UK employers review supply chain risks as new Right to Work liability takes effect

The new Right to Work rules are now in force, extending mandatory checks beyond conventional employees to a wider range of working arrangements. But another significant change, which took effect on 1 October, is the introduction of extended liability, meaning businesses can now face penalties for illegal working further down certain contractual chains.
For employers, the changes raise important questions about their contractual arrangements and the steps needed to protect themselves. We’ll speak to immigration expert Shara Pledger about what businesses need to know.
The final Home Office guidance, published on 1 October, provides further clarification about the new extended liability regime, including how it applies to contractual arrangements already in place before the changes took effect.
Importantly, the rules are not intended to apply retrospectively to existing arrangements that continue unchanged. However, questions remain about what happens when those agreements are extended, varied, or used for new packages of work.
For businesses operating through contractual chains, understanding where liability arises and when additional protections are needed is now a key compliance issue.
So, how does this new extended liability work in practice? Earlier I spoke to immigration expert Shara Pledger by video-link from Manchester and I put that question to her:
Shara Pledger: “The biggest change, really, in relation to this new right-to-work scheme has been the introduction of this concept of extended liability. So, moving away from the previous position that we had, where it was only the direct employer of the individual who was liable, and looking instead to see where does that individual actually go? Where do their work or services get passed on to for the benefit of somebody else? So we now have this new indirect liability scheme. It covers circumstances where you have a business, an organisation, whatever, that is contractually obligated to deliver work or services onwards to their own customer, and they engage with a third-party company, so an employer, work, labour, provision service, etcetera, and they gain the employees, or the work, or the services from them in order to fulfil that contractual obligation that is further up. So we have a chain that has a minimum of three links with an organisation that is obtaining this indirect liability in the middle, their customer at the top, and then whatever the third-party engagement is that they have beneath them to gain that work, or services, that they need in order to serve the needs of their own customers.”
Joe Glavina: “What has the guidance clarified about when extended liability starts, Shara?”
Shara Pledger: “Well, the prescribed requirements have been now incorporated into the guidance as of 1 October, but the guidance is a little bit confusing in terms of exactly when those prescribed requirements are needed. There are some elements that we know definitely are included, so it's definitely going to be a need that if you're putting new pen to paper, as it were, so a brand new agreement that is signed and is commencing as of 1 October or later, that is going to be caught in this indirect liability scheme and employers will want to be having additional protections within some of that documentation, additional steps that they need to take to make sure that they are protected against indirect liability. At the other end of the scale, we also know exactly what it doesn't apply to. So we know that where we have contractual arrangements that are ongoing already, so they had started before 1 October and they continue unchanged from that date, we know that they are not included. The Home Office has been very clear that they do not intend there to be retrospective activity in relation to those arrangements. The uncertainty sits in the middle. So where we have long-standing commercial arrangements and contractual arrangements that might last for several years, it's very common to have things like extensions, variations, call-off, or work packages under those agreements, which may be new as of 1 October. As the scheme was introduced on the first, it isn't 100% clear whether or not these should or should not be excluded. So, where possible, the most risk-averse approach would be to have prescribed requirements in place in relation to where those new, clearly defined packages of work are happening from 1 October onwards.”
So, the key point for employers is that the new Right to Work rules can now expose businesses to liability for illegal working further down certain contractual chains. Employers need to understand where that liability arises and review their contractual arrangements to make sure appropriate protections are in place.
Shara is currently working with clients to help them navigate these changes. If you would like advice on how the new rules affect your business, please do contact Shara – her details are on the screen for you.