From 1 October 2026, businesses that subcontract the delivery of services or operate platforms matching workers with clients may need new terms in their commercial contracts, or risk losing their defence against illegal working penalties of up to £60,000 per worker. This comes from a major overhaul of the UK's right to work regime under the Border Security, Asylum and Immigration Act 2025, which extends liability well beyond the traditional employer-employee relationship. The changes work in two ways: first, the definition of "employer" is now much wider, capturing worker's contracts, individual sub-contractors and online matching services; second, a new "extended liability" regime reaches upstream into supply chains, meaning a business may be treated as "employing" individuals it has never directly engaged.
Guilty until proven innocent
Where illegal working is found, and a direct employer can't be identified, the Home Office works backwards up the contracting chain — and liability is the starting position. A business caught by the extended liability provisions must prove it has established a statutory excuse, and for many arrangements, that means having specific prescribed wording in place with a downstream supplier before the work even starts.
Where does this bite?
Three scenarios are in scope: (1) subcontracting delivery of services to another "employer"; (2) online matching services connecting clients with corporate service providers who themselves employ workers; and (3) contracts with individual sub-contractors or service providers that permit substitution. The first two require contractual terms and conditions (a "written statement") containing five prescribed terms, covering right to work checks, subcontracting restrictions, audit rights, enforcement provisions and Home Office cooperation. Substitution arrangements trigger separate process-based obligations rather than the written statement, though contracts still need suitable termination / suspension rights for illegal working by a substitute.
What must the written statement include?
The written statement must require the downstream supplier to: carry out prescribed right to work checks on any individual performing the work; not further subcontract without prior written consent (with equivalent RTW obligations cascading into any permitted subcontracting); permit audits of right to work compliance; accept enforcement action (including suspension or termination) where illegal working is identified; and cooperate with any Home Office investigation. These are prescribed requirements, not optional best-practice clauses.
Not every arrangement is caught
Businesses that simply purchase services or workers for their own operations, supply finished goods, or provide technology without engaging the underlying workforce generally sit outside the regime. PSCs are worth particular attention: engaging one for your own benefit is generally fine, but weaving one into a subcontracting chain may still trigger the written statement requirement, with the curious result that the PSC ends up needing to check the right to work of its own director.
The existing contracts problem
There are no transitional arrangements. The prescribed terms need to be in place for any worker whose engagement starts on or after 1 October 2026, even under contracts signed years ago. Businesses cannot simply update their template going forward; they need to actively amend existing supplier and subcontractor agreements that will still be live after the deadline, whether through addendums, side letters or superseding agreements.
What should commercial teams do now?
Map out where your business sits in a subcontracting chain, prioritise the relationships involving individuals rather than large corporates, review and update contracts to include the five prescribed terms, and build enhanced procurement due diligence into onboarding and renewal processes. Above all, do not wait for new contracts to roll around naturally. With no grace period and a hard deadline approaching, you need to start the contract review exercise now.
For the full analysis, read How the UK's new right to work scheme will affect your commercial contracts.
