What impact will changes to the UK’s illegal working regime have on the construction industry?

The construction sector’s reliance on subcontracting, agency labour and self-employed workers means proposed changes to the UK’s illegal working regime are likely to have a significant practical impact. From October 2026, right to work (RTW) obligations will extend beyond direct employees to the wider workforce, increasing compliance responsibilities across project supply chains.

Right to work in the UK

Currently, employers must prevent illegal working by checking that employees have the legal RTW in the UK, in line with Home Office requirements. Compliant checks provide a statutory excuse against civil penalties, which can otherwise reach up to £60,000 per illegal worker.

Incoming changes

The Border Security, Asylum and Immigration Act 2025 substantially expands the illegal working regime, which currently applies only to employees working under a contract of employment or apprenticeship. From 1 October 2026, the expanded regime will also cover individuals engaged: under a worker’s contract; as an individual subcontractor; and through an online matching service (where the ’employer’ is providing the details of an individual who is a ‘service provider’ to potential clients or customers).

Businesses will therefore need to carry out RTW checks across the broader workforce and could face penalties where individuals lack the correct immigration permission. Combined with increased Home Office enforcement activity and greater data sharing with HMRC, the changes will significantly heighten risks for businesses.

The act also confirms that civil penalty liability can extend beyond the employer who holds the direct contractual relationship with the worker, where:

• a person is under a contract to provide work or services to a third party and enters a contract with another employer providing workers to fulfil that contract;
• an online matching service provides details of a service provider to clients or customers, and the service provider enters a contract with a client or customer; or
• an employer engages an individual to provide work or services, and the contract includes a substitution provision or clause.

These provisions are designed to ensure accountability for illegal working where the employer with the direct contractual relationship cannot be identified.

Businesses should therefore obtain clear documentary evidence of workers’ contractual arrangements, ensure contracts with third parties confirm who is responsible for conducting RTW checks, and conduct due diligence on third party right to work processes.

Effect on the construction sector

The impact on construction will be significant because of the widespread use of subcontracting chains. According to ONS data, self-employed workers accounted for 39% of the overall construction workforce in the first quarter of 2026. Businesses will need to take a more active role in verifying RTW across the labour supply chain, including individuals they do not directly employ.

Penalties for non-compliance

Existing civil and criminal sanctions will remain in force, but will extend beyond employees to the wider workforce categories outlined above.

Penalties will also apply where a worker sends a substitute or where services are subcontracted to another individual. If required checks are not completed, businesses may face civil penalties, reputational damage through Home Office naming practices, temporary business closures, director disqualification and, in the most serious criminal cases, prison sentences and unlimited fines.

Businesses can protect themselves from civil penalty liability by completing ‘prescribed requirements’ to obtain a statutory excuse. These include having a written statement in place before the work or services commence which (amongst other things) requires the other employer/service provider to conduct RTW checks on individuals engaged to perform the work, prevents further subcontracting without prior written consent and allows enforcement action where illegal working is identified and no statutory excuse has been established. 

Next steps for businesses

The extended requirements will apply to new hires and follow-up checks from 1 October 2026. This gives employers a transitional period to review arrangements and prepare. From that date, full compliance will be expected, and breaches may trigger enforcement action.

Businesses should now take practical steps to prepare:

• Review onboarding processes: check that existing procedures meet current requirements and identify what changes will be needed under the new regime (including how compliance will be demonstrated across the labour supply chain).
• Assess workforce composition: map the use of non-employee workers and identify what changes will be required under the extended obligations.
• Invest in technology: consider digital verification systems or providers to streamline checks for British/Irish nationals and improve consistency.
• Train personnel: ensure staff involved in onboarding or labour supply understand the expanded requirements.

Although the changes take effect in October 2026, early preparation is essential to ensure compliance and minimise disruption.

Shabana Muneer is a partner, employment and immigration, and Ruth Jowett is a senior associate, employment and immigration, at Walker Morris