Right to work: Are contractors being asked to go beyond the law?

The Home Office’s new right to work (RTW) requirements are creating another potential risk for the construction supply chain.  

We are already seeing RTW schedules being introduced to construction contracts which go significantly beyond statutory compliance, imposing absolute obligations, potentially uncapped liabilities and new rights to withhold payment or terminate.

For contractors and sub-contractors, the question is not simply whether they are complying with the law. It is whether they are being asked to take responsibility for risks they cannot realistically control.

What has changed?

The UK-wide RTW regime is principally set out in sections 15 to 25 of the Immigration, Asylum and Nationality Act 2006.  

From 1 October 2026, changes introduced by the Border Security, Asylum and Immigration Act 2025 extend the regime beyond conventional employment arrangements to include worker’s contracts, individual sub-contracting agreements and certain online matching services. New provisions applying to contracts starting on or after 1 October 2026 also address responsibility further up a contracting chain and substitution arrangements.  

In broad terms, this means that a business which sub-contracts work may be treated as employing those who carry it out.

The Home Office will ordinarily seek to take action against the direct employer. Civil penalties can be substantial: up to £60,000 per illegal worker, with the Home Office's starting point currently £45,000 for a first breach and £60,000 for a repeat breach.  

However, where the direct employer cannot be identified or the contractual terms do not contain the prescribed terms, the Home Office may take action for payment of a civil penalty to another person upstream in the chain of contracts through which the work or services are being delivered.  

How can contractors prevent civil penalties?

With penalties starting at £45,000 per illegal worker identified, businesses upstream need to protect themselves by ensuring all contracts entered into impose five prescribed requirements on the relevant sub-contractor:

1. They carry out prescribed RTW checks
2. They must not further sub-contract the worker or services without prior written consent
3. They must permit audits to be carried out on RTW checks to ensure that they establish a statutory excuse against a civil penalty
4. They must enable enforcement action (including suspension or termination) to be taken where illegal working is identified and there is no statutory defence or equivalent provisions in respect of the direct contractual relationship between the employer or service provider and the individual who is carrying out the work or services
5. They must require the employer to co-operate with any Home Office investigation in relation to illegal working

The statutory excuse remains central. Correctly carried out RTW checks, record keeping, and any necessary follow-up checks can protect both the direct employer and businesses upstream from having to pay a civil penalty fine. Requirements should be checked against the legislation and current Home Office guidance, rather than assumed from a schedule presented for signature.

The real risk is in the contract

The legislation establishes compliance requirements. The contract determines who carries the financial consequences when something goes wrong. Those are not necessarily the same thing.

In our recent work, several recurring issues have emerged:

• Absolute guarantees. Obligations to ‘ensure’ that every individual at every tier has the right to work, rather than obligations framed by the checks and controls the relevant party can undertake.
• Repeated warranties. Declarations on every payment application which may amount to fresh, unqualified guarantees about the entire supply chain.
• Uncapped indemnities. Liability for investigations, penalties, delay or other losses, sometimes regardless of fault and outside the contract’s overall liability cap.
• Payment and termination rights. Broad withholding powers or automatic ‘material breach’ provisions triggered by administrative failures, without proportionate remedies or an opportunity to put matters right.
• Suspension and removal. Rights to remove personnel or stop work without a clear mechanism for dealing with time and cost where concerns prove unfounded.

Individually, these clauses deserve scrutiny. Taken together, they can turn a problem several tiers down the chain into a potentially disproportionate claim against a party with limited practical control over what happened. They also need to sit coherently alongside existing provisions on statutory compliance, payment, instructions, default and termination.  

For main contractors, effective compliance requires clear responsibilities, workable verification procedures and proportionate remedies. An onerous schedule may offer apparent protection on paper while creating real difficulties in delivery.

For sub-contractors, the priority is to distinguish obligations they can properly discharge from guarantees about other businesses and individuals over whom they have little control.

What to check before signing

Here are things to consider before signing a contract:

• Compare the schedule with the statutory baseline. Identify what the law actually requires and where the proposed wording goes further.  
• Keep responsibility proportionate. Qualify absolute guarantees and seek to link indemnities to a defined breach, appropriate causation and the agreed liability cap.
• Protect payment and termination. Ensure any deductions comply with the contract and statutory payment machinery; resist automatic termination for remediable failures.
• Consider the programme and price. Supply chain checks, revised terms and site procedures take time and money. Establish who bears those costs before committing.
• Control changes after signature. Check whether new obligations can properly be instructed under the contract and what adjustments to time or money follows.  
• Put practical controls in place. Map the supply chain, update relevant sub-contract terms, address substitution and site identity checks, and ensure that statutory requirements are met from the outset.

Legal advice for contractors and sub-contractors

RTW compliance is not optional, but accepting unlimited contractual responsibility for everyone in a construction supply chain should not be the price of compliance.  

The challenge is to ensure contractual obligations reflect the legislation, allocate responsibility to those best placed to manage it, and provide proportionate remedies where something goes wrong.

Get in touch with our Construction and Business Immigration teams if you are reviewing a RTW schedule, updating your construction contracts or need guidance on whether your processes are fit for purpose. Our legal experts are here to support you.