How to deal with a civil penalty notice for illegal working
03 July 2023
The Home Office is currently focusing on identifying and penalising illegal working. Where illegal working is found, an employer may be liable to pay civil penalty of up to £20,000 per illegal worker, and may also suffer adverse consequences for their business. It is therefore beneficial for employers to understand how to deal most effectively with a civil penalty if received.
As part of a nationwide operation in June 2023, the Home Office conducted a record number of visits to businesses targeting illegal working. They arrested over 100 workers and are currently in the process of determining further actions, including whether to issue civil penalty notices to employers.
With Home Office activity in this area on the rise, employers should be aware of what to do on receipt of a civil penalty notice. In this article, we set out some options for responding to one, as well as outlining the factors that can reduce the penalty amount imposed.
What should an employer do on receipt of a civil penalty notice?
A civil penalty notice does not mark the end of the civil penalty process. The Home Office must follow various stages of the process detailed in an Employer’s guide to the administration of the civil penalty scheme. A precursor to issuing a civil penalty is for a business to be sent a preliminary Information Request. For a brief overview of the civil penalty system and details on how to respond to an Information Request, see our previous article.
Employers can challenge a civil penalty notice. If they do so, strict deadlines apply. The options available for employers are set out below. Some options can be combined to secure the best possible outcome for an employer.
Option 1: Object to the notice
If an employer wants to object, they must do so in writing using an ‘objection form’ and submit evidence within 28 days of the notice being issued. The notice will confirm what the deadline is. There are three grounds to object and the employer can rely upon one or more in combination.
Ground 1: The employer is not liable to pay
This may be the case for example if there is the recipient of the notice is not the employer. Where this applies, the business should submit evidence that there is no employer-employee relationship. Note that determining employment status can be difficult especially where the lines between contractors and workers/employees can seem blurred. Consider seeking advice from an employment lawyer to confirm.
Ground 2: The employer has a statutory excuse against liability because it carried out a compliant right to work check
An immigration adviser can help to assess whether a compliant right to work check was completed before employment commenced, and whether follow-up checks were also completed compliantly if relevant. They can also establish the legal basis for the employment such as the worker’s nationality and if they have been complying with their visa conditions, if relevant. If the employee does have the right to work, liability for a civil penalty is not established.
The illegal working regime contains safeguards that can protect employers and it may be the case that an employer has a statutory excuse against a civil penalty. Even if an employer discovers that they have been misled by an employee who does not have the right to work in the UK, they can retain the statutory excuse if they can demonstrate right to work check compliance.
Ground 3: The level of penalty is too high
This may be argued by the employer if they believe the amount has been miscalculated using the wrong scale or they meet specified mitigation criteria, and this has not been taken into account (more on this below).
The objection is considered within a 28-day time frame, following which the employer will receive one of the following:
A warning notice
This tells the employer that they are not liable for the civil penalty. An employer may however wish to take the opportunity to review their right to work processes and consider conducting an internal audit to minimise the risk of a further penalty notice being issued in the future.
A new civil penalty notice where the penalty is increased
This can happen where the Home Office does not accept the submissions made in the employer’s objection and there are grounds to believe that a previously applied discount no longer applies. The employer may consider appealing the decision. An appeal is outside of the scope of this article, but see chapter 8 of the Code of Practice for more information.
An objection outcome notice
There are three types of objection outcome notice. The most favourable is a decision to cancel the penalty.
The next type of notice is a decision to reduce the penalty, which is issued when the Home Office accepts that the employer meets certain mitigating criteria. For a first-time breach, the amount could be reduced to as low as £3,500 per worker.
The third type is a decision to maintain the civil penalty amount issued.
Each notice is accompanied by a statement of case, which lists the evidence held and contains an explanation of how the decision has been made. This includes a breakdown of how the penalty amount is calculated.
Option 2: Consider the fast payment option and reduce the amount of the penalty by 30%
If an employer does not want to challenge the notice, they can opt to make payment in full within 21 days of the date of the notice. This option is stated on the notice itself including the reduced amount and the deadline to pay it by.
If an employer wants to object first, they are still eligible for the 30% discount provided they make the payment in full by the new date stated in any fresh notice.
The 30% reduction is only available to employers who have not been found to be employing illegal workers within the previous three years.
Option 3: Request to pay by instalment
If an employer considers they cannot afford to immediately pay the penalty in full, they can request to pay by instalments over a period of time, usually 24 months, subject to agreement.
The Home Office will want to see evidence of an employer’s ability to pay, which must be submitted within 28 days of the date of the notice. Further correspondence will be sent to the employer confirming if payment by instalments is agreed and if so, the instalment amounts and due dates.
Debt recovery enforcement action is triggered if the employer fails to make a payment.
An employer is not eligible for the 30% discount if they pay by instalments.
How is the penalty amount determined?
If an employer has received a civil penalty for the first time, the Home Office’s code of practice states that the starting point for calculating the amount is £15,000 per illegal worker. If they have been liable for a civil penalty in the last three years, the starting point is £20,000.
Proactive reporting of suspected illegal working and active cooperation with the Home Office are mitigating factors that can result in penalty reductions. For first-time breaches, proactive reporting and cooperation with the Home Office can even result in the notice being withdrawn and replaced with a warning notice if the employer also can show it has effective right to work checking processes in place. An employer must submit evidence of any relevant mitigating factors being relied on.
Once any reductions relating to accepted mitigating factors have been applied, an employer can choose to use the fast payment option to further reduce the penalty by 30%, to a minimum of £3,500 per worker. The fast payment option is not available however if the employer has been liable to pay a civil penalty within the last three years.
What other issues should an employer be aware of if they are liable for a civil penalty?
The consequences of an employer being found liable for an illegal working civil penalty can be far-reaching.
If the employer is a sponsor licence holder employing overseas workers, they are at an increased risk of having their licence revoked. If this happens, all individuals sponsored under the licence will have their immigration permission shortened, normally to 60 days from the date they are notified. They must either submit a fresh immigration application or leave the UK before the shortened permission expires.
The Home Office publishes reports on the recipients of civil penalties so liability can be followed by reputational damage, including in some cases negative press coverage.
An employer can also be at risk of potential criminal prosecution if they know, or have reasonable cause to believe that they are employing an illegal worker.
If you have questions about dealing with civil penalties or the illegal working regime more generally, please get in touch with a member of our Immigration Team.