What are the risks in offering incentives?

I run a small, relatively successful agency, and whereas we aren’t able to compete with our larger counterparts on price, we pride ourselves on the relationships we build and the quality of our service. Corporate hospitality has played a big part in that, and it has been critical to our success to be able to spend time informally with clients, and to reward their loyalty. I don’t have a sophisticated gifts and hospitality policy, and with the Bribery Act 2010 coming into force, I wanted to check whether I’m leaving myself vulnerable or even breaking the law, and if there is any way of protecting myself.

A. Jo Davis answers:

There is currently some uncertainty as to when and if the Bribery Act in its current format will be implemented. Last month, the government ordered a review, but let’s assume the Act is going to come into force later this year. The four offences under the Act are: bribing another person; being bribed; bribery of foreign public officials; and failure of commercial organisations to prevent bribery.

The definitions of each offence are broad and cover not just financial inducements, but also what are termed “other advantages” given, offered, promised or received in order to induce or reward someone to “improperly perform” a “relevant function or activity”.

These undefined offences make it difficult for any organisation to know whether they are in breach of the Act – and the bribe doesn’t have to be given, it’s enough to have the intention. Neither does it have to be money, which is why the Act talks about financial “advantage”.

For many businesses, corporate hospitality is simply part of accepted practice, and the government says it isn’t seeking to penalise legitimate examples. It will consider if entertaining appears particularly lavish and isn’t in line with the norm in the marketplace However, businesses should take steps to ensure they don’t fall foul of the law as the possible penalties include unlimited fines and the threat of jail.

The only currently available line of defence is to be able to prove that there were “adequate provisions” in place. Apply clear, practical and accessible policies and procedures to everyone you employ and to business partners under your effective control, taking into consideration: political and charitable donations; gifts and hospitality; and promotional expenses.

Even if businesses stick to the rules, they could be vicariously liable for the acts of their employees unless they can show there were procedures in place designed to prevent that bribery. Hopefully, the courts will adopt a common sense approach. There is a world of difference between inviting a client to an event and providing a financial inducement. It is advisable to keep a record of the amounts you spend and the circumstances in which it is offered, so you are always in a position to argue that the hospitality is a ‘thank you’ for past services, not a bribe for future ones.

Jo Davis is a partner in the employment practice at law firm BP Collins LLP. She acts for a broad range of corporate and high net worth private clients. www.bpcollins.co.uk


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