Fined for employing an illegal worker? What to do if your business can't pay

What happens if your company receives a fine for employing an illegal worker?

If your company has been fined for employing an individual who did not have the right to work in UK, you are facing a penalty reaching £45,000. For many small companies, this in itself is enough to tip its finances into severe difficulty.

We speak to directors in this situation regularly. Many had no idea their employee didn't have the right to work in the UK, some made a genuine mistake with their right to work checks, while others relied on a member of staff to handle the paperwork.

Whatever the circumstances, the fine has landed and you need to understand your options quickly, because the deadlines are tight.

How much are the fines for employing illegal workers in 2026?

The civil penalty regime changed significantly in February 2024, when the Home Office more than doubled the maximum fines. The increase was introduced as part of a major government crackdown on illegal working, and enforcement activity has risen sharply since. The current penalties are:

• £45,000 per illegal worker for a first breach
• £60,000 per illegal worker for a repeat breach within three years

These are starting figures before any reductions. To put that in context, if Immigration Enforcement finds two workers without the right to work at your premises, you could be facing a bill of £90,000 even if it's a first offence and even if you genuinely didn't know their immigration status.

In 2025 alone, the Home Office issued over £130 million in civil penalties to employers across the UK, following more than 17,400 raids and 12,300 arrests. Hospitality, construction, care homes and retail have been particularly targeted.

What happens when you receive a civil penalty notice?

If Immigration Enforcement suspects your business has employed someone without the right to work in the UK, the process typically follows these steps:

1. Referral notice - You'll receive a letter letting you know that your case is being considered and that you may face a civil penalty.
2. Civil penalty notice - If the Home Office decides you're liable, you'll receive a formal notice setting out the fine amount, which worker or workers it relates to, and who is responsible for paying; this may be you personally as a director, the company, or both.

The notice will also confirm:

• The deadline for payment (28 days from the date of the notice)
• Whether you can reduce the penalty by paying early
• Your rights to object and how to do so
• What enforcement action can be taken if you don't pay

Can you reduce the fine?

If this is your first breach, you may be able to reduce the penalty by 30% if you pay the full amount within 21 days. This is known as the Fast Payment Option. It isn't available for repeat breaches or if you're paying in instalments.

There are also limited reductions available if you can demonstrate:

• You reported the suspected illegal worker to the Home Office
• You cooperated fully and promptly with the investigation
• You had effective right to work systems in place
• In some cases, particularly for a first breach where these mitigating factors are strong, the Home Office may issue a warning notice instead of a financial penalty. But this is the exception rather than the rule.

“Spoke with Chris who put me at ease straight away. He was very knowledgeable and listened intently to all my worries and concerns. Will definitely be using Real Business Rescue and advise anyone with business issues to give them a call.”

Diana

 

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Chris Bristow
Business Debt Expert

What happens if you cannot afford to pay the fine?

A penalty of £45,000 or more can be devastating for a small business, particularly in sectors like hospitality, where margins are already tight and cash reserves are limited. We have seen an uplift in the number of directors we are speaking to who are faced with these fines with not enough cash flow to cover them.

If you don't pay within 28 days and haven't lodged an objection, the Home Office can take enforcement action through the civil courts. This can result in:

• A County Court Judgment (CCJ) being recorded against your business, which will damage your credit rating and your ability to borrow
• HMRC requiring a security bond to allow you to continue trading, with you personally liable as director
• Bailiff action or asset seizure to recover the debt

On top of this, Immigration Enforcement publishes the names of businesses that have been fined in quarterly reports. The reputational damage alone can be enough to lose customers and contracts.

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What happens if the fine has caused the business to become insolvent?

If the fine is large enough that your company genuinely cannot afford to pay it, then your business may have become insolvent. For those businesses operating on thin margins and already indebted with existing borrowings and outstanding amounts owed to suppliers and HMRC, a fine of this size can be enough to tip it into an insolvent state. 

Once you have reason to believe your company is insolvent, you must take swift action. You have specific legal duties as a director of an insolvent company and you must not continue trading if doing so would worsen the position of your creditors. If you do, you could face personal liability for the company's debts, or even disqualification from acting as the director of a limited company in the future.

Once knowingly insolvent, you need to take professional advice urgently. An insolvency practitioner can assess your company's financial position and help you understand which options are available to you and your company.

These may include:

• Company Voluntary Arrangement (CVA) - A Company Voluntary Arrangement (CVA) acts as a formal agreement to repay debts over time, which could allow you to keep trading while managing the penalty payments alongside your other liabilities
• Company administration - Administration is a formal process that provides breathing space from creditors while a plan is put together to rescue the business or achieve a better outcome than immediate liquidation
• Creditors' Voluntary Liquidation (CVL) - If the business isn't viable, a Creditors' Voluntary Liquidation allows you to close the company in an orderly way, ensuring the process is handled properly and your duties as a director are fulfilled

Which sectors are most affected?

While any employer can be fined, certain industries are disproportionately targeted by Immigration Enforcement. The sectors most commonly affected include:

• Restaurants, takeaways and hospitality businesses
• Construction firms and contractors
• Care homes and social care providers
• Retail outlets
• Car washes and personal care services

If you run a business in any of these sectors, the risk of a compliance visit is higher than average and the financial impact of a penalty can be particularly severe where margins are thin and cash flow is tight.

What should you do right now if you have received a fine?

If you've received a civil penalty notice, the most important thing is to take action quickly. The deadlines in this process are strict, and missing them can significantly reduce your options.

Here's what Real Business Rescue's licensed insolvency practitioners suggest to directors in this position:

1. Read the notice carefully to understand exactly what you're being asked to pay, what it relates to, and what your deadlines are
2. Consider whether you have grounds to object, particularly if you have evidence of proper right to work checks having taken place
3. Assess your company's financial position honestly and ask whether the business absorb this fine and continue to trade. If not, you may already be insolvent
4. Seek professional advice whether that's immigration legal advice to challenge the penalty, or insolvency advice to understand your options if the business can't pay the fine

How Real Business Rescue can help

We understand that receiving a fine of this size can feel overwhelming, especially when your company does not have the means to pay. At Real Business Rescue, we speak to directors every day who are dealing with unexpected financial shocks, and a civil penalty for illegal working is a trigger we're seeing a growing number of right now.

If your business is struggling to absorb the cost of a civil penalty, or you're worried about what comes next, we can help you understand your options clearly and confidentially. Our initial consultation is free, and there's no obligation to proceed any further.

Call our director helpline on 0800 644 6080 for a free, confidential conversation, and to book an appointment with a licensed insolvency practitioner.