This article provides a summary of new government guidance on both the duty of large companies to report on their payment practices and the duty to provide an annual Modern Slavery statement.
The payment reporting practice regime
For large companies with financial years beginning on or after 6 April 2017, there is a duty to report on their payment practices and performance. The government originally issued guidance in January 2017. It has now been updated.
- In a welcome move for businesses with an international footprint, the guidance provides additional clarification of how companies should assess whether a contract has “a significant connection with the UK”. At paragraph 40, the guidance provides examples. It remains the case that the particular circumstances of each contract still need to be considered. However, this will hopefully prove useful for international businesses trying to assess which contracts they actually need to report on.
- Expanded guidance is provided on the maximum payment period. This adds clarity on the description that should be provided of standard payment terms and gives examples as to when a business may choose to provide extra information. This should help businesses provide descriptions which are aligned with the government’s expectations (for more information see paragraph 47).
- A government web service has been established which allows businesses to publish the required information (see paragraph 79). Access the government web service.
As an additional point to note, the first Small Business Commissioner has been appointed. This will give small supplier businesses a new avenue to take action against large businesses when they encounter payment issues. The office is not yet fully operational but when it becomes functional the Small Business Commissioner will have the power to deal with complaints in respect of payment matters from small businesses occurring from 6 April 2017.
Businesses supplied by smaller suppliers need to be aware that this complaints procedure is open to any supplier who feels aggrieved as a result of delayed payments.
Transparency in supply chains – the Modern Slavery Act regime
With the enactment of the Modern Slavery Act 2015 came the requirement for large businesses with UK operations and a global turnover of over £36 million to prepare an annual statement detailing the steps taken to ensure modern slavery is not taking place in their business or supply chains. Recently published guidance from the Home Office provides information on key developments in relation to the MSA.
- Relevant to both smaller companies and groups with smaller subsidiaries, the guidance encourages businesses which do not meet the £36 million global turnover threshold to make a Modern Slavery Act statement. Those producing group statements might consider whether to now make a statement for the whole group, not just those caught by the requirements of the Modern Slavery Act 2015. Organisations close to the threshold might also consider producing an annual statement. Of course, the change may not have a significant impact for groups that implemented Modern Slavery Act changes as a 'group-wide’ initiative, but it perhaps provides a further incentive to adopt measures group-wide where this was not previously the case.
- There are also useful clarifications on what is considered good practice when making the statement; keeping historical statements; and the continuity and public scrutiny of Modern Slavery Act statements. The guidance places particular importance on keeping historic statements, the idea being that this will evidence an organisation's path towards driving out modern slavery. So qualifying organisations may want to review the arrangements highlighted in previous historical statements and provide an update as they develop. Overall, this is not a major change, but it sets the tone that organisations should be doing more than producing the same statement every year.
- The guidance also contains some advice that companies can easily adopt as low cost first steps towards showing they are combatting this issue. For example, it encourages use of the Modern Slavery Helpline (on 0800 0121 700). So noting this helpline exists as a contact point, whether in a circular to employees or a formal Modern Slavery Act policy, may be a useful step.