A draft revised Code of practice on preventing illegal working has been published and is due to come into effect from 1 October 2026. It reflects new legislation that significantly increases the risk of businesses receiving an illegal working civil penalty of up to £60,000 per worker, particularly for organisations using complex labour supply chains, subcontractors and agency arrangements. Online job matching platforms are also affected. Organisations should begin planning and making operational changes now to ensure compliance by the go-live date.

---

What should businesses do now?

The changes take effect from 1 October 2026. Businesses should begin preparing now, particularly those with complex labour supply chains or high volumes of non-employee workers. We would suggest the following actions:

• Map all categories of labour used by the business;
• Identify which arrangements could be in scope from 1 October 2026 and prioritise high-volume or high-risk areas;
• Review and update right to work policies, onboarding procedures, repeat-check processes and document retention processes so they reflect the requirements of the draft Code;
• Review and update contracts with agencies, subcontractors and service providers;
• Check RtW DVSP registration, confirming whether existing or prospective DVSPs are registered on the relevant OFDIA register and have a note confirming they can provide right to work checks;
• Assess identity verification options where extended liability applies;
• Train relevant teams – HR, procurement, contract management, operations and line managers will all need to understand the new requirements;
• Build an evidence pack approach so the business can demonstrate compliance quickly in the event of a Home Office information request – the Code emphasises that persons seeking to rely on a statutory excuse must retain sufficient evidence of the steps taken and provide evidence of compliance on request; and
• Seek specialist advice promptly, particularly for complex supply chains, online matching services, arrangements where substitution is allowed and/or where there are known weaknesses in current right to work checking processes.

---

Key new definitions in the Code

The Code introduces several new definitions for the purposes of the right to work scheme:

‘Employer’ which, as noted above, means a person who employs an individual under a contract of employment (contract of service or apprenticeship), under a worker’s contract, as an individual sub-contractor, or when operating as an online matching service providing details of an individual service provider to potential clients or customers. References to ‘employment’ in the Code of practice include all of these working arrangements, and references to a ‘contract’ includes express or implied contracts, whether oral or written.

‘Individual sub-contractor’ which means an individual who has entered into a contract with a ‘person’ to provide work or services, in circumstances where the other person has entered into a contract with a third party to provide, or arrange for the provision of, the work or services, but the individual has not.

We anticipate the ‘individual sub-contractor’ definition may prove complex for businesses to apply in practice (especially whether an individual’s work or services are provided for the purposes of fulfilling a third party contract) and could present a significant new risk area for compliance.

‘Online matching service’ which means a ‘person’ who, in the course of their business, keeps a register of ‘service providers’ in order to match them with potential clients/customers via an online service, and who charges a fee or commission when a match is made.

‘Person’ which means a company, organisation, business or other entity – it doesn’t mean an individual worker unless the Code expressly states so.

‘Service provider’ which, in the context of an online matching service, means a ‘person’ providing, or seeking to provide work or services for payment.

‘Substitution’ which refers to where a worker is permitted to substitute their work or services to another individual, including through a contractual clause allowing the worker to be replaced by another individual to perform the same work or services.

In practice, a right of substitution will exist where the individual engaged is self-employed and the contract involved is a contract for services.

‘Worker’ or ‘individual’ which means an individual engaged to carry out work or provide services under a contract of employment (employee), under a ‘worker’s contract’, as an ‘individual sub-contractor’, or through an ‘online matching service’.

‘Worker’s contract’ which means any non-employee contract whereby the individual undertakes to perform work or services personally for another person (whether or not that person is mentioned in the contract), and where that person is not a client or customer of any profession or business undertaking carried on by the individual.

---

How a statutory excuse works in the context of non-direct contractual arrangements

Where an ‘employer’ may be potentially liable for an illegal working civil penalty, it can protect itself from liability by completing ‘prescribed requirements’ to obtain a statutory excuse.

Currently, this generally means completing and evidencing a manual, online or Digital Verification Service (DVS) right to work check before employment begins, as well as completing and evidencing follow-up right to work checks before any time-limited statutory excuse expires.

Section 3 of the Code addresses the extended liability that will arise for ‘employers’ engaged in non-direct contractual arrangements from 1 October 2026, i.e. where an individual who doesn’t have the right to work in the UK personally provides work or services in the following contexts:

• Where a ‘person’ is under contract to provide work or services to a third party and in turn contracts with another employer who employs the individual to carry out some or all of the work or services required to fulfil the third party contract;
• Where a ‘person’ is an online matching service and a registered service provider is engaged by a user of the online platform to carry out a job; or
• Where a ‘person’ engages an individual under a contract that includes a right of substitution.

In each of these circumstances, the ‘person’ may be treated as employing the individual who personally provides the work or services, irrespective of how long the chain of contracts is between them and that individual.

The Code makes it clear however that end-users/clients/customers of a service who commission or buy work or services for their own benefit (and are not under a contract to provide those services onwards to a third party) are not within scope of the extended liability provisions.

The Home Office’s states its objective will continue to be identifying the employer in the direct contractual relationship with the individual worker. However, where the direct ‘employer’ can’t be identified or another ‘person’ in a chain of contracts isn’t able to show sufficient evidence that they have complied with the ‘prescribed requirements’ discussed below (i.e. contractual terms and conditions, substitution controls and identity verification), that ‘person’ may be liable for an illegal working civil penalty.

The Home Office states it will ‘have regard to the nature of the contractual arrangements and the extent to which each party has complied with the prescribed requirements’ when deciding whether to apply liability to each relevant person in a chain of contracts. What this means in practice is that relevant persons should not be complacent about satisfying the prescribed requirements, even where a direct employer is identifiable, and even if the contractual arrangement they are a party to is multiple contracts removed from the one under which the illegal worker is engaged.

If you have any specific questions you would like advice on or if you would like information about what is discussed in this article, please get in touch with Li.Xiang@lewissilkin.com of Lewis Silkin LLP.