Pay & Benefits Article
Illegal Working: Penalties at work June 2014

28 May 2014

Illegal Working: Penalties at work June 2014

As part of the Immigration Bill, the Government wants to increase fines under the civil penalty regime to £20,000 to deter illegal working. Dawn Lewis highlights the effect this will have on employers.

Speed read

The Government is keen to deter employers from engaging illegal workers and has proposed increasing the maximum fine under the civil penalty regime from £10,000 to £20,000. This change is unlikely to affect diligent employers. However, it does highlight the importance of checking for unusual employee circumstances that may catch out some businesses. The Government is keen to strengthen and simplify the civil penalty scheme to deter employers from hiring people with no right to work in the UK, sometimes at rates of pay below the national minimum wage and with few or no employment rights. Employers already have a responsibility to ensure their workers can legitimately work here. Since 2008, this has been reinforced by the penalty regime, which currently has a maximum automatic fine of £10,000 per illegal worker. Although this has helped, the Government is seeking to make refinements to clamp down on employers that continue to exploit labour and make it fairer on law-abiding organisations.

Civil penalty scheme

The proposed changes to the civil penalty scheme are part of the wider Immigration Bill now going through the House of Lords. Its aim is to support migrants who contribute to life in the UK, but take action against those who have no right to be in the country.

"The Bill will make it more difficult for illegal migrants to live and work in the UK and it will also ensure that legal immigrants make a proper contribution to our key public services," comments Home Secretary Theresa May in the Government's response to the consultation on the preventing illegal working.

To improve the existing prevention of illegal working provisions, the Government is proposing to increase the penalties that can be applied and make them simpler to enforce. It also wants to make it easier for employers to comply with the right-to-work checks.

"To deliver a strong deterrent to illegal working we need to enforce the rules effectively," adds May. "Our enforcement operation is also working closely with other Government departments to increase our enforcement reach and the range of sanctions we can bring to bear against abusive and exploitative behaviour by some employers."

Higher penalties

The Government wants to increase to £20,000 the maximum penalty for engaging an illegal worker. Although this may go some way to deterring rogue employers, for legitimate businesses it is unlikely to change the status quo. However, there have been warnings that this high fine may disproportionately affect smaller employers and put them off engaging migrant workers.

Pat Saini, Head of Immigration at law firm Penningtons Manches, highlights a big distinction between employers that do not conduct any right to work checks and those that believe they are carrying out the correct processes but their system malfunctions.

"The maximum penalty per worker may be reduced depending on whether document checks have been done and to what extent they were completed," she explains. Although the maximum penalty is likely to be £20,000, the Government's response to the consultation into this issue states the intention is to set the fine at £15,000 for a first breach.

Recovering fines

A key issue with the existing scheme is the Government's effectiveness at recovering penalties. Between February 2008 and the end of 2012, more than 8,100 civil penalty notices were issued, equating to £57.5 million in fines. However, according to Government figures as at July 2013, only £24 million had been paid, £16.5 million were payable and subject to recovery, and just over £17 million had been written off. This was attributed to the fact that many companies with outstanding fines had ceased to trade.

Natasha Chell, Partner at Laura Devine Solicitors, says: "This is a big issue with the current regime. It is all well and good that they are trying to increase the level of the civil penalty but if people are getting away with it then it's not going to have much effect."

To improve the recovery rate, the Government suggested in its consultation making directors and partners of limited liability companies, as well as the business, liable for a civil penalty. However, the reaction was negative, and as a result it was indicated that the provision was unlikely to be implemented.

Saini adds: "More does need to be done to improve the collection rate. I would query whether a business that shuts because it cannot pay the fine will resurface in some other shape or form."

Carry out the right checks The Home Office offers a guide to employers on how to prevent illegal working. Towards the back of the document it provides a comprehensive checklist to help businesses ensure they have the correct information about their staff. It outlines four steps:

  1. You must ask for and be given an acceptable document.
  2. You must check the validity of the documents.
  3. You must take and retain a copy of the documents.
  4. If you receive a civil penalty from the Home Office but have carried out the above three steps on the individual in question as outlined in its guidance, you will have an excuse against payment. However, you need to be aware of the type of excuse you have because this determines how long it is valid for.

To read the full guidance from the Home Office, visit this link.

Other proposed changes

Employers are expected to carry out annual checks on migrant workers. Many view this administrative task as laborious, particularly where a migrant has permission to work in the UK that is valid for a long period.

"The Government is proposing to replace this with a check shortly before the point of expiry, but in reality employers will already be doing that, especially diligent ones that are proactive," says Chell.

Debra Schofield, Service Director UK & Ireland for recruitment agency Kelly Services, agrees that most businesses will already be doing these checks and adds that monthly document monitoring will continue in her company.

She explains: "It is one of our mandatory checks that we carry out monthly on our temporary staff. We use a system to generate reports to allow us to do that. We certainly wouldn't stop doing it."

There are also proposals to remove warning letters for first-time breach of the right-to-work checks. The reasoning behind this suggestion is that employers should be aware of their responsibility and that the availability of a warning over a penalty may not encourage upfront compliance.

Many respondents to the consultation were concerned about this amendment, highlighting that small and new employers may lack an understanding of the rules. As a result, the Government response states that it will keep the warning letter, but will narrow the circumstances in which it will be applied.

Complex anomalies

Although it could be argued that the provisions are aimed at rogue employers who intentionally disregard their employment responsibilities, many legitimate businesses can be caught out, usually by anomalies in their workforce.

Saini explains that there can often be complex situations, particularly with students and partners of European Economic Area (EEA) nationals. For example, an employer might be engaging the partner of an EEA national who is exercising treaty rights. That partner is able to be in the UK because of those rights, but how does the employer ensure that the employee is still married to the EEA national and that they are still in the UK exercising their rights?

Students can also be problematic. Some can work, but the number of allowable hours will vary depending on their visa and whether it is term time.

Another problem highlighted by Saini was the time the Home Office takes to issue documentation to migrants. On occasion an individual may be entitled to work in the UK. However, because they do not have the correct paperwork when the employer needs to see it, they may miss out on a job.

"The Government is trying to tackle these issues by lowering processing times for applications, they're trying to get information on their system as quickly as possible," she says. "However, increasingly, if you turn up for a job and your partner's application has not yet been recorded on the Home Office's computer then the information is not going to be at hand."

The tier 2 system

The tier 2 system is part of the immigration system and allows employers to sponsor migrants. It replaced the work permit scheme in 2008, dramatically changing sponsorship.

"Employers are now akin to immigration officers, with the whole tier 2 system having a big focus on voluntary disclosure, and employers working with the Home Office to monitor and track migrants," says Chell. "While this was quite a shock to employers at first, many small and medium-sized enterprises and internationals have taken on these responsibilities and, with clear systems in place, can run a business with the brightest and best talent from overseas."

Saini agrees that employers are happy with the tier 2 sponsorship arrangement. However, problems can occur when visa renewals are sent back because the forms have been incorrectly filled in. As a result, the visa can expire in the interim, which may leave the employee without the right to continue to work.

She adds: "This is why a lot of employers will resort to using the same-day process where a new visa can be obtained within 24 to 48 hours, or the tier 2 priority postal service - because the cheapest postal route would take anything up to four to six months. So people are paying these extra fees to make sure these visas are processed quickly."

Right-to-work checks

Legislation provides that employers have a statutory defence against illegal working as long as they have undertaken the right-to-work checks. Chell says these are straightforward but emphasises that the responsibility to ensure the legitimacy of workers falls with the employer and not with any other third party.

Despite this, Schofield highlights that, as a recruitment business, Kelly Services has two roles. The first is as an agency, in that it supplies workers to other companies and is therefore the employer. In this capacity it is responsible for ensuring that these individuals are eligible to work in the UK as part of its compliance processes. The second element is where it puts forward candidates to employers.

"Where we are submitting candidates to customers for permanent roles, although there is no legal obligation for us to check, from a professional point of view it is our best practice to check work eligibility," comments Schofield.

She adds that the company wouldn't want to submit a candidate who was ineligible to work in the UK so, where possible, it will carry out checks. However, she notes that in an increasingly global recruitment market this is not always possible.

The impact on employers

The rise in civil penalties is unlikely to dramatically change the approach diligent employers take to carrying out right-to-work checks. However, businesses should put in place processes to make sure that they are not caught out by unusual employee circumstances.

Additional changes to illegal working requirements

More changes to the UK's prevention of illegal working requirements and associated civil penalty scheme came into force on 16 May 2014 in addition to those highlighted in the article, Penalties at work, (Pay and Benefits, June).

Annual checks have now been replaced with mandatory ones when the migrant employee's immigration permission expires. However, should they present one of several documents, a follow-up check is required within six months.

These documents are a Certificate of Application less than six months old for an European Economic Area/Swiss national family member stating the holder's employment permission and a Home Office Employer Checking Service (HOECS) Positive Verification Notice; an Application Registration Card stating the holder's employment permission and an HOECS Positive Verification Notice; or an HOECS Positive Verification Notice to the employer stating the named person's employment permission.

The grace period for employers to conduct right-to-work checks on employees acquired under the Transfer of Undertakings (Protection of Employment) Regulations has been increased from 28 to 60 days.

Employers reasonably believing that an employee has filed an extension application or immigration appeal now have a 28-day grace period from the date of expiration of the employee's work permission to conduct a follow-up check.

The Home Office has amended and reduced the prescribed documents in List A and List B of the Code of Practice for right-to-work checks, many of which must now not have expired.

There is also a new requirement for employers to record the date they undertook the right-to-work check. In addition, when relying on a passport, employers no longer need to copy the front page.

Employers hiring a student with restricted work permission must obtain evidence from the educational sponsor confirming the academic term and vacation times over the period of study for which they will be employed.

Finally, a partial right-to-work check is no longer a mitigating factor in the calculation of a civil penalty.

Natasha Chell
Laura Devine Solicitors