The Home Office has confirmed to UKCISA that students who have applied to join the International Graduate Scheme, and who are still waiting for a decision when their student permission runs out, can continue work unlimited hours if they wish, but the type of work is still subject to the student work restriction.
It was previously a grey area. If you apply to switch from one status to another, your original status and any conditions attached to it always continue automatically, until you get the decision, even if this takes you beyond the end of your original permission. However, it was never clear what this meant for students who were switching to a work status. Clearly they can continue to work, because students have the right to work, but can they continue to work full-time beyond the end of their student visa, while waiting for the IGS decision.
Anyway, yes they can, but until they have formally switched to IGS, they are still bound by the student restriction which says they cannot be self-employed, or work as a professional entertainer or sports person, or pursue a career by taking a full-time permanent post. They can however take a permanent post which is not a career vacancy. Although I detect another grey area emerging.
And whether employers will understand this right to continue working remains to be seen...