Loosening the chains of modern slavery

To tackle the issue, the Government has introduced the Modern Slavery Act 2015 (the Act) which, among other things, requires organisations meeting certain criteria to publish an annual statement setting out the steps they have taken to eradicate slavery not only within their own business but also through their supply chain.

With the publication of an anti-slavery statement, large businesses are expected to be more transparent about their operations in the hope that this will drive up standards throughout supply chains. It is envisaged that the legislation will have a cascading effect on smaller businesses to ensure that their own organisation and supply chains are slavery-free.

The Act has also encouraged many businesses to address their commitment to corporate social responsibility and brand protection, both in their workplace and supply chains. With this commonly landing upon the desks of HR professionals to tackle, what are the some of the key issues to be mindful of?

1. While HR can assist with the preparation of the slavery and human trafficking statement, ultimate responsibility lies with senior management. It is therefore important to identify which senior individual(s) within the business are responsible for compliance and for taking responsibility for the organisation’s commitment to anti-slavery and ethical matters.

2. HR should familiarise themselves with the requirements of the Act. The statement may include details about: the organisation’s structure; its policies; due diligence processes and risk assessments; its effectiveness in ensuring slavery is not taking place; and the training the organisation has delivered.

3. It is recommended that the appropriate people within the business are made aware of the Act and what impact this has on their roles. For example, procurement managers should review tender documentation and contracts and consider including provisions regarding compliance with the spirit of the Act. Customers further up the chain are equally likely to require this from their own suppliers.

4. Organisations are advised to know their business and to map out their supply chains to understand where labour is sourced. Particular consideration should be given to any risky areas to the business – such as contracting with businesses in geographical areas with a statistical high level of slavery; sectors where there is much low-paid unskilled labour; and where there is a high use of unfamiliar agency providers.

5. It is essential to understand the warning signs of slavery occurring in the business and its supply chain and educate your workforce on what modern slavery means in practice. Most slavery is well hidden with many affected individuals being unaware that they are actually victims.

6. It is advisable to develop your policies on anti-slavery which should contain action plans setting out the steps staff and suppliers must take in the event that they suspect or uncover slavery or forced labour. Staff should be trained in how to report modern slavery particularly as there is a real risk that police enquiries could be hampered if internal company investigations are not carried out correctly.

Forced and slave labour is an unfortunate reality within businesses and the global supply chain. As such, it is essential to take action now if you are a business which falls within the scope of the Act. Prime Minister, Theresa May, in the guidance to accompany the Act, states: “it is simply not acceptable for an organisation to say, in the twentyfirst century, that they did not know [about modern slavery]”.1

Even if your own organisation is not required to publish an anti-slavery statement, it would be wise to consider the cascading effect of the Act on your business as well as the significant risk to your reputation if any of your labour supply is found to be affected. Loosening the chains of modern slavery.. Source: 1. Slavery and human trafficking in supply chains: a practical guide (https://www.gov.uk/government/publications/ transparency-in-supply-chains-a-practical-guide)

Employee Incentives

Implemented effectively, employee incentive schemes can be used to recruit, retain, motivate employees and improve performance. They can also be tax-efficient and therefore help reduce the overall cost of a remuneration package. Furthermore, if an employee incentive scheme uses shares or share value, it can effectively align the interests of participants with those of shareholders and assist private companies with succession or exit planning.

Before implementing a scheme the following questions should be considered:

What is the purpose of the scheme? Is it to reward participants for future or past efforts? Should any value be “ring-fenced”? Considering the purpose of the scheme will give some indication of whether the participant should be gifted the incentive or if there should be a payment equivalent to market value at the point of acquisition. Ring-fencing value by the creation of a “growth share” or “hurdle share” may be appropriate.

Will all employees benefit from the scheme or a select group? Some types of tax-favoured schemes have to be made available to all qualifying employees (all-employee schemes), whilst under others, the board of directors can select the employees to be invited to participate (discretionary schemes).

Is the business comfortable with participants being shareholders or should there be a degree of separation? If employee shareholders are not desirable, options can be used to deliver an upfront incentive with without any immediate shareholding. “Exit only” options mean that employees are only shareholders for a moment immediately before sale which avoids employee shareholders getting involved in shareholder affairs beforehand.

What should happen if the participants cease to be employed? Should a distinction be made between “good” and “bad” leavers? It is not uncommon for an incentive scheme to make provision for differing treatment depending on the circumstances which lead to an employee leaving.

Should the incentive be subject to any performance conditions e.g. meeting a personal or corporate performance target? In order to align the interests of participants with those of shareholders careful consideration should be given to the conditions under which the incentive vests and becomes exercisable. It is not uncommon for such conditions to be linked to the passage of time and the achievement of business plan objectives whether corporate or personal.