Modern day slavery reporting obligations kick in for businesses in the UK
The UK government has taken an increasingly proactive stance to try and address the global issue of human trafficking, slavery, servitude or forced or compulsory labour which is estimated to affect 20.9 million people worldwide. Improved knowledge of the size of the problem, as well as a greater emphasis being placed on the value of corporate social responsibility programmes, means that UK organisations are now expected by both customers and their own people to uphold high standards of corporate citizenship or to face the negative consequences in terms of their brand and employer value.
However, the recent enactment of section 54 of the Modern Slavery Act 2015 adds a new legal requirement for businesses and means that every organisation carrying out business in the UK, with an annual turnover of £36 million or more (whether that is derived within or outside the UK), must produce a slavery and human trafficking statement each financial year. Surprisingly, these new requirements have attracted remarkably little debate or publicity. Taking into account the fact that the new law impacts many global businesses who may only have a small UK subsidiary, as well as UK businesses with a modest turnover, it’s safe to assume that many affected businesses may be unaware of their new obligations.
The impact of this change is imminent as businesses with a year-end of 31 March 2016 will be the first required to publish a statement under the new rules.
What constitutes modern day slavery?
The new provisions are designed to prevent the offences of “slavery, servitude and forced or compulsory labour” and “human trafficking”, but what do these really mean?
- “Modern slavery” is a term used to encapsulate the offences of slavery, servitude and forced or compulsory labour and human trafficking in the Modern Slavery Act.
- Government guidance makes clear that slavery is intended to cover behaviour on the part of the offender as if he/ she owns another person, which deprives the victim of their freedom.
- The same guidance makes clear that “servitude” is an obligation to provide services through coercion where the individual is obliged to live on another person’s property and has no possibility of changing his or her living and working conditions.
- Forced or compulsory labour is defined in international law as involving coercion through direct threats of violence or more subtle forms of compulsion. The key elements are that work or service is extracted from any person under the menace of any penalty and for which the person has not offered him/her self voluntarily.
- An offence of human trafficking occurs where a person arranges or facilitates the travel of another person with a view to that person being exploited. The offence can be committed even where the victim consents to the travel, which reflects the fact that a victim may be deceived by the promise of a better life or job or may be a child who is influenced to travel by an adult.
Quite rightly, businesses have a responsibility to ensure that workers are not being exploited, are safe, that relevant employment includes a wage and working hours and that health and safety, human rights laws and international standards are adhered to, including freedom of movement and communications.
Which organisations have to provide a statement?
Any organisation in any part of a group structure will be required to comply with the provision and produce a statement if they:
- Are a body corporate or a partnership, wherever incorporated;
- Carry on a business, or part of a business, in the UK;
- Supply goods or services; and
- Have a group turnover (including that derived outside the UK) of £36m or more.
How will this work for group companies?
As stated above, the annual turnover threshold of £36m includes the turnover of any UK entity together with the turnover of any group companies (including those operating wholly outside the UK). In practice, this means that each parent and subsidiary organisation (whether it is UK based or not) that meets the requirements set out above must produce a statement.
If a foreign subsidiary is part of the parent company’s supply chain or group, the parent company’s statement should cover any actions taken in relation to that subsidiary to prevent modern slavery.
How will this work where a parent or one or more subsidiaries need to produce a statement?
Where a parent and one or more subsidiaries in the same group are required to produce a statement, the parent may produce one statement that subsidiaries can use to meet this requirement. However, this statement must cover, in full, the steps that each of the organisations required to produce a statement have taken in the relevant financial year.
What information should be provided in the statement?
A slavery and human trafficking statement must include either a statement:
- Of the steps your organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains, and in any part of its own business; or
- That your organisation has taken no such steps.
The requirement to “ensure that slavery and human trafficking is not taking part in any part of its supply chain” does not mean that your organisation must guarantee that the entire supply chain is slavery free, but your organisation should set out in the statement all the actions it has taken to ensure its supply chain and its business is free from slavery.
There is no prescribed form, or length requirements for the statement but it may include information about your:
- Organisation’s structure, business and its supply chains;
- Policies in relation to slavery and human trafficking; and
- Due diligence processes in relation to slavery and human trafficking in your business and supply chains.
In addition it may mention:
- The parts of your business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps you have taken to assess and manage that risk;
- Your effectiveness in ensuring that slavery and human trafficking is not taking place in your business or supply chains, measured against such performance indicators as considered appropriate; and
- The training about slavery and human trafficking available to your employees.
Where your organisation has a website the statement must be published there with a prominent link to the statement on the home page.
When are businesses required to produce the statement?
The obligation to produce a statement only applies to financial years ending on or after 31 March 2016.
There is no prescribed time limit in which to make the statement but the Home Office provides the following guidance.
- Is expected to publish its slavery and human trafficking statement as soon as reasonably practicable after the end of the financial year.
- May decide to publish the statement alongside its annual or non-financial reports.
- Is encouraged to report on their policies within six months of the financial year end to which the statement relates.
What happens if my company does not comply?
The Secretary of State may enforce the duty to prepare a slavery and human trafficking statement in civil proceedings by way of injunction.
However, there are no statutory financial penalties – the real danger is the likelihood of damage to the reputation of your organisation with both customers and your own employees by being seen to fail to comply.
A failure to comply, or publish a statement makes it clear that inadequate steps have been taken to ensure that slavery and human trafficking are not taking place in the organisation.
Where your organisation is obliged to produce a statement you should:
- Identify what, if any, actions are being taken to ensure there is no slavery or human trafficking in your organisation or supply chain.
- Review, and if necessary amend, any existing processes and policies relating to slavery or human trafficking.
- Consider what training is offered on this subject within the organisation.
- Seek information from suppliers about what steps they have in place to safeguard against these issues.
- Where necessary, start to put new processes and policies in place and report these initial steps in your first statement.
CELIA member firm Abbiss Cadres offers a unique blend of skills to enable businesses to tackle HR and employment issues in the UK.
If you have any questions on this topic, or to discuss how they can help you, speak to their team on +44(0)203 051 5711 or send an email.
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