The announcement from the Home Office regarding the increase in liability for a civil penalty has undoubtedly been heard by all employers in the UK. It is certainly a hot topic in the temporary labour market.
The consequences of employing an illegal worker can now result in three times the liability. As employers will know, there has not been a change to the penalty regime in 10 years! In the words of Suella Braverman, this really is the “biggest shake up” of civil penalties since 2014.
We would urge all employers to be fully prepared and comfortable with their processes when undertaking right to work checks because this “shake up” came into force on Monday, 22nd January 2024. The draft legislation set to implement the proposed changes has now been released. By way of reminder, under the previous regime the prescribed maximum penalty is £20,000 per illegal worker.
The draft legislation changes the maximum penalty that can be imposed on an employer for the employment of an illegal worker to £60,000 per illegal worker. Importantly, the draft legislation makes clear that £60,000 is the maximum penalty. As many employers will be aware, under the current regime, the maximum penalty of £20,000 can be reduced by increments of £5,000 based on mitigating factors and this is set to continue under the new regime.
The ‘Draft code of practice on preventing illegal working’ confirms that the Home Office will follow a specified framework, which comprises of three stages, with the aim of providing a consistent approach to determining liability and calculating the amount of the penalty (including, where relevant, mitigation). By way of an extract from the aforementioned code of practice, the three stages for calculating the penalty level are as follows:
- Stage 1: Determining liability. Where an employer has been found to have employed someone with no right to work, do they have a statutory excuse?
- if the answer is yes, the Home Office issues a no action notice
- if the answer is no, proceed to stage 2
- Stage 2: Determining the level of breach. Has the employer breached the civil penalty scheme within the past three years?
- if the answer is yes, the case will proceed to stage 3, repeat breach
- if the answer is no, proceed to stage 3, first breach
- if the answer is yes, the case will proceed to stage 3, repeat breach
- Stage 3, Determining the penalty amount. The Home Office determine the penalty level depending on whether this is the employer’s first breach of the scheme or a repeat breach.
- penalty level for first breach within the last 3 years – £45,000 per illegal worker
- penalty level for repeat breach (within 3 years) – £60,000 per illegal worker
As evident from the above stages, the approach taken by the Home Office seeks to punish repeat offenders. Employers with a history of breaches, or even just 1 breach in the previous 3 years, will be faced with a civil penalty notice of up to £60,000. First time offenders will be faced with a civil penalty notice of up to £45,000. As with the current regime, the possibility of reducing the starting penalty of £45,000, or £60,000 (if dealing with a repeat breach), remains the same. That is, the Home Office has the discretion to reduce the penalty by increments of £5,000 if any of the mitigating factors apply.
For completeness, mitigating factor 1 considers whether the employer has already reported the suspected illegal worker to the Home Office. If yes, the penalty is reduced by £5,000. Mitigating factor 2 considers whether the employer has actively cooperated with the Home Office during the Home Office’s investigation. If yes, the penalty is reduced by £5,000. There is, however, one difference from the existing regime as a result of the strict approach towards repeat offenders. That is, an additional mitigating factor has been introduced for first time offenders only, otherwise referred to as mitigating factor 3.
Mitigating factor 3 for first time offenders only considers whether the employer has effective right to work checking practices in place together with satisfying mitigating factors 1 and 2 above. If yes, the Home Office will not impose the penalty but instead issue a warning notice. Evidently, the threshold for mitigating factor 3 is very high. But, it is nevertheless significant as it reduces the penalty to nil. However, it must be noted that the warning notice issued in place of the penalty is still recorded as a breach and will therefore be considered in determining the penalty level for a subsequent breach within the following 3 years.
The best form of protection against a civil penalty notice remains the same. As set out in stage 1 above, if an employer can evidence that they have a statutory excuse then the Home Office will issue a no action notice. This means that no breach has been committed. To obtain a statutory excuse, employers must evidence that they have carried out a prescribed right to work check. Further information on undertaking such checks can be found from the Employer’s Guide to Right to Work Checks. We strongly advise all employers to read and be familiar with this. Considering the changes to the penalty regime, we expect that the employer’s guide will be updated.
Conclusion:
The new penalty regime reflects the Home Office’s stern approach toward the employment of illegal workers. Evidently, first time offenders, although better off than repeat offenders, are still paying triple the penalty for employing an illegal worker. Furthermore, despite having an additional mitigating factor with the potential of reducing the penalty to a warning notice, the threshold for doing so is very high.
If you would like more information or advice surrounding the penalty regime please do get it touch.