New UK Right to Work Rules Effective 1 October 2026: What Your Business Needs to Know

The UK is introducing significant changes to illegal working rules from 1 October 2026, affecting a much broader range of businesses than before. These reforms, set out in the Border Security, Asylum and Immigration Act 2025 and detailed in new Home Office guidance (expected in July 2026), will have a far-reaching impact, not just for HR and recruitment, but for those responsible for commercial contracts, especially where services are delivered through complex supply chains or online platforms.

If your company sits between the end client and those who perform the work, these changes are likely relevant to you. These developments are discussed in depth in materials such as the draft Employer’s Guide, new Codes of Practice, and Home Office guidance on right to work checks and discrimination risks.

Why Immigration Compliance Matters for Contract Managers

Historically, responsibility for checking employees’ right to work in the UK was a fairly straightforward HR concern, reserved for those directly employing staff. This is changing. From October, two fundamental shifts will take place:

• The scope of who qualifies as an “employer” is widening. Businesses engaging staff under worker agreements—including agency workers, casual staff, individual contractors, and digital platforms, will have direct responsibilities for conducting right to work checks.
• Liability now extends across supply chains. If you outsource or subcontract delivery of services, you may be seen as an “employer” of workers further down the chain, even if you never contract directly with those individuals.

The stakes are high. Failing to comply can mean penalties of up to £60,000 per worker for repeated offences, criminal charges, and harmful publicity for non-compliance.

Practically, this means supplier contracts and subcontractor arrangements will need to contain mandatory terms covering right to work obligations. Without these, businesses risk losing the protection of the “statutory excuse”, which can shield them from penalties if they are able to demonstrate compliance.

The Statutory Excuse: Establishing Compliance Before Work Begins

Under the new system, when illegal working is detected, the Home Office will trace liability up the contract chain if a direct employer cannot be identified.

The default is liability: companies are presumed at fault unless they can show that they’ve satisfied three requirements before work starts:

1. Specified contractual terms covering right to work compliance;
2. Controls over substitution (where a worker can be replaced by someone else), ensuring any substitute has their right to work checked prior to starting;
3. Adequate systems to confirm the worker’s identity matches the person whose right to work was verified.

These requirements mean increased scrutiny of both existing and new supplier relationships.

Extended Liability: Who Falls Within Scope?

Three scenarios now trigger the new extended liability for illegal working:

1. Service Subcontracting: If a business contracts to deliver services to a client and subcontracts all or part of that delivery to another provider, it may find itself liable for illegal working by individuals performing services, even if those workers are engaged by companies further down the chain.
2. Digital Platforms: Online matching services that connect corporate service providers with clients may face liability for illegal working by anyone performing the matched services.
3. Substitution: If contracts allow someone other than the original worker to deliver the service, businesses must ensure right to work checks for any substitutes. Failing to do so could lead to liability if the substitute is working illegally.

Key Contract Terms: What Must Be Included?

Businesses falling into the above categories must incorporate certain mandatory terms in their contracts with suppliers:

• The supplier is required to perform right to work checks for anyone delivering services.
• Further subcontracting is only allowed with written consent, and right to work obligations must be passed along in subcontracts.
• The supplier must permit audits to verify compliance.
• Contracts must allow for enforcement measures, such as suspension or termination, if illegal working is found and compliance cannot be demonstrated.
• Suppliers must cooperate with Home Office investigations and provide detailed information about the supply chain.

For substitution scenarios, contracts must also outline consequences if substitution occurs without proper right to work checks.

These are not optional clauses—they are mandatory for companies wishing to protect themselves against penalties.

Updating Existing Contracts: No Transitional Period

The updated regime applies to anyone commencing work after 1 October 2026, even if the principal contract was signed much earlier. Businesses need to ensure prescribed terms are included in any contract, addendum, or side letter covering engagements starting on or after this date. With no transitional arrangements, large enterprises with numerous supplier relationships face a substantial contract review and amendment exercise.

Who Is Excluded?

Some arrangements fall outside the regime:

• Businesses buying services for their own operations (not for onward supply) are generally not caught. For instance, a retailer contracting a cleaning company for its own premises does not need compliance clauses.
• Use of temporary workers for internal operations, as opposed to serving a third-party contract, is excluded.
• Supplying goods (rather than services or workers) does not trigger liability.
• Technology platforms that merely facilitate orders without directly engaging workers are not in scope.

Freelancers and PSCs: Still a Grey Area

Many professionals contract through personal service companies (PSCs). When a PSC is hired for a company’s own needs, no right to work check is required. However, if a PSC is part of a supply chain serving a third-party client, the prescribed clauses may need to be included—even if this means the PSC performing right to work checks on its sole director. Businesses should err on the side of caution and include compliance terms in contracts with PSCs until further guidance clarifies the position.

What Steps Should Businesses Take Now?

1. Audit existing subcontracting chains and supplier relationships.
2. Identify high-risk or high-volume relationships that involve individual workers or small suppliers.
3. Update or amend contracts to include required clauses, covering all engagements commencing from October onwards.
4. Implement standard terms for supplier and subcontractor agreements at scale.
5. Coordinate between procurement, legal, commercial, and HR teams—these new requirements cut across organisational functions.
6. Seek specialist legal advice for nuanced situations, including digital platforms, substitution arrangements, freelancers, influencers, and complex supply chains.

How We Can Support You

Our Employment and Immigration teams are closely monitoring these changes and can assist in:

• Assessing which contracts and relationships fall within scope;
• Reviewing and amending existing arrangements efficiently;
• Drafting template right to work clauses for widespread use;
• Advising on less clear-cut scenarios, like PSCs, platforms, and unique supply chains;
• Developing tools and training for procurement and contract management teams.

With the October 2026 deadline fast approaching and no grace period, now is the time for businesses to get started. For more details, contact immigration@fsp-law.com