Further penalties to be introduced for employing illegal workers

Following on from the announcement in the March 2016 budget that employers will be excluded from claiming the £3,000 national insurance contributions (NICs) employment allowance where they have employed illegal workers, the Government has recently published draft Regulations on this measure.

The NIC employment allowance entitles the vast majority of businesses, charities and community amateur sports clubs to a reduction of up to £3,000 per year on their employer NICs bill. The Government introduced this allowance in April 2014 to support small businesses and charities with the cost of employment.

The draft Employment Allowance (Disqualified Persons) Regulations 2017 provide that employers will be denied the NIC employment allowance for one year if:

• The employer has received a civil penalty for employing workers who do not have the right to work in the UK; and 
• The employer has exhausted their appeal rights against the penalty.

The exclusion will apply for the full tax year following the year in which appeal rights have been exhausted.

Responses on the draft Regulations are required by 3 January 2017 and the exclusions will apply from April 2018, for employers who received a civil penalty in the tax year 2017/18.

These measures add to the existing penalties for employing illegal workers, which include a fine of up to £20,000 per illegal worker for not carrying out the correct right to work checks and a potentially unlimited fine and/or prison sentence of up to 5 years for knowing or having reasonable cause to believe that a worker has no right to do the work in question. Companies that sponsor employees on the points based system who are issued with a civil penalty could also have their licence revoked.

It is therefore imperative that all employers, regardless of size, carry out thorough right to work checks before employing staff to ensure that you have a statutory excuse against such a penalty and to preserve your NIC employment allowance.