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HR | Employment Law | Health & Safety

Managing Conflicts of Interest In The Workplace

James Rowland

James Rowland

Commercial Director

Conflict of interest in the workplace

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As a business owner or manager, you have a responsibility to identify and address conflicts of interest in your workplace. Failure to do so can negatively impact your company’s reputation, finances, and employee morale.

What Are Conflicts Of Interest?

A conflict of interest arises when an employee’s personal interests interfere with their ability to make objective decisions on behalf of your company.

Common examples include:

  • An employee has a second job with a competitor
  • An employee is in a relationship with someone they manage
  • An employee having a financial stake in a supplier or partner company

According to the Companies Act 2006, directors have a legal duty to avoid situations where there is a potential conflict between their personal interests and those of the company.

Why Managing Conflicts Matters

Failing to address conflicts of interest can:

  • Lead to legal action if conflicts violate laws like the Bribery Act 2010
  • Cause employees to make decisions that unfairly benefit themselves over the company
  • Undermine trust between staff members and leadership
  • Allow unfair competitive advantages if sensitive information is shared

Properly managing conflicts helps maintain workplace fairness, compliance, and positive team dynamics.

How To Prevent And Address Conflicts Of Interest

How To Prevent And Address Conflicts Of Interest

To minimise conflicts, you should:

  • Develop a clear policy: Outline expected conduct and disclosure procedures aligned with UK law. Share with all employees.
  • Offer training: Educate staff on identifying and disclosing conflicts via resources like online modules.
  • Implement reporting procedures: Provide secure channels for staff to report potential conflicts.
  • Document everything: Keep detailed records of reported conflicts and how they are addressed.

If a conflict arises, start a conversation with the employee, provide a chance to correct it, and take disciplinary action if needed per your policy. Document each step.

Spotting Potential Conflicts

Some common situations that can lead to conflicts of interest include:

  • Outside employment with competitors, suppliers, or business partners
  • Personal relationships between staff, such as family members or romantic partners
  • Gifts, hospitality, or other incentives offered by external parties
  • External investments or ownership interests
  • Serving on boards or committees of other organisations
  • Access to confidential information that could benefit an employee personally

Be on the lookout for these red flags and encourage employees to self-report any areas of concern. Develop a conflict disclosure form they can submit.

Handling Conflicts Sensitively

Addressing conflicts requires tact. Avoid accusatory tones and give employees the benefit of the doubt initially, as many conflicts are inadvertent.

Listen carefully to understand their perspective. Present it as an opportunity to amend the situation, rather than solely a punitive measure. Offer additional training if knowledge gaps become apparent.

Document the incident neutrally, focusing on facts. This creates a paper trail in case further issues emerge.

Conflicts Involving Leadership

Special care should be taken when senior leaders have a conflict of interest. Given their influence, their compromised objectivity could significantly impact the company’s reputation and direction.

Consider involving your board of directors or independent advisors. More stringent oversight and accountability measures may be required.

Be prepared to make tough calls for the good of the company over protecting individual interests.

Annual Review Of Policy

Revisit your conflict of interest policy annually to assess if it needs updating. Involve department heads in identifying potential problem areas based on emerging company developments.

Welcome feedback from employees on improving the policy and making appropriate adjustments.

Staying abreast of legislative changes affecting UK workplaces can further strengthen your policy.

Further support: View HR Compliance Services 

Get Expert Help

With legal compliance on the line, support from qualified professionals like Neathouse Partners can be invaluable.

Our team of employment lawyers and HR consultants can help craft robust conflict-of-interest policies, deliver staff training, and provide ongoing legal and HR assistance to ensure your company meets UK regulations and embeds a culture of integrity.

Call 01244 893776 or use our contact form to get in touch.

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