UK Immigration Update: July 2026

This update highlights recent developments in employers’ obligations to document Right to Work (RTW) for non-employees under the Draft Code of Practice published on 30 June 2026, and the latest developments on the Earned Settlement provisions.

1. Will the changes apply to all “non-employees”?

No, the basic principle remains that the legal responsibility to conduct Right to Work checks rests with the employer with the direct contractual relationship. However, for UK immigration purposes, where the actual employer cannot be identified or has not fulfilled its RTW obligations in a compliant manner, the definition of employee is extended to include those engaged under a Workers Contract, an individual Sub-Contractor arrangement and an Online Matching Service (the “Extended Employer”). 

Whilst these categories are defined in the Draft Code, the current Employers’ Guide to Right to Work Checks has not yet been updated. It is hoped that revised guidance will provide greater clarity on the new arrangements.

2. What are the new categories in layperson’s language?

The principal scenarios are:

• a. Entity A enters into a contract to provide work or services to a third party and then enters into a separate contract with Entity B, under which Entity B provides its own employees to fulfil the contract between Entity A and the third party. In this scenario, Entity A may be treated as the Extended Employer of the individual providing the services to the third party.
• b. An employee of Entity A has the contractual right to substitute another individual to perform their employment duties. In this scenario, Entity A may be treated as the employer of the substitute.
• c. A classic agency scenario where an online matching service matches a service provider with a client or customer to provide work or services, and the service provider enters into a contract with the client or customer. In this scenario, the online matching service may be treated as the Extended Employer of the individual ultimately providing the services.

3. What is the Extended Employer’s exposure under the extended employment arrangements?

Extended Employers would be exposed to a maximum civil penalty of £60,000 per employee. 

In addition to the financial consequences, the imposition of a civil penalty may lead to the revocation of a Skilled Worker sponsor licence and could also affect future sponsor licence applications submitted by linked entities, as defined under the Immigration Rules.

4. Can the Employer under the extended employment arrangements establish a Statutory Excuse?

Yes,  by meeting the “prescribed requirements” as set out in the Draft Code.

In scenarios (a) and (c) above, the prescribed requirements include having written contractual terms and conditions in place before the work or services commence. Those terms must contain a number of warranties from Entity B and the service provider to the Extended Employer, including (but not limited to) warranties that compliant RTW checks have been completed, that the Extended Employer has the right to conduct its own audits, and that Entity B and the service provider will fully cooperate with any Home Office investigation.

The prescribed requirements for scenario (b) include, among other things, the Extended Employer carrying out prescribed RTW checks on any substitute before they commence work and maintaining ongoing monitoring arrangements to ensure that no additional substitutes are engaged without compliant RTW checks first being completed.

In all scenarios, the Extended Employer must also verify the individual’s identity using one of the alternative methods set out in the Draft Code of Practice.

5. When will the changes come into force?

The changes will be effective from 1 October 2026 and will not have retrospective effect.

6. How should Employers be preparing for the new arrangements?

Employers that may be affected by the Extended Employer arrangements should:

• Identify the areas of their business that may be impacted.
• Where possible, conduct compliant RTW checks on the relevant individuals.

In practice, it may not always be possible for the Extended Employer to carry out compliant RTW checks. It is therefore critical that the Extended Employer can rely on a Statutory Excuse. This means ensuring that appropriate systems and processes are in place to satisfy the prescribed requirements and verify relevant identities.

7. Latest Developments on Earned Settlement

As part of the ongoing Parliamentary scrutiny, the House of Lords Justice and Home Affairs Committee published its report on settlement, citizenship and integration on 23 June 2026.  

Whilst the report is not binding, a majority of the Lords opposed increasing the default eligibility period for Settlement from 5 to 10 years and described the suggestion that transitional arrangements would not apply to those already in the UK on a route to settlement as “manifestly unfair and potentially unlawful.”  

There are likely to be further developments as the new Government takes shape, but indications are that any changes will be significantly diluted from those foreshadowed in the Government’s Public Consultation published earlier this year.

For further information please contact Jonathan Chaimovic or your usual Clyde & Co contact.