Illegal Working and Civil Penalties

Key Takeaways

• A civil penalty for employing an illegal worker starts at £45,000 per worker for a first breach and £60,000 per worker for a repeat breach. The amounts apply per worker rather than per visit, so one enforcement visit can produce a six figure bill.
• Liability does not depend on you knowing anything. The penalty is civil, and an employer who genuinely believed the person had permission to work can still be liable.
• The Home Office has to say which of the four grounds of liability it is relying on. A notice that simply lists all four can be invalid.
• There are three statutory grounds of challenge: you are not liable, you have a statutory excuse, or the amount is too high. You have 28 days to object, and the appeal to the county court only opens once you have objected.
• Objecting in time does not cost you the 30 per cent faster payment reduction, but the Home Office can increase a penalty as well as reduce it, so the grounds need evidence behind them.
• One first breach penalty does not automatically cost a sponsor its licence. The licence consequence attaches when you remain liable after your objection and appeal rights are exhausted, which is a reason to challenge rather than pay.
• WorkPermitCloud works on both sides of this. Our civil penalty service handles objections and county court appeals, and our right to work check service builds the statutory excuse that stops a penalty arriving.

Introduction

This page is for UK employers, HR teams and licensed sponsors. It explains when an employer becomes liable for illegal working, how the penalty is calculated, how to challenge a notice, and what a penalty means for a sponsor licence and for the people who run the business.

It covers what happens when an employer does not hold a statutory excuse. How to obtain that excuse, and how to carry out a compliant check in the first place, is dealt with separately in the section below.

When an Employer Is Liable for Illegal Working

The civil penalty scheme sits in section 15 of the Immigration, Asylum and Nationality Act 2006. It makes an employer liable for employing an adult who is subject to immigration control and who is not permitted to do the work in question. The illegal working provisions apply to people aged 16 and over.

Two features of the scheme surprise employers. The first is that it is civil rather than criminal, so there is no requirement for the Home Office to prove dishonesty or even carelessness. The second is that liability turns on one specific ground rather than a general allegation, and the ground matters because it shapes what your defence looks like.

The Four Grounds of Liability

An employer contravenes section 15 in one of four situations. Only one of them can be true of any given worker, because they are mutually exclusive.

The last of these catches more compliant employers than the others. A student working more than the permitted hours in term time, or a sponsored worker taking a second job outside the rules on supplementary employment, engages section 15(1)(b)(iii) even though the person is lawfully in the UK and holds a valid visa.

Who Counts as an Employer

For most of the scheme's life it applied to contracts of employment. That changed with section 48 of the Border Security, Asylum and Immigration Act 2025, which inserts sections 14A and 15A into the 2006 Act and extends the illegal working provisions well beyond employees. Section 48 was commenced on 1 October 2026 by the Border Security, Asylum and Immigration Act 2025 (Commencement No. 4) Regulations 2026, made on 24 June 2026.

The wider definition applies to engagements beginning on or after 1 October 2026. The commencement regulations contain no transitional provision, so this comes from Home Office guidance rather than from the face of the legislation: the position taken is that a penalty for the newly captured arrangements may only be imposed where the engagement commenced on or after that date. A renewal or a fresh engagement counts as a new one. On that basis, employing someone includes all of the following.

• Employing a person under a contract of employment, as before.
• Engaging an individual under a worker's contract, which brings in casual, temporary and zero hours arrangements.
• Engaging an individual sub-contractor.
• Operating an online matching service that provides the details of a service provider to potential clients or customers.

The practical effect is that a large number of businesses that never considered themselves employers now sit inside a penalty scheme carrying £45,000 per worker. Platforms, agencies and any business that engages individuals rather than staff are the obvious examples.

Extended Liability Beyond the Direct Employer

A separate provision, section 15A, goes further. It can make a person liable even where they hold no contract with the worker at all. It applies in three situations:

• You are contracted to provide work or services to a third party, and you then contract with another employer to supply the workers who do it.
• You operate an online matching service that puts a service provider in front of a client or customer.
• A contract you hold contains a substitution clause allowing someone other than the named individual to do the work.

This is the part of the regime most likely to catch a business by surprise, because the exposure arrives through a contract rather than through a payroll. It also means the compliance obligation sits with whoever manages your contracts as much as with HR.

Genuine Self-Employment and Where the Line Sits

A person genuinely operating a business on their own account is outside the scheme. The distinction has to be real rather than a label. The code of practice is explicit that it does not exclude people who obtain work through an intermediary or a platform without running an independent business of their own, so describing someone as self-employed does not by itself put them beyond the scheme.

Where the position is unclear, the safer course is to carry out a check. There is no penalty for checking someone who turns out to be outside the scheme, and there is a very large one for the reverse. Our post on whether you need a right to work check for a self-employed contractor works through the common arrangements.

The Statutory Excuse

The statutory excuse is the complete answer to a civil penalty. An employer who holds one is not liable, whatever the worker's actual status turns out to be. Everything else on this page is a remedy. This is the cure.

What Establishes a Statutory Excuse

You obtain the excuse by carrying out a prescribed right to work check before the person begins work, and keeping clear, dated evidence of what you did. Three points decide most cases.

• Timing. The check must be completed before the first day of work, not during the first week. This is the single most common reason an excuse fails.
• Method. An online check using a share code, a certified digital identity check for British and Irish passport holders carried out through a registered provider, or a manual document check. Where the person cannot produce documents or a share code, for example because they have an outstanding application, appeal or administrative review, the Employer Checking Service is the route instead.
• Retention and follow up. Keep the evidence in a form you can retrieve quickly, with the date of the check recorded, and complete a follow up check before permission expires for anyone with time limited permission.

One rule catches out employers who use agencies. You may have the check carried out by your own staff, including agency workers who are engaged by you and working under your control, and liability stays with you either way. What you cannot do is delegate it to a third party. If a recruitment agency or a professional adviser carries out the check, you do not obtain a statutory excuse from it.

The digital identity route is narrower than it is often described. A check through a registered right to work digital verification service provider is available for British and Irish citizens holding a valid passport, or an Irish passport card, and not for anyone else. It is not a way to hand your whole checking function to a supplier.

Our guidance on Right to Work Checks covers the methods, the acceptable documents and the follow up schedule in full. The rest of this page assumes the excuse is missing or disputed.

Prescribed Requirements for Sub-Contracted, Platform and Substitution Arrangements

For the arrangements caught by extended liability, a check in the ordinary sense is not always possible, because you may never meet the person doing the work. The statutory excuse is established instead by meeting prescribed requirements about the contractual arrangements themselves. In outline these cover three things.

• The contract terms. Before work begins, a written agreement requiring the other party to carry out prescribed right to work checks, preventing further sub-contracting without your consent, giving you the right to audit compliance, giving you the right to suspend or terminate, and requiring cooperation with the Home Office.
• Substitution controls. Where a contract permits substitution, a check on each worker and each substitute, no work before verification, and contractual provisions allowing termination for illegal working.
• Identity verification. Proportionate systems confirming that the person performing the work is the person who was checked, for example workplace passes, facial verification or biometric systems, re-verified at reasonable intervals through the engagement.

The requirements are set out in the code of practice on preventing illegal working, which should be read alongside the contracts themselves. This is a genuinely new compliance obligation and it is not satisfied by a clause saying the supplier will comply with immigration law.

How Much the Penalty Is

The Starting Amounts

These levels took effect on 13 February 2024 and are set out in the code of practice on preventing illegal working. Note that the public GOV.UK page on penalties for employing illegal workers quotes only the £60,000 maximum. The £45,000 first breach figure sits in the code, and the difference between the two is worth knowing before you assume the worst.

How the Penalty Is Calculated

The amount on a notice is the output of a three stage calculation, not a fixed figure.

• The Home Office considers whether you have a statutory excuse. If you do, it issues a no action notice and the matter ends.
• It considers your history, which decides whether this is a first or a repeat breach and sets the starting amount. A breach counts as repeat where a penalty or warning notice was issued for an earlier breach that occurred within three years of the current one, or where a section 21 offence was committed in that period.
• It applies the starting amount and then deducts for the mitigating factors you can evidence.

Stage three is where most of the money is, and it is the stage employers most often neglect because they are focused on arguing liability.

The Three Mitigating Factors

The unique reference number is easy to miss. Reporting a suspicion informally, or mentioning it to officers on the day of a visit, is not the same as having reported it and holding the reference that evidences it.

The combinations matter more than the individual figures. On a first breach, meeting the first two factors takes £45,000 down to £35,000 per worker. Meeting all three produces a warning notice instead, with no financial penalty at all. On a repeat breach only the first two factors are available, so the best achievable outcome is £50,000 per worker and a warning notice is not on the table.

Warning Notices and No Action Notices

A warning notice carries no financial penalty, but it is not a clean result. It counts against you where a further breach occurs within three years of the one it relates to, turning what would have been a first breach into a repeat breach at £60,000. It is also a ground on which the Home Office may revoke a sponsor licence where it was issued within the previous five years.

A no action notice is the clean result. It confirms that you are not liable and closes the case, and it is not counted when any future penalty is calculated.

There is a related point worth knowing. If a penalty is cancelled following an objection or an appeal and is not replaced by a warning notice, it does not count towards your compliance history either. Successfully challenging a notice therefore protects you twice, once now and once against the next inspection.

Paying the Penalty

A penalty can be paid in full or by an instalment plan agreed with the Home Office. The faster payment reduction is not available where you pay by instalments, so the choice is between the discount and the cash flow.

Non payment has consequences beyond the debt. For a licensed sponsor, failing to pay a first breach penalty in full, or to set up an instalment plan, within 29 days of the relevant date, or defaulting on a plan once agreed, is a ground on which the Home Office will revoke the licence. The relevant date is the date you were notified of liability if you did not object, the date your objection was rejected if you did not appeal, or the date your appeal was dismissed.

What Happens Before a Penalty Notice Arrives

A penalty notice is the end of a sequence rather than the start of one, and knowing the sequence tells you where you can still influence the outcome.

• Immigration Enforcement attends your premises and identifies a worker it believes has no right to do the work.
• You may be served with a referral notice, telling you that your case is being referred for consideration of liability.
• You are sent an information request. This is your opportunity to supply further information or evidence of a statutory excuse before any decision is made.
• A decision is taken, producing one of three outcomes: a civil penalty notice accompanied by a statement of case setting out the evidence and reasons, a warning notice, or a no action notice.

The information request is the stage most often underestimated, and it is the cheapest point at which to resolve the matter. An excuse produced at that stage avoids a notice altogether. The same evidence produced two months later has to be argued through an objection.

If officers have attended and you are waiting to hear, that is the moment to audit your records rather than the moment to wait. Our Home Office compliance visit support and our free HR compliance audit tool are both built for that window.

The Three Grounds for Challenging a Penalty

You cannot object because the penalty feels unfair, or because paying it would damage the business. The legislation limits you to three grounds, and your entire case has to be built inside one or more of them. The same three grounds apply at objection stage under section 16 and at appeal stage under section 17.

The grounds are not mutually exclusive and you can run more than one. Arguing that you are not liable does not stop you arguing, in the alternative, that the amount is wrong. What you must not do is concede liability in passing while arguing about the figure.

Where the statutory excuse is available it is the strongest ground, because it is a complete answer. The difficulty is that it depends on the quality of your records at the time of the check rather than on what you can assemble afterwards. A check carried out a week after the start date, or an undated photocopy, will usually fail.

Whether the Notice Itself Is Valid

Alongside the three statutory grounds there is a question about the notice itself. Section 15(6)(a) requires a penalty notice to state why the Home Office thinks the employer is liable.

In Akbars Restaurant (Middlesbrough) Ltd v Secretary of State for the Home Department [2026] UKSC 26, decided on 27 July 2026, the Supreme Court quashed a £15,000 penalty relating to a single worker because the notice did not identify which ground of liability was relied on. It listed the alternatives joined by “or”. Lord Sales held that the Secretary of State “must state her reasons, including by explaining which of the limbs of section 15(1) she thinks applies”.

The Court treated the regime as penal in nature and reasoned that an employer should not have to launch an appeal simply to discover what the allegation is. It rejected the argument that later clarification in the proceedings cured the defect, because the duty attaches to the notice itself. It is the notice that forces an employer to decide whether to pay, object or appeal.

The decision reversed the Court of Appeal, which had upheld the notice. A good deal of commentary written before July 2026 still reports the earlier outcome, so check the date on anything you read on this point.

Three practical points follow.

• Read the paragraph of your notice that explains why you are liable. If it recites every possible ground rather than identifying one, that is the defect the Supreme Court found unacceptable.
• Raise it as part of your objection rather than instead of your other grounds. It is an additional argument, not a replacement for a statutory excuse.
• Do not treat it as a way out. The Home Office can issue a fresh, properly worded notice, and your right to work records will be examined again.

Objecting to the Home Office

The Deadlines

This is where most challenges fail. The windows are short, they are strictly applied, and they are not extended because an adviser was instructed late.

Two details in that table are worth isolating, because they are where competent employers still lose. The objection window runs from the due date specified in the notice rather than from the date of the notice. And in Scotland the appeal is made to the sheriff rather than to the county court. Always read the dates from your own notice, because it sets the operative deadline.

How to Object, Step by Step

• Read the notice properly. Note the worker named, the amount, the due date, and whether the notice identifies one ground of liability or lists them all.
• Pull the right to work file for that worker. You need the date the check was done, what was checked, what was retained and who signed it off. Compare the check date against the employment start date.
• Decide which grounds apply. You can rely on more than one, and the amount argument can be run in the alternative.
• Gather your mitigating evidence in parallel, even if you are arguing that you are not liable at all. If the objection only partly succeeds, this is what reduces the figure.
• Write the objection clearly, addressing each ground separately and attaching the evidence relied on.
• Submit it within 28 days of the due date on the notice, and keep proof of submission and of the date.
• Diarise the appeal deadline immediately, before you know the outcome. If the objection is refused you will have very little time to move.

Take regulated advice before you submit rather than afterwards. An objection that concedes the wrong point, or that argues the amount without preserving the liability argument, is difficult to unwind on appeal. Our civil penalty service exists for this stage.

The Risk That the Penalty Goes Up

Section 16 allows the Home Office to cancel the penalty, reduce it, take no action, or increase it. An increase is uncommon, but it is a real statutory power, and where the amount goes up a new civil penalty notice is issued with fresh deadlines running from it.

This is the reason an objection should be built on evidenced grounds rather than submitted as a general protest. The question to answer before filing is not whether the penalty feels wrong. It is which ground you are running and what document proves it.

Whether to Take the Faster Payment Reduction Instead

The faster payment option reduces the penalty by 30 per cent if you pay in full within 21 days. On a £45,000 first breach that is £13,500, which is an attractive number when the alternative is months of correspondence.

Many employers assume this forces a choice between taking the discount and challenging the penalty. It does not. The code of practice confirms that an employer who objects before the deadline specified in the notice continues to be eligible for the faster payment option, and that if the objection does not succeed you are given 21 days to pay in full from the date specified in the objection outcome notice.

Two limits apply. The option is only available on a first penalty, and it cannot be combined with an instalment plan. For a repeat breach the discount does not arise at all.

The conclusion is straightforward. On a first penalty, objecting within the deadline costs nothing in discount terms, so there is rarely a good reason to pay before the notice has been properly reviewed. Paying concludes the matter, so any challenge has to be made before the money leaves your account.

Appealing to the County Court

If your objection is unsuccessful, or the penalty is only partly reduced, you can appeal to the county court in England, Wales and Northern Ireland, or to the sheriff in Scotland. The forum is fixed by your principal place of business rather than by where the breach happened. Three features of this stage catch employers out.

• You cannot go straight to court. You must object first, and the appeal then opens once the objection has been determined, or once the Home Office has failed to tell you its decision within the period allowed for it. Missing the objection window closes off the appeal route as well.
• You can only appeal on the same three grounds available at objection stage. New arguments outside those grounds will not assist.
• There is a costs risk. If the appeal does not succeed, the court may order you to pay the Home Office's reasonable costs of defending it.

The court considers the matter afresh rather than reviewing the Home Office's reasoning, which is why the quality of your documentary evidence matters more than the elegance of the argument. Where a decision needs to be challenged beyond this point, our judicial review service can advise on whether there is a route.

What a Penalty Means for a Sponsor Licence

If you hold a sponsor licence, the penalty is only half the problem. The licence consequence runs on its own timetable and is governed by the Workers and Temporary Workers sponsor guidance, which grades the outcome according to what has happened. It is more precise than the common assumption that any penalty costs you the licence.

Where a licence is revoked on any of these grounds, you cannot re-apply until at least 12 months have elapsed from the date the penalty was paid in full. The cost of returning to the sponsorship system is set out in our guidance on Visa Fees and Sponsorship Costs, and it is only part of the damage, because revocation also curtails the permission of the workers you sponsor.

Why Challenging the Penalty Protects the Licence

Read the middle column of that table again. In every case the trigger is not the arrival of a penalty. It is remaining liable once your objection and appeal rights have been exhausted, or, in the case of Annex C1(j), failing to deal with payment.

That has a direct consequence. A successful objection removes the licence ground as well as the debt. This is the strongest practical argument for challenging a notice properly rather than paying it to make it go away, and it is why the two workstreams have to be coordinated. What you say in an objection can be read across into a licence review, and a concession made to settle a penalty quickly can be quoted back at you when the licence is considered.

Our guidance on Sponsor Licence: Suspension and Revocation covers the licence process itself. On the service side, our sponsor licence suspension service and our sponsorship duties support run alongside a penalty challenge rather than after it.

Criminal Liability and Other Consequences

The Section 21 Offence

Section 21 of the 2006 Act creates a criminal offence alongside the civil penalty. It is committed by employing a person knowing that they are disqualified from employment by reason of their immigration status, or by employing a person where you have reasonable cause to believe that they are. The second limb was added by the Immigration Act 2016 with effect from 12 July 2016 and it is the more significant of the two, because it does not require actual knowledge.

On conviction on indictment the maximum is five years' imprisonment, a fine, or both. The maximum was raised from two years by the Immigration Act 2016. On summary conviction in England and Wales the maximum is the general limit in a magistrates' court, a fine, or both.

The civil penalty and the criminal offence are alternatives rather than stages of the same process. The civil penalty requires no knowledge at all. The offence requires knowledge or reasonable cause to believe. An employer who kept no records and asked no questions can find that the second limb is easier for the Home Office to establish than they expected.

Closure Notices and Compliance Orders

The Immigration Act 2016 gave immigration officers the power to close business premises where illegal working is suspected and the employer has a recent penalty, an unpaid penalty or a prior conviction for the employer offence. An illegal working closure notice runs for up to 24 hours, or up to 48 hours where it is issued by an officer of at least the rank of immigration inspector, and an extension notice issued at that rank can add up to a further 24 hours. The notice can be cancelled if you produce evidence of compliance during the closure period.

After the closure, the magistrates' court, or the sheriff in Scotland, may make an illegal working compliance order. That can continue the closure, or allow the business to reopen subject to conditions such as compliance inspections and mandatory right to work checks. For a restaurant, a car wash or a retail site, a closure of a day or two and a public notice on the door tends to cost more than the penalty.

Licensing, Publication and the Worker's Own Position

Three further consequences are worth knowing.

• Licensing. The Immigration Act 2016 made immigration status a material consideration in licensing decisions. For alcohol and late night refreshment licensing the changes apply in England and Wales. For taxi and private hire licensing they apply across the UK. In those sectors a penalty can threaten the licence the business trades on, quite separately from any sponsor licence.
• Publication. Immigration Enforcement publishes a quarterly illegal working penalties report naming penalised businesses. It does not name everyone who receives a penalty. It names employers who have not paid, or are not making regular payments, 28 days after exhausting their objection and appeal rights, and employers served with a second or further penalty once those rights are exhausted.
• The worker. Illegal working is also a criminal offence for the worker, carrying a maximum of 51 weeks' imprisonment in England and Wales, and six months in Scotland and Northern Ireland, together with a fine. Earnings are recoverable under the Proceeds of Crime Act 2002. The two liabilities are separate, and your worker being prosecuted does not reduce your penalty.

How to Avoid a Penalty

Every remedy on this page costs more than the check that would have prevented it. Six habits separate employers who survive an inspection from employers who do not.

• Complete the check before the first day of work, every time, with no exceptions for urgent starts or for people who are known to the business.
• Keep the evidence in a form you can retrieve in minutes, with the date of the check clearly recorded on it. An excuse you cannot produce on the day is worth very little.
• Diarise follow up checks for everyone with time limited permission, and complete them before expiry rather than after a reminder.
• Train the people who actually run the checks. In most organisations that is a line manager rather than HR, and it is the line manager who will be asked to explain the file.
• Extend the same discipline to agency, sub-contracted and platform labour, and to any contract containing a substitution clause.
• Audit honestly, before the Home Office does it for you.

Our free right to work check tool walks through the correct method for a given individual, and our HR compliance audit tool gives a structured view of where your records would fail scrutiny. Where the volume justifies a system rather than a spreadsheet, our UKVI compliant HR software and HR compliance service keep every check and expiry date audit ready. The employer's guide to right to work checks on GOV.UK is the underlying source for all of it.

Licensed sponsors have a second reason to get this right. Right to work checking is part of your sponsor duties as well as a defence to a penalty, and the two are assessed together. The GOV.UK summary of sponsor duties and compliance sets out the wider obligation, and our immigration compliance service covers both sides.

Detailed Guides on This Topic

• Do you need a right to work check for a self-employed contractor? Works through the arrangements where the answer is not obvious, including sub-contractors and substitution.
• New right to work checks for gig economy and construction workers The operational detail for the arrangements brought into scope for engagements beginning on or after 1 October 2026.
• Employer checking service: can ARC card holders work? When the Employer Checking Service is the right route and how to use it.

How Can WorkPermitCloud Help?

WorkPermitCloud is an IAA regulated legal and HR technology firm specialising in UK business immigration and HR compliance. If a notice has arrived, our civil penalty service reviews the wording and the amount, builds your objection or County Court appeal, and manages the sponsor licence risk in parallel so that a penalty does not turn into a revocation. If you would rather never receive one, our right to work check service and free right to work check tool build and evidence the statutory excuse, while our UKVI compliant HR software keeps every check and expiry date audit ready. We also provide immigration compliance advice, Home Office compliance visit support, sponsorship duties support and judicial review where a decision needs to be challenged further. You will find more employer guidance across our blog library.

Conclusion

A civil penalty notice is not a bill to be paid on receipt. It is a decision that can be tested, on grounds set out in statute, within deadlines that are short but workable if you start on the day the notice arrives. Employers who understand the three grounds, who check whether the notice itself identifies the ground relied on, and who can evidence the mitigating factors, routinely achieve better outcomes than employers who simply pay.

For a licensed sponsor the case for challenging is stronger still, because the licence consequence attaches to remaining liable rather than to receiving the notice. Paying quickly to make the problem disappear can be the step that creates the larger one.

The better position, of course, is never to receive a notice at all. A compliant check completed before the first day of work, properly evidenced and followed up before expiry, remains the only complete answer, and it now has to reach further into the business than payroll.

Glossary