There is new law for businesses to understand: in this time of uncertainty employers need to think about the here and now, specifically the coming into force of the Immigration Act 2016 on 12 July 2016. The Act builds on the provisions of the Immigration Act 2014 and forms part of the Government’s manifesto promise to reduce net migration to the UK. Given it was formulated while the new Prime Minister, Theresa May, was Home Secretary we can expect a strong focus on its enforcement.

The 2016 Act contains powers aimed at creating a hostile environment for those who do not hold immigration permission to reside lawfully in the UK. It makes it more difficult for illegal immigrants to work, rent property and receive financial support. It imposes greater obligation on employees and property owners to police the immigration status of those they deal with. Further it dramatically increases the Home Office’s ability to penalise employers.

The 2016 Act is part of the revamping of the Home Office approach as evidenced by the increase in the number of civil penalties issued. From July to December 2015 over 1,200 penalties were issued with a value of £21.5 million.

For as long as immigration is a political hotspot, there will be an increased need for businesses in the UK to show they comply with immigration rules to protect their brand with customers, their contractual relationships with business counterparties, and their standing with the regulators who will determine future applications. “Tip-offs” which give rise to investigations and penalties are increasing, and businesses face risks of consumer campaigns against non-compliant practice (like the social media tax campaigns which emerged after the financial crash).

Below we look at the key powers in the 2016 Act and how employers can protect themselves.

Employer sanctions – 12 July 2016 changes

More criminal liability

It has, to now, been difficult for the Home Office to enforce criminal sanctions against employers who employ someone who does not hold the right to work lawfully in the UK. They had to be proved to have “knowingly” done so. The 2016 Act has reduced the threshold for conviction to where an employer knows or has “reasonable cause to believe” that an employee does not permission to work lawfully. This makes it materially easier to prosecute. Conviction on indictment will increase from the current 2 years to 5 years imprisonment.

Comment – This lower burden of proof could result in an increase in criminal charges against businesses, and those individuals responsible for recruitment.

Right to close business premises

The 2016 Act grants the Chief Immigration Officer the power to close a business’ premises for up to 48 hours where (i) illegal working is suspected, (ii) an employer cannot provide evidence that right to work checks have been conducted, and the employer has:

  • received 1 or more civil penalties for employing illegal workers in the last 3 years,
  • failed to pay a previous civil penalty, the 28 day appeal period has expired and there is no live appeal, or
  • an unspent conviction for employing illegal workers.

Comment – This lets the immigration authorities effectively impose spot penalties. There is no certainty that the power to do this will be limited to the site at which a civil penalty has been issued. It could be applied to any site managed by the non-compliant company where there are grounds for suspicion. The instant loss of profits arising from a site closure, as well as the impact on the reputation of a business and the likely adverse publicity this will lead to, make this a powerful new sanction.

Increased costs and sanctions

Immigration skills levy – April 2017

From April 2017, employers will be required to pay an annual skills levy if they want to sponsor migrant workers under Tier 2 or extend existing migrant workers Tier 2 visas. The levy will be £1,000 per migrant for large employers and £364 for small employers or charities.

Comment – The levy is intended to reduce employers’ reliance on imported labour, and boost the skills of young people in the UK. It will significantly increase the costs of sponsoring Tier 2 workers in the next visa year. We recommend that employers consider their future visa needs and, where possible, submit new visa applications as well as extension applications prior to the end of March 2017.

Loss of NICs allowance for employers of illegal workers 2017/2018

Since April 2014, most employers who pay Class 1 National Insurance Contributions have been entitled to benefit from an Employment Allowance of up to £2,000 a year per employee off their National Insurance bill. The 2016 Budget announced that employers will lose this allowance for one year if they are subject to a civil penalty for employing illegal workers.

… and don’t forget Brexit

Whilst the 23 June 2016 referendum decision does not currently have any impact on EU national employees living and working in the UK, it is prudent for employers to make plans to future proof their business and employment needs in light of likely future changes. Please see our article on this topic.

Employee sanctions – charges against illegal immigrants

The 2016 Act permits those convicted of working illegally in the UK to be personally liable for a fine of up to 51 weeks pay and/or up to six months imprisonment. As illegal working is criminalised, any pay received by the illegal worker can be recovered from the worker under the Proceeds of Crime Act 2002.

What can employers do to protect themselves?

Non-compliance with the 2016 Act could lead to serious consequences. The financial penalties connected to site closure will be hard hitting. The potential downgrading of the sponsorship licence of non-compliant employers, coupled with reputational damage stemming from negative press, will be of concern.

Here are some suggestions of ways that employers could mitigate the impact of these risks:

  • Employers should regularly audit employee files to ensure (i) they hold compliant up-to-date right to work evidence and (ii) reminders of employee visa expiries. This will enable employers to liaise with employees in good time to ensure they have taken steps to extend their visa;
  • Employers who become aware during someone’s employment that there has been a change to their personal circumstances which may impact on their visa should take active steps to address this with the employee. Becoming aware that an employee may not have the right to work in the UK may mean that the manager has now already committed the criminal offence of having reasonable cause to believe that the employee is an illegal worker. Officers investigating and disciplining employees may training in how to dismiss employees more quickly in these circumstances, which could increase unfair dismissal claims. Following a fair process will remain key;
  • Maintaining a clear right to work policy and training staff on how to conduct right to work checks and retain compliant documentation will continue to be very important. If you have no policy now is a good time to address this; and
  • Companies may wish to appoint individuals who are go to points of contact for immigration queries. This may be particularly helpful for large organisations or those with sites spread over a large geographical area.