Away from recent lurid revelations about certain immigration judges’ private lives, Osborne Clarke EPI Associate Lloyd Davey highlights new powers in the pipeline for immigration officers to raid the workplace and hand out ‘on the spot’ £2000 fines for each illegal employee.


Will employers pay the penalty?

A look at the new penalty system for employing illegal workers

Nowadays companies are more willing than ever to recruit from a global labour market and immigration issues are increasingly under the spotlight.  With the Home Office clamping down on its own procedures following the Home Secretary's comment that the department is not "fit for purpose" and the impending introduction of a new penalties system and a points-based visa system, this trend is likely to continue.  This article looks at the new penalties system and considers what issues employers are likely to face in complying with its requirements.

The current penalty system

The existing provisions can be found in the Asylum and Immigration Act 1996.  Currently it is a criminal offence to employ a person who has not been granted leave to enter or remain in the UK or whose leave to remain places a restriction on him working in the UK.  There is a statutory defence to the offence which can be attained by carrying out specified document checks before employment commences.  The penalty is a maximum fine of £5,000 if summarily convicted or an unlimited fine following conviction on indictment.

There were only 17 successful convictions between 1998 and 2004, although 8 of those occurred in 2004 at a time when the Immigration Service substantially increased its enforcement efforts which would suggest that enforcement will be given greater resources under the new system.

The new penalty system

The new system can be found in the Immigration Asylum and Nationality Act 2006 which was passed on 30 March 2006.  However, the sections relating to the new penalty system have yet to be brought into force and there is presently no scheduled date for commencement. The new system will comprise a revised criminal offence and a new civil offence. 

Civil offence

The civil penalty will be a fine of up to £2,000 per illegal employee and it will be imposed on the spot by an immigration officer who will have the power to "raid" the workplace. 

An illegal employee is one whose leave to enter or remain in the UK is invalid at the point of recruitment, ceases to have effect during employment or is subject to a condition preventing him from accepting employment.  The current system requires the employer only to carry out document checks before employment begins, but under the new system it will be an offence to continue to employ someone whose leave has expired, even if it was valid on the date employment started.

The burden on the employer will be to satisfy the immigration officer that he did not know that the employment was illegal and that he has complied with the "prescribed requirements".  Those requirements will be prescribed at a later date but will require document checks to be undertaken both before employment begins and at specified intervals during the course of employment (likely to be every 12 months).

Objecting to the penalty

The penalty must be paid within 28 days but an employer will have an opportunity to object on the basis that there has been an error, that he had in fact complied with the "prescribed requirements" or that the amount of the penalty is too high.

The objection procedure will be independent of the court system and will be administered by the Secretary of State but the precise mechanism is not yet known.  What is known at this stage is that the employer will be able to make various representations that the person did indeed have the right to work, that the penalty was too high or that it had actually complied with the prescribed requirements and that no penalty should have been imposed.  The Secretary of State will then have the power to cancel, reduce, increase or maintain the penalty as he sees fit. 

If the penalty is reduced it must be paid within the original payment period specified on the notice, but an increased penalty will result in a new penalty notice being issued (with a new 28 day payment period).


In addition to the objection procedure, or as an alternative to it, the employer will be able to appeal to the county court.  Any appeal must be lodged within 28 days of the penalty notice and the employer is likely to want to raise the same grounds of appeal as it did when objecting to the penalty notice (though there is no obligation to have objected to the penalty notice before appealing to the country court).

The county court will have the power to cancel, reduce or maintain the penalty notice but, to the employer's advantage, it will not be able to increase the penalty. 

Codes of practice

The Secretary of State will issue two codes of practice, one concerning the amount of penalties and the other guiding employers on avoiding discrimination on the grounds of race in their recruitment practices.  Both are presently in draft form but provide useful insights as to how the penalty scheme will operate in practice.  The code on non-discriminatory practices mainly echoes the current code of practice and so it is the code on the amount of penalties which is particularly useful.

It states that the principles of fairness, flexibility and proportionality will be key to the penalty system so, for instance, an employer's financial means and the effect of any penalty on the viability of the employer's business will be taken into account in imposing a penalty and in any subsequent objection or appeal hearing.  Consideration may also be given to employers who request to pay the penalty in instalments so as to spread the cost and avoid cash flow problems.

A cooperative employer or one who has a good history of performing document checks is likely to benefit from a degree of leniency when the penalty notice is issued.  For example, whilst the maximum penalty is £2,000 per illegal employee, an employer who has committed its first offence but has conducted some document checks may receive a lesser fine which may then be reduced further if he cooperates with the immigration officer.  There may also be financial reductions where it was the employer itself which reported the illegal employment. 

Criminal offence

Running parallel with the civil penalty scheme will be a criminal offence of knowingly illegally employing someone.  Unlike the civil scheme there is to be no defence of having complied with particular procedures.  The offence will be punishable by imprisonment of up to two years, a fine or both (on conviction on indictment) or imprisonment of up to one year, a fine of up to £5,000 or both (on summary conviction).  Managers and directors will be particularly concerned by this since any connivance or consent on their part to illegally employing someone will see them also liable to criminal punishment.

Employees not workers

This new penalty system will only apply to the employment of employees and so consultants, contractors and agency staff do not fall within the penalty scheme.  However, given the tribunals' and courts' willingness to infer a contract of employment between many of these "workers" and the end user "employer", it is not inconceivable that an employer could be punished for illegally employing someone it believed was not its employee.  This throws up all sorts of problems for the employer.  Should it conduct the document checks of "workers" as well as employees to be on the safe side?  Can it be certain that the agency or consultancy company has complied with the document checks?  Even if they have, can it rely on their good housekeeping in its defence?  Given the principles of fairness and proportionality it seems logical that the Secretary of State and the courts will hear arguments as to the employment status of the individual in question at the objection and appeal stages and any mitigating factors are likely to be taken into account in reviewing the amount of the penalty.

Look out for future updates for the latest news on the commencement of these provisions.


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