Learnings from the introduction of modern slavery legislation

One year ago, on 1 January 2022, new modern slavery laws came into effect in New South Wales with affected organisations expected to have been compliant for over 12 months.

The Modern Slavery Act (2018) requires public sector agencies to implement effective systems, processes and controls to prevent, identify, and manage modern slavery risk.

Whilst obligations are mandatory for private sector entities with revenues over $100 million, all organisations are encouraged to assess their risks and promptly remediate any vulnerabilities. Key processes include employee training and the awareness of reporting procedures to ensure risks are understood and managed.

What is modern slavery?

Modern slavery is defined as coercion, threats, violence or deception to exploit or deprive a person of their freedom.

Examples include:

  • Human trafficking
  • Slavery and forced labour
  • Deceptive recruiting
  • Debt bondage
  • Forced marriage
  • Sexual exploitation.

What does modern slavery look like?

Indicators of modern slavery may include:

  • False promises of legitimate employment, or employment conditions
  • Confiscation of personal documents, isolation, and controlled access to accommodation and health services
  • Obtaining personal information to threaten, manipulate, coerce or control
  • Individuals provided promises of freedom after a set time period
  • Physical, emotional and psychological abuse.

Recent examples of modern slavery

Despite legislative attempts, we continue to see numerous examples of modern slavery, often in first-world countries. In December 2022, it was reported that at least four major suppliers of popular vehicles had employed children as young as 12 years of age across more than ten different factory locations in the United States.

The organisations involved both have modern slavery statements. Their initial response to investigations was that under age workers were not used ‘to the best of their knowledge.’ Subsequently, both companies committed to review their recruitment processes.

Contributing factors to the use of slave labour include:

  • Pressure from performance measures and monitoring – with contracts noting that hefty fines could be issued for each minute that supplier delays were incurred
  • Shortages in labour and supply chain – the pandemic adversely impacted capacity across industry
  • Inconsistent level of regulatory enforcement – many suppliers operated in rural areas and were not subject to same level of scrutiny
  • Inadequate recruitment, onboarding and monitoring processes
  • Stakeholders being aware of issues and not acting. In the December case, recruiters were allegedly ‘tipping off’ under age workers when the investigation commenced. Senior personnel had also reportedly conducted site visits over the years and did not ask questions, nor observe the age of workers.

When assessing risks, businesses should consider the applicability of the following table to their business operations:

Sector and industry
  • Perform impairment testing
  • Unskilled or seasonal labour
  • Short-term contracts / outsourcing
  • Foreign or temporary workers
Products and services
  • Short delivery time-frames
  • Sourced from high-risk countries
  • Seasonality of product
Organisational risks
  • Poor governance structures
  • History of human rights violations
  • Inadequate procurement or auditing processes
Sovereign risks
  • Poor political governance and corruption
  • Conflict
  • Inadequate worker protection
Hidden risks
  • Geographical areas where there is limited monitoring/visibility.

Who can help?

For efficient and effective advice on modern slavery risk management, please contact your local PKF Audit and Assurance team. We will deliver a tailored solution that provides your organisation with an accurate view of current state, as well as practical improvements to assist your modern slavery risk management framework.

Please reach out to your local PKF Audit and Assurance team for further insights or guidance.

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