Government launches most significant review of whistleblowing framework in over 25 years – including paying whistleblowers to report economic crime

The most significant change in culture may come from the proposed Serious Fraud Office (SFO) financial incentive scheme, which the Government supports. Inspired by the US Securities and Exchange Commission programme (of which UK nationals are already the second-largest overseas user group), the proposal is that:

• the information must be significant and original and lead to a corporate conviction or a Deferred Prosecution Agreement; 

• rewards would be a percentage of the company's penalty, payable only once the case and any appeals have concluded, with views sought on whether there should be a cap;

• eligibility would not depend on being a worker under the Employment Rights Act 1996 (ERA), but could exclude those with a legal duty to report, those culpable in the offending and those who obtained information dishonestly; and

• there would be new criminal offences of making knowingly false reports and of harassing or intimidating whistleblowers.

This proposal is worth watching. For comparison, HMRC's Strengthened Reward Scheme already offers up to 30% of tax collected where at least £1.5m is recovered, with no cap. One proposed factor in setting the size of an SFO reward is, for workers, whether they used their company's internal reporting systems.

While having a whistleblowing policy is best practice, employers, other than certain financial services firms, are not under a legal obligation to have one, keep disclosures confidential, follow them up or inform whistleblowers of the outcome. The Government invites views on whether more detailed guidance will suffice or whether a statutory duty to have appropriate and effective procedures is needed. The paper suggests that any statutory duty could broadly reflect either the prescriptive approach taken in Ireland or the less rigid approach in the FCA’s rules in SYSC 18.

The Government emphasises that a duty to follow up would not require every disclosure to be formally investigated, only reasonable and proportionate steps to assess it. It proposes civil, not criminal, penalties and asks whether a government body should enforce compliance. Significantly, the Government would consider exempting organisations already subject to equivalent requirements, such as certain FCA-regulated firms.

Whistleblowing protection already extends beyond employees and workers to agency workers, trainees and LLP members, among others. Some stakeholders want it extended to non-executive directors, charity trustees, volunteers, job applicants and certain self-employed individuals. 

The Government will test any extension against the approach in MacLennan v The British Psychological Society [2024] EAT 166, namely how likely the individual is to encounter wrongdoing, the importance of their disclosures, their vulnerability to retaliation and whether they have alternative protections. Its initial view is that volunteers may not meet these criteria, but that certain self-employed individuals may have a stronger case. This means that NEDs, consultants and contractors whose roles end after raising concerns could gain a route to uncapped tribunal compensation.

Whistleblowing protection is only granted where the worker reasonably believes their disclosure is in the public interest. This threshold was introduced in 2013 to keep personal disputes, such as disagreements over pay or bonus, out of the regime. Some stakeholders find the case law test for “public interest” too vague; others say case law now provides enough clarity and that disputes over the test are relatively uncommon. The Government is not proposing to remove this important safeguard, but is asking whether it works in practice and whether more guidance, perhaps through practical examples, is needed.

Disclosures to a prescribed person, such as the FCA or PRA, are protected only if the worker also reasonably believes the information is substantially true. Removing this could encourage reporting but, as the consultation notes, may protect less well-founded allegations, hamper disciplinary action and increase direct reporting to regulators. 

The consultation also asks whether:

• section 43B ERA adequately covers AI and corruption risks, 
• an AI tool or central body should help workers navigate the 90+ prescribed persons to whom they can make disclosures; and
• the deadline for applying for interim relief should be extended from seven to 14 days.