In 2015, the Modern Slavery Act 2015 (‘the Act’) consolidated criminal offences relating to human trafficking, forced labour and slavery. Slavery is widely defined to include servitude, forced labour and human trafficking; the Act came into force.
Section 54 of the Act requires large business to produce a slavery and human trafficking statement each financial year. The statement is intended to improve transparency in business supply chains and encourage businesses to take steps to avoid any association with modern slavery.
In 2018, the government issued a review of the Act and a consultation,following publication of a report which highlighted the severe social and economic cost of modern slavery: estimated at £4.3billion a year in support costs, lost earnings, law enforcement and physical and emotional harm suffered by the victims. The government has put forward a range of proposals for tightening up the reporting process. For example, the government intends to legislate for the contents of modern slavery statements and include reporting deadlines. However, no timetable has been published for these reforms to take effect.
In this article we revisit the current requirement to produce a statement, who it applies to and what must be covered.
Requirement To Produce a Statement
The requirement to publish a statement applies to:
- commercial organisations (including companies, whether incorporated in the UK or not, and partnerships, whether formed in the UK or not);
- carrying on a business or part of a business in the UK;
- supplying goods or services; and
- having an annual global turnover of £36 million or more.
If the organisation meets the criteria above, it does not matter if it operates with or without profit, for charitable or educational aims or performs purely public functions.
If any organisation in any part of a group structure (whether parent or subsidiary and whether based in the UK or not) meets the requirements of section 54 then it is legally required to produce a statement.
Turnover
Total turnover is calculated as:
- the turnover of the organisation; and
- the turnover of any of its subsidiary undertakings (including those operating wholly outside the UK).
For corporate groups, the turnover threshold of £36 million takes into account the combined global turnover of all subsidiaries within that group.
Businesses caught by section 54 but whose turnover drops below £36 million in a subsequent financial year are strongly recommended by the guidance to continue to produce a statement each year.
Carrying on a Business or Part of a Business in The UK
The guidance provides that a common-sense approach should be taken to assessing whether a body incorporated outside of the UK is carrying on a business or part of a business in the UK. The suggestion is that having a demonstrable business presence in the UK will meet this requirement.
Having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK since the subsidiary may act completely independently of its parent or other group companies.
Content of Statement
The statement must detail the steps the organisation has taken during the relevant financial year to ensure that slavery and human trafficking is not occurring in its supply chains or in any part of its organisation. This can include setting out that it has taken no such steps, or is just beginning investigations. The Act places particular emphasis on the investigation of supply chains as this has been identified as an area in which many organisations may unknowingly support crimes related to slavery.
The statement should be succinct and written in simple language that is easily understood. It is up to the organisation how they present information and how much detail they provide. Relevant links to documents/policies can be included (rather than replicating wording). Organisations can draw on existing programmes of activity rather than creating new ones where appropriate.
The statement may include information about the following.
- The organisation’s structure, its business and 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.
Annex E of the statutory guidance provides detailed guidance with regard to the information that should be included in a statement, which is summarised below:
Information in the statement about an organisation’s structure, its business and supply chains mayinclude the following:
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Guidance on an organisation’s policies in relation to slavery and human trafficking includes the following key points:
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Information in the statement about an organisation's policies may include:
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The following information may be included in the statement about the organisation’s due diligence processes:
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The following information in the statement about assessing and managing risk may be included:
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Information in the statement about the organisation’s performance indicators may include the following:
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Guidance on the organisation’s training includes the following points.
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Approval
The statement must be approved and signed by an appropriate senior person in the business.
Publication
The statement should be published as soon as reasonably practicable after the end of each financial year (and may be published at the same time as other annual or non-financial reports). The statutory guidance encourages publication within six months of the financial year end.
The statement must be published on the organisation’s website with a clear link in a prominent position on the homepage. The guidance recommends calling the link “Modern Slavery Act Transparency Statement”.
If the organisation does not have a website, a copy of the statement must be provided within 30 days of the receipt of a written request.
Failure to comply
If an organisation fails to produce a statement, fails to publish it on their website (where they have one), or has not set out the steps it has taken in the relevant financial year then it will have failed to comply with section 54.
In this situation, the Secretary of State may seek an injunction through the High Court (or, in Scotland, civil proceedings for specific performance of a statutory duty) requiring compliance. Failure to comply with the injunction will be contempt of court punishable by an unlimited fine. While there is no specific criminal penalty as such, it is nonetheless prudent to provide the statement in line with the legislative requirement, as a matter of good practice and in order to avoid facing negative publicity.
Takeaways for Companies
If you are not already preparing an annual statement, you should consider your organisation’s financial status (taking into account any subsidiaries where the organisation forms part of a corporate group) in order to determine whether it is likely to meet the £36 million turnover threshold.
We have included some takeaways below for employers.
Responsibility - Consider who in the company will take responsibility for ensuring compliance with the requirement to prepare and publish a statement, and who will be responsible for managing the risk of modern slavery in the business and its supply chains
Policies and procedures – Review existing policies and procedures relevant to modern slavery and consider the introduction of a specific anti-slavery policy if the company does not already have one.
Training and reporting - Provide training to staff regarding human trafficking and slavery in the modern context so they are able to spot the signs and report anything suspicious. Setting up a confidential whistleblowing helpline can also provide a helpful tool in order to encourage confidential reporting of any concerns.
Due diligence – review due diligence processes for appointing suppliers etc to minimise the risk of modern slavery occurring.
Commercial contracts - consider including an anti-slavery clause within commercial contracts
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