CIPD - Business gifts

HR practice

Originally issued in March 1998; latest revision September 2007

This factsheet gives introductory guidance. It:

considers the implications and ethics of gift-giving
outlines the law covering this area of business
looks at setting up and implementing a business gifts and hospitality policy.

The gift and hospitality scene

Corporate gifts are commonplace, with organisations offering promotional packages and hospitality as a reward for their support and level of business. The practice of gift giving is widespread, although more prevalent and ‘acceptable’ in some industries than others. Christmas is the main season for items such as bottles of wine and spirits, boxes of chocolates, diaries, calculators, even briefcases to land on the desks of employees. There is no secrecy or deception involved and the gifts are given in order to consolidate a business relationship.

But where does this stop? Corporate and government policies on receipt of business gifts and hospitality exist because the system is potentially open to abuse. In the financial sector one day’s hospitality could include flying by helicopter to the British Grand Prix and then on by private jet to another major event in Paris. It would be hard not to feel in debt to such a host. As the value of what is given increases, so an unspoken quid pro quo begins to creep in. Eventually the employee and their employer may become unacceptably compromised. Policies can be introduced to protect both employees and employers against relationships leading to bribery and corruption.

Definition of inappropriate business gifts

Anyone receiving or offering an undue reward, be it a holder of public office or a private employee or employer, which is designed to influence the recipient in carrying out their work and incline them to act contrary to the known rules of honesty and integrity, will be acting corruptly.

Where gift giving goes beyond the consolidation of a business relationship, with the main beneficiary being the organisation, and where it no longer follows the published guidelines (where these exist) it may become ‘corruption’. Gifts become bribes and backhanders. The ‘accepted’ foundation for gift giving will vary from organisation to organisation. The important point is that what is ‘acceptable’ and what is ‘not acceptable’ is clearly and widely communicated and published.

How to recognise a bribe-taker

Whether an individual is acting in an unethical manner may be difficult to determine in practice, but certain indications to look out for could be that the individual:

lives, apparently beyond their means with a lavish lifestyle, and has no obvious explanation as to how they fund it
has very close social contacts with suppliers
is generally dismissive of rules, both for themselves and their staff
tries to exert influence outside own area
often complains about the company which is the source of the bribes (as a means of providing ‘cover’ for themselves).

The law and business gifts

There is a plethora of complex, primarily criminal, legislation dealing with bribery and corruption which may arise where seriously inappropriate business gifts are made. This legislation includes:

The Corruption Act 1889
The Prevention of Corruption Act 1906
The Anti-terrorism, Crime and Security Act 2001
The Proceeds of Crime Act 2002 .

Current criminal law is complex and careful legal advice should be taken if issues of bribery and corruption arise. It suffices to say that it is an offence for all civil servants corruptly to solicit or accept any gift or consideration as an inducement or reward for:

doing, or knowingly not doing, anything in their official capacity, or
for showing favour or disfavour to any person in their official capacity.

Other persons may commit criminal offences by accepting or offering bribes, although matters become more complex in situations where a bribe is paid to a third party rather than the person performing the act.

Other relevant legislation includes the Public Interest Disclosure Act 1998 which to protects whistleblowers from victimisation and dismissal where they raise concerns, in good faith, about misconducts and malpractices – see our factsheet on Whistleblowing for more information on this topic.

Go to our factsheet on Whistleblowing

Contractual provisions concerning gifts

A number of implied terms are automatically imposed by the law into an employment contract. These implied terms include a duty of fidelity whereby all employees should serve their employer faithfully and honestly. This implied duty encompasses an obligation not to accept bribes and to account to the employer for 'secret profits'. In addition to the implied duty, many employers include an express term in their employment contracts that any gifts (or gifts over a certain value) should be reported to an employee’s line manager before they are accepted.

Accepting a bribe may amount to a breach of an employee’s implied duty of fidelity and any express term in the contract. If a director accepts such bribes they will be in breach of their fiduciary duty to always act in the best interests of the company.

Making corporate gifts

The entitlement to make gifts and provide gratuities must be considered in relation to the activities of, and be in the interests of, the company. As long as a donation is incidental or beneficial to the company’s business it is permissible – charitable, educational and political donations given publicly out of corporate funds are usually fine. A gift to former directors or their dependants is also considered to be for the benefit of the company, but will usually require shareholder approval.

Public life

There is a government Committee on Standards in Public Life which was created to examine concerns about standards of conduct of all holders of public office, including arrangements relating to financial and commercial activities, and to ensure the highest standards of propriety in public life. This applies to ministers, civil servants, their advisers, Members of Parliament and UK Members of the European Parliament. Members and senior officers of all non-departmental public bodies, National Health Service bodies and other bodies discharging publicly-funded functions are also covered, as are elected members and senior officers of local authorities¹.

The international context

Cultural differences can lead to different interpretations of what could constitute 'corruption'. What one country might consider unethical, another may view as standard commercial conduct. For example, it may be considered wholly inappropriate, when doing business in Japan, to decline an offer of a night on the town with a sumptuous meal. Similarly, it is customary in Japanese culture to give gifts of increasing value as a business relationship develops. It could be extremely rude in this context to return or refuse a gift because it was seen as a bribe.

There is a growing trend among global organisations to take a stand, and lay down rules that apply throughout all the countries in which they operate irrespective of local ‘custom and practice’. Again, the important point is that all employees are clear about what is ‘acceptable’ or ‘unacceptable’ to the organisation.

In 2005 the Organisation for Economic Co-operation and Development (OECD) published a critical evaluation of the UK's implementation of the OECD Conventions on Combating Bribery in International Business Transactions. As a result of the OECD evaluation, a number of trade unions, charities and non-governmental organisations have called for the UK government to take immediate action to meet its international commitments on bribery and corruption. The concern is to ensure that UK companies working abroad combat bribery and corruption. The OECD has said that the persistence of corruption suggested that the conventions were not being enforced by the international community. The government has been asked by a number of pressure groups to accelerate comprehensive anti-corruption legislation and introduce principles for establishing corporate liability for bribery.

Companies, particularly those who operate overseas, are under considerable pressure from organisations such as Greenpeace, Amnesty International and Christian Aid to ensure they publish overall ethical codes of practice. If they are using cheap labour from developing countries, for example, they need to show they are practising high moral and ethical standards. These published policies on international business ethics will often include a section on business gifts.

Suggested good practice framework

Organisations should produce a clear, concise, written policy to protect the company against fraud, bad practice, and abuse. Employees also benefit from such a policy as they then know where they stand and it is then easier for them to refuse a gift without causing offence.

Policies should:

be issued in a structured way to all employees so that there is proof that each individual has received their own copy
leave employees in no doubt about what they are allowed to do and not do in the event of being offered gifts and/or hospitality
cover a wide range of situations
define what gifts are acceptable (if the organisation allows acceptance of gifts at all)
provide examples. This may be a value, for example ‘of a value of not more that £15’ or otherwise described, such as ‘nothing more than a simple calendar, diary, blotter or other item of office equipment of modest value may be accepted, and then only if it bears the company’s name or insignia and could legitimately be regarded as being in the nature of advertising material’.
state what action employees need to take to confirm the acceptance of the gift officially
provide for gifts and entertainment to be declared to superiors
be applied and enforced uniformly, without exception
be clear about the nature of any disciplinary action that might be taken as a result of a breach of the policy.

An employee may be able to successfully challenge a dismissal if they could show that other employees were corrupt and were not disciplined in the same way.

Setting up and implementing a policy

Determine whether there are any rules of professional conduct applicable to certain groups of employees, and ensure that these are incorporated into any policy.
Clarify how the policy will be enforced.
Benchmark against other appropriate organisations.
Make the policy as practical, workable, clear and concise as possible to make it easy for employees to understand and follow.
Ensure the policy is supported by senior management.
Spend time thinking carefully about how the policy will be communicated – emphasise in particular the benefits for the employees:
- the policy should be in writing, and everyone affected should have their own copy.
- ensure the policy is given to new recruits, for example, as part of their terms and conditions of employment, or linked in to the disciplinary procedure, by making a breach of the policy an act of misconduct.
- translate the policy for foreign subsidiaries.
- make copies of the code available to business partners (suppliers in particular).
- include the main points in the annual report.
Consult as necessary and offer staff an opportunity to respond.
Monitor and review.
Offer a contact for employees to check any situations which are borderline.

When should a gift be declared?

This will depend on the industry, culture and circumstances. What may seem perfectly normal in the financial sector, may seem outrageous in manufacturing. It is helpful to give a guideline – a maximum value is one which is often mentioned. Consider also who the giver is – if it is a patient in a hospital for example, this would most likely be a method of thanks with no intention to corrupt. Timing is also important: if the gift was given prior to entry to hospital, there might be some idea of gaining a private room, or moving up a waiting list. Some organisations distinguish between ‘casual’ gifts (eg those given at Christmas) and gifts offered whilst business transactions are being made.

Who should sign up to the policy?

Some organisations ask all employees to sign the policy and include it in the terms and conditions of employment. If an employer seeks to introduce a policy on business gifts as part of an employee’s contractual obligations, it is important to remember that changes to existing contracts of employment can only validly be made with an employee’s consent. The correct procedure would involve seeking that consent, allowing time to deal with any queries or concerns employees had. This may also involve an obligation on the company to consult collectively with the elected employee representatives, depending on the circumstances and the number of employees involved. Consequently, it would be wise for an employer to take legal advice to reduce the risk of unfair dismissal claims or other liabilities arising.