Employers seeking to plug the skills gap in the region by hiring foreign workers should be aware of the potential legal pitfalls.

With tough new penalties for employing illegal workers set to take effect next month, employers will need to ensure they are on the right side of the law when taking on new workers.

From February, employers caught know-ingly employing illegal workers will face a prison sentence and/or an unlimited fine. In addition, the new rules will see civil penalties levied on companies that have been negligent in carrying out checks on workers including increased fines of up to £10,000 for each illegal worker employed. The new system, which will be monitored by the Border and Immigration Agency, will provide for tougher checks abroad and the introduction of compulsory identity cards for foreign nationals, as well as stricter enforcement and penalties for rule-breakers.

The construction industry has borne the brunt of the labour market shortfall with employers turning to workers from Eastern Europe to fill traditional roles. But lawyers are warning that the onus will be on employers to check whether their workers really are entitled to work in the UK.

Teresa Dolan, a partner at Hammonds in Birmingham, said: "Employers in the region have been quick to diversify their workforce and address skills shortages by taking on skilled employees from outside of the UK.

"But with the Home Office taking an increasingly hard line on illegal working, employers must ensure that they have proper systems in place to weed out those who are not entitled to work here. In fact, after the recent fiasco which saw more than 11,000 illegals cleared to get jobs as security workers, the issue is likely to be top of the Home Office's agenda in 2008."

Employers should ask all potential employees to provide original documentation evidencing their entitlement to work in the UK. They should ask to see the original of a 'secure' document, such as a UK or European Economic Area passport, a national ID card or a UK residence permit. In the absence of these, two verifying documents, such as one giving the person's permanent NI number and name and a full birth certificate issued in the UK or an Immigration Status Document issued by the Home Office, indicating that the person named can stay indefinitely in the UK, should be required.

Ms Dolan continued: "Ensuring these straightforward checks do take place will protect employers further by allowing them to rely on a statutory defence if an illegal worker is subsequently found in their workforce.

"Employers should satisfy themselves as to the authenticity and validity of any documents presented to them, that the potential employee is the rightful holder of them and that the documents permit the potential employee to do the type of work offered. Proof of these verification checks is essential if an employer is to successfully rely upon the statutory defence."

In addition, employers should keep adequate records of the documents. This simply involves making a photocopy or electronic scan of the papers, and keeping the copies throughout the employee's employment and for at least three years after the person has moved on.

"With steps in place to verify employee identity and copies of relevant documents on file, employers can rest assured that diversifying their workforce will not land them in hot water with the Home Office," Ms Dolan stated.