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Employment Matters

Employment Matters

Employment MattersIssue 7 | November 2017

Date
16 November 2017

Adam Rose Partner

Nina O'Sullivan Legal Director, Professional Support Lawyer

Will Winch Managing Associate

Modern slavery has been described by the Prime Minister, Theresa May, as "the great human rights issue of our time".


Updated guidance on modern slavery supply chain transparency statements

Modern slavery has been described by the Prime Minister, Theresa May, as "the great human rights issue of our time". The Modern Slavery Act 2015 requires large organisations to publish statements on their website setting out the steps that they have taken to prevent modern slavery in their own organisation and in their supply chains.  After just over a year of compliance with the new regime, the Government has issued updated guidance on preparing and publishing transparency statements. 

This comes at a time when Members of the House of Lords have called for tougher measures to ensure compliance and effectiveness of such statements. Two Private Members Bills are also currently before the House of Lords seeking to strengthen the regime. First, the Modern Slavery (Victim Support) Bill makes provision for identifying and supporting victims of modern slavery. The Modern Slavery (Transparency in Supply Chains) Bill meanwhile calls for enhanced obligations in relation to transparency statements including:

  • Extending the requirement to public bodies
  • Requiring relevant organisations and public bodies to publish their statement in their annual report and accounts
  • Requiring the Secretary of State to publish a list of all those organisations that are required to publish a statement
  • Requiring organisations or public bodies that have not taken any steps to set out the reasons in their statement
  • Making the categories of information to be disclosed mandatory.

Given the short period of time since the initial guidance was produced, the changes are not wholesale ones. However, organisations preparing their annual statement should note the below updates. For a more detailed review of the requirement to produce an annual modern slavery statement, please read our March 2017 bulletin or watch our short film here.

Who has to produce a statement? 

The Act requires commercial organisations supplying goods or services with a minimum global annual turnover of £36 million to publish a statement each financial year on their website (section 54 of the Act). The organisation must set out in the statement the steps it has taken during that financial year to ensure modern slavery is not occurring in its own organisation and supply chains.

The updated guidance now also encourages smaller organisations to voluntarily produce a statement, as all businesses, regardless of size, should be open and transparent about their recruitment practices, policies and procedures in relation to modern slavery, and should take proportionate steps to deal with it.

What needs to be disclosed?

The Government has not been prescriptive about what must be included in the statement and how it must be set out. However, the guidance (building upon the Act) sets out a non-exhaustive list of six categories of information that a statement should "aim to include information about". This is stronger wording than in the previous form of the guidance where these were merely types of information that 'may' be included:

  • The organisation's structure, its business and its supply chains
  • Its policies in relation to slavery and human trafficking
  • Its due diligence processes in relation to slavery and human trafficking in its business and supply chains
  • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk
  • Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate
  • The training and capacity building about slavery and human trafficking available to its staff.

Who can approve the statement, and when and where must it be published?

An appropriate senior person in the organization, i.e., director, member or partner must approve and sign the statement. The updated guidance states that it is best practice for the director who signs the statement to also sit on the board that approved the statement, and for the statement to include the date on which the board or members approved it.

The statement must be published on the organisation's website with a link in a prominent place on the homepage. Previously, the guidance indicated that the statement should be published 'as soon as practicable' after the financial year end. The updated guidance now provides that it should be published 'as soon as possible' after financial year end. However, there remains no specific deadline except that the Government expects statements to be published, at most, within six months, of year end. 

Organisations should also look to keep historic statements from previous years available online even where new statements have been published – this will allow the public to compare previous years' statements and to monitor what progress has been made.

New definition of child labour

The guidance introduces a definition of child labour in accordance with ILO convention standards. 

What if you fail to publish a statement?

A recent Chartered Institute of Procurement & Supply (CIPS) survey indicated that 34% of organisations required to publish a statement had failed to do so. However, there is no fine or penalty in the Act for failure to publish a statement although the Secretary of State can bring civil proceedings for an injunction requiring compliance (we are not aware of any such action having been brought to date).

Updated guidance on payment practices reporting for large businesses

As the first qualifying businesses start to prepare their statements on their payment practices, the Government has also updated its guidance, and launched the website portal where statements should be published and will be available for inspection. The website will contain more reporting information in 2018, when it is expected that the majority of businesses required to report will have begun reporting.

We reported on the Government's initial guidance for businesses meeting the threshold criteria and entering into qualifying contracts in our March 2017 bulletin. The updated guidance includes information on:

What contracts must be reported on?

The updated document includes more guidance on what will amount to a qualifying contract, i.e., one that has a significant connection with the UK. Specific examples are now given of when contracts involving a non-UK party will likely to be considered to have a significant connection with the UK.

What information must be included in the report?

Reports must include certain descriptions (e.g., of standard payment terms), statistics relating to when payments are made and yes/no tick boxes on certain aspects. The updated guidance expands upon the narrative description required for a business' standard payment terms, for example, in relation to the maximum payment period. There is also new guidance in relation to construction contracts and where supply chain finance is used.

Updated FAQs

The FAQs have been updated in a number of areas, no doubt to reflect a number of issues that have arisen, such as for example:

When paying by cheque, the period for counting how long it takes to make a payment ends when the supplier receives the payment, unless it is delayed for circumstances outside the paying business' responsibility, such as the time taken to cash the cheque.  In practice, therefore, if the cheque was posted first class, it can be assumed it would reach the supplier the next working day; the payment should then be treated as clearing within the standard time for the paying business' bank. 

An invoice is received once it is received (by whatever means) and not when it is entered on the business' software system. 

Guidance on how to calculate the turnover thresholds when a business' financial year is less than 12 months.

Guidance on invoices that are wholly or partially offset against an amount owed by a supplier.

Confirmation that qualifying businesses within a group of companies should report on qualifying contracts with one another.