External Workforce Compliance Is Bigger Than Worker Classification
Conversations about external workforce compliance often begin and end with worker classification. And understandably so. Misclassification creates significant tax exposure, and regulatory scrutiny has intensified in recent years.
But worker classification is only one dimension of external workforce risk. The same visibility gaps that create classification blind spots also affect security, health and safety, right to work compliance, data protection, and broader supply chain obligations.
This article examines the wider compliance landscape for external workers, and why organisations that focus only on classification are addressing just part of the challenge.
The Visibility Foundation
Every external workforce compliance requirement shares a common foundation. You need to know who is working for you.
- You cannot assess classification status for workers you do not know exist.
- You cannot verify right to work for people who are not in your systems.
- You cannot ensure health and safety briefings for contractors you cannot identify.
- You cannot revoke access for leavers you never tracked in the first place.
This is why workforce visibility matters beyond any single compliance domain. Organisations that achieve consistent visibility of their external workforce are positioned to govern across multiple requirements. Organisations with blind spots tend to have gaps everywhere.
Security and Access Control
The security implications of external workforce blind spots are substantial, and increasingly urgent.
The Offboarding Problem
Cybersecurity and insider risk research consistently highlights weaknesses in offboarding processes. Commonly cited figures across industry studies indicate that:
- Around half of organisations acknowledge that former workers still retain some form of system access after leaving
- More than a third of organisations take several days or longer to fully revoke access
- Insider-related incidents, including those involving former staff or contractors, remain a persistent source of data breaches
These figures are typically focused on employees. For contractors and other external workers, the risks are widely understood to be higher.
External workers often fall outside standard HR processes. Engagement end dates may not be centrally tracked. Access may be provisioned informally by project teams. Ownership of offboarding is frequently unclear.
Why Contractors Increase Risk
Contractor arrangements create specific security challenges:
Shared credentials When one contractor leaves and another joins, credentials are sometimes reused rather than properly deprovisioned and reissued.
Shadow IT External workers frequently use collaboration tools such as Google Drive, Dropbox, Slack, or Trello that sit outside formal IT inventories. When engagements end, access to these tools may never be reviewed.
Orphaned accounts Without clear lifecycle management, contractor accounts can persist long after work has finished, creating long-lived vulnerabilities.
When external workers are not properly tracked, they cannot be properly offboarded. When they are not properly offboarded, they retain access they should no longer have.
What Good Looks Like
Effective security governance for external workers typically includes:
- Central tracking of all contractor engagements, including those engaged via agencies and service providers
- Clear engagement start and end dates across all channels
- Access provisioning and revocation linked to engagement lifecycle events
- Regular audits of active credentials against known worker populations
- Defined offboarding protocols that apply to all external workers, not just employees
Health and Safety
Organisations have health and safety obligations for everyone working on their premises, regardless of employment status.
The Visibility Gap
In many environments, the question is simple but difficult to answer. Who is actually on site today?
For employees, organisations usually have reasonable visibility. For contractors and service provider staff, the picture is often less clear.
Without consistent visibility of external workers, organisations cannot reliably ensure that:
- Site inductions have been completed
- Workers understand relevant hazards and safety protocols
- Emergency procedures account for everyone present
- Incident investigations can identify all involved parties
Liability Does Not Disappear
Engaging workers through agencies or service providers does not remove the organisation’s duty of care for health and safety on its premises. Where visibility is poor, organisations may be exposed to liability even where work is outsourced.
Supply chain complexity increases this challenge further. Service providers frequently bring their own workers on site, creating ongoing obligations without direct line-of-sight into who is present or what training they have received.
Right to Work Compliance
The right to work compliance landscape has become more demanding, and visibility gaps create real exposure.
Understanding the Rules
Testing exercises and industry surveys conducted over recent years have repeatedly shown that a large proportion of UK employers misunderstand at least one aspect of right to work compliance. This is rarely deliberate non-compliance. It reflects complex rules, evolving guidance, and inconsistent processes.
Escalating Penalties
From 2024, the maximum civil penalty for employing a worker without the right to work increased to £60,000 per illegal worker for repeat breaches, up from the previous £20,000 limit. Criminal liability continues to apply where employers knowingly hire individuals without the right to work.
The Contractor Blind Spot
Right to work checks are typically embedded in employee onboarding. External workers often bypass those processes entirely.
Direct contractors, workers supplied under service agreements, and labour embedded within supply chains may never pass through HR. Where organisations rely on suppliers to conduct checks, evidencing that reliance becomes critical if challenged.
Digital Identity Requirements
Since April 2022, organisations have been permitted to conduct digital right to work checks for British and Irish citizens using certified Identity Service Providers. Where the digital route is used, approved technology is mandatory. Workers who sit outside visible processes are more likely to bypass these controls.
Data Protection
External workers with system access raise important data protection considerations under UK GDPR and the Data Protection Act 2018.
Access Scope and Minimisation
Contractors often receive broad access to perform their roles. That access may exceed what is strictly necessary, may not be reviewed as roles evolve, or may persist after engagements end.
The principle of data minimisation applies to access as well as data collection. Organisations should be able to demonstrate that external workers’ permissions are appropriate and regularly reviewed.
Records and Accountability
Article 30 of UK GDPR requires organisations to maintain records of processing activities. Where contractors process personal data, those activities should be reflected in records and governance frameworks.
If a personal data breach involves a contractor, the organisation remains accountable. Notification timelines can be as short as 72 hours. Without visibility into what data external workers can access, assessing impact quickly becomes difficult.
Modern Slavery and Supply Chain Due Diligence
For larger organisations, the Modern Slavery Act requires annual statements describing steps taken to prevent slavery and human trafficking in business operations and supply chains.
Labour in the Supply Chain
Where supply chains include labour provision, whether explicitly through agencies or implicitly through service contracts, due diligence obligations extend beyond direct employees.
Understanding who is actually delivering services, and under what conditions, is essential to meaningful assurance.
Procurement Act 2023
The Procurement Act 2023, effective from February 2025, strengthens exclusion and termination powers for public sector contracts. Public authorities may exclude suppliers based on labour-related misconduct, supported by a central debarment list shared across the sector.
Visibility into labour practices within supply chains is increasingly a commercial and eligibility issue, not just an ethical one.
Building Integrated Governance
These compliance domains are not separate problems requiring separate solutions. They are symptoms of a single challenge: governing the external workforce.
A Shared Foundation
Across all domains, the same core requirements appear:
- Visibility of who is working for you
- Lifecycle management of engagements
- Documented evidence of compliance activities
- Clear accountability and ownership
- Ongoing monitoring rather than point-in-time checks
Breaking Down Silos
In many organisations:
- HR manages right to work
- Tax manages classification
- IT manages access
- Operations manages health and safety
- Legal manages data protection
All are governing the same external worker population, often without shared data or coordinated processes. The result is duplication, inconsistency, and gaps where no function takes responsibility.
Integrated governance recognises external workforce compliance as a single discipline with multiple dimensions.
Key Takeaways
- Worker classification is only one dimension of external workforce compliance
- Security, health and safety, right to work, and data protection all depend on workforce visibility
- Industry research consistently highlights weaknesses in offboarding and access control
- Right to work penalties have increased significantly, with fines up to £60,000 per worker
- Different compliance functions often govern the same workers without coordination
- Integrated governance treats the external workforce as a single population with multiple risk dimensions
What This Means for Your Organisation
If you have invested in worker classification governance, you have taken an important step. But if compliance attention stops there, significant risk remains.
The visibility foundation required for classification is the same foundation needed for security, health and safety, right to work, data protection, and supply chain due diligence. Building that foundation once, comprehensively, positions organisations to govern across the full compliance landscape.
If you would like to understand how CoComply supports integrated visibility and governance across the external workforce, extending beyond classification alone, we would welcome the conversation.
Indicative Data Disclaimer
Some statistics referenced in this article reflect commonly cited findings from industry research, regulatory commentary, and cybersecurity studies. Figures are used illustratively to highlight recognised patterns and risks rather than as definitive measurements for any individual organisation.