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British businesses have been warned by the Home Office that they will need to prove the legal status of their migrant workers. At the same time, they will have to ensure they don't weed out illegal workers by using methods that could be construed as racist.

Under the proposed rules outlined last week, a maximum fine of £10,000 per employee could be imposed on those bosses who negligently hire illegal immigrants. Employers who knowingly recruit illegal immigrants face an unlimited fine and prison sentences of up to 15 years.

Seen as part of the government's ongoing effort to crackdown on illegal work, guidelines issued include the planned introduction of an Australian-style points-based system which measures how well a worker's skills could benefit the economy.

Companies and colleges that take on or "sponsor" foreign students and migrant workers will also be required, under a licence scheme, to report to the Border and Immigration Agency (BIA) any individuals who fail to turn up for a course or work within 10 days.

Home secretary Jacqui Smith said: "By working together with employers and others we have developed a system that delivers the migrants the UK needs, but which also keeps out those that it does not."

Compulsory ID cards will also be brought in for so-called foreign nationals and the BIA, Customs, and UK Visas will combine as a "single border force".

Employers would also be expected to ask prospective workers to produce passports and birth certificates to prove their right to work in the UK. In addition, firms will be required to do follow-up checks on employees at least every 12 months.

However, the new immigration control programme hinges on a BIA code of practice that is yet to be drawn up.

Under that proposal, employers could be prosecuted under race discrimination laws if they only carry out checks on workers who they believe are not British citizens.

The plans were put forward by the Home Office following consultation with businesses in May this year. The government said it hopes to see the new measures come into force by February 2008.

Home Office minister of state Liam Byrne said in a statement: "Our proposals may of course change before we finally launch the system. We will give businesses and others the opportunity to apply for sponsorship licences from early 2008." ®

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