It may have slipped under the radar of many small businesses, but now is the time to take note and get your house in order to comply with the Modern Slavery Act says Shirley Smith, Partner at Kreston Reeves

The Modern Slavery Act that became law in October 2015, introduces new legislation designed to address the abhorrent abuse of human rights that arises from the offences of slavery, servitude, forced or compulsory labour and human trafficking. This legislation has helped increase awareness of these practices, and has enabled the police to investigate allegations of modern slavery and associated crimes such as human trafficking. This has already led to investigations into businesses such as farming, takeaway restaurants and car washes which may be exploiting the staff that work in them.

Legitimate businesses have been affected too – many without realising it, for example by landlords letting premises that have been used to carry on an illegal trading activity. It is no surprise that the requirements of this Act have a regulatory impact on business, with greater attention now being paid to transparency within commercial organisations and the promotion of ethical business practices than ever before. Consequently, it is now a legal requirement for many commercial organisations to publish a statement on their approach to addressing modern slavery and human trafficking.

Who must fulfil this requirement?

All commercial organisations with a global turnover exceeding í36m, and which carry on whole or part of their business in the UK, must now fulfil this requirement of publishing a statement and updating it annually. This includes companies, groups and partnerships. It is envisaged that other organisations that are not subject to this legislation, particularly larger charities, may wish to adopt this requirement voluntarily, as a statement of good practice.

When will this first be enforced?

The new requirements apply for financial years ending on or after 31st March 2016, and with many companies having a year end of 31st March, the requirements will be relevant to them for the year ended 31st March 2017.

Those who meet the requirement by law, will have to produce a report on what steps they have taken in the last financial year to ensure that modern slavery and human trafficking are not taking place in their business, or within their supply chains. If no procedures have been put in place the statement must state this. The statement should be produced as soon as practicable, and certainly within six months of the year end.

Where must this statement be published?

Organisations must publish their report on their website with a link to the publication prominently displayed on the organisation’s homepage. Alternative rules apply if a company does not have a website.

Although the report is not required to be included in the financial statements of a company, there is nothing to prevent it from being referred to, for example as part of the company’s strategic report.

What must be included as part of the statement?

The statement should address the following issues:

  • The organisation’s structure, business and supply chains
  • Its policies on slavery and human trafficking
  • The due diligence it has undertaken regarding the risk of slavery and human trafficking
  • The parts of the business and supply chains where there is a risk of slavery and human trafficking
  • How it measures that slavery and human trafficking has not taken/is not taking place in its business or supply chains
  • Staff training

What will happen if a company does not comply with the Act?

Failure to comply with Section 54 of the Act can result in an injunction from the Home Secretary to force compliance. If an organisation still doesn’t comply it could be deemed to be in contempt of a court order, which is punishable by an unlimited fine. In addition, the Home Office envisages that there will be considerable public interest generated by this new disclosure requirement, with standards of behaviour by business increasingly being reported on by the media.

For reputational reasons, it is also imperative that organisations treat the issue of modern slavery within their business seriously, and meet their legal obligations to report on the steps that they have taken to address this issue.

Why this actually affects companies of all sizes

Readers of this article, whose organisations have a global turnover of less than í36m, may be relieved thinking that this extra compliance doesn’t relate to them – think again!

If you supply an organisation with a turnover of í36m they will be, if they haven’t already started, carrying out due diligence on their supply chain, namely you! If you are tendering or considering tendering for a contract for a larger company, you will doubtless also have to take this into consideration.

Therefore, even if there is no legal requirement for you to publish your statement on your website, we would recommend that you have an internal statement prepared, ready for your supply chain enquiries which is updated each year as part of your supply chain management. This will, of course, mean you will need to carry out due diligence on your own suppliers!

Need advice?

If you have any questions regarding the above article or would like to find out how Kreston Reeves can help your business please contact Shirley Smith, Partner, Kreston Reeves.

Email shirley.smith@krestonreeves.com or call 0330 124 1399

Kreston Reeves