant contractors, including those carrying out work for the company under a substitution clause. This will apply to companies that provide services in relation to postal and courier activities, food and beverage service activities or taxi operation, have more than 250 employees in the UK and overseas, and include provision within the company’s contracts with contractors which allow the contractor to send another qualified person (a substitute) to complete the work in the contractor’s place.

In tandem, the Government has proposed amendments to the Borders and Immigration Bill to expand the duty to undertake right to work checks to workers or individual sub-contractors, such as those working in the gig economy. It is understood that this requirement will cover those working as subcontractors, but as currently drafted will not extend to substitutes. The Government’s intention however is to tighten up regulations to bring substitutes within right to work regulations, although this is recognised as being challenging due to the complexity defining status under employment law, and far-reaching consequences of these changes. 

Those working as substitutes can easily go undetected. The proposal to require companies to maintain a register of substitutes would provide much needed transparency and would support a further expansion of the duty to prevent illegal working and would enable these gig economy companies to be held to account.