Wining and dining: the rules on client hospitality

Taking a valued customer out for a three-course lunch or sending a client a bottle of champagne as a thank you gift can be an important part of a maintaining a good working relationship. But recent reforms have made many small firms question whether they are still permitted to wine and dine their clients. Has the Bribery Act changed the rules on client hospitality?

Good customer care can be particularly vital in small firms, whose reputation often depends on a personal touch and good customer service skills. However, under the Bribery Act, businesses must now ensure that client hospitality is “proportionate” or risk prosecution.

That’s what the Act says anyway, but a variety of people have gone to great lengths to reassure small firms that the reforms are not aimed at them. Nevertheless, it could be a good time to review your approach to client hospitality. So should you review the way you manage customers?

The lawyer’s view on the Bribery Act

“Business owners don’t need to worry provided corporate hospitality is proportionate and reasonable for the size and type of their business.” Susan Barrington-Binns, head of the construction department at Shulmans solicitors.

“The Bribery Act isn’t there to stop or thwart legitimate business interest or put an end to genuine hospitality. For example, you can still pay for reasonable travel expenses for clients or take them to Wimbledon or out to lunch ― provided it’s proportionate for your firm.

“But small firms should carry out a risk assessment for bribery and put in place anti-bribery procedures. And they don’t have to get a law firm in to do it ― they can do it themselves."

You need to be able to demonstrate you’ve done all that could be reasonably expected to prevent or detect bribery. So what’s reasonable for a firm with a handful of employees? Talk to staff or email a handout round with advice about the Bribery Act. Small firms should also have a threshold on expenses and have checks in place to ensure directors and staff stick to them, so employees aren’t coming back with lunch or dinner receipts in the hundreds of pounds.

“Clearly, if corporate hospitality is just used as a means to an end to cover bribing someone, such as to pay for someone’s holiday or to have a meeting in a luxurious location, then that wouldn’t be proportionate. We won’t really know how substantial the fines will be until the courts start interpreting and applying the test.

"However, the first prosecution and sentencing has now taken place, and a 3 year sentence was given to a magistrates court clerk who pleaded guilty to accepting a £500 bribe. This case demonstrates the rigorous approach of the courts and the need for businesses to protect themselves against unlimited fines and heavy prison sentences."

Do small firms really need to carry out a risk assessment? Isn’t that a bit over the top for most small firms? This is what business owners think…

The small-business view

“I don’t believe in taking clients out for a meal to pitch to them - it has to be part of he client contact policy, focused on relationship building, not winning business.” Claire Curzon, managing director of business services firm Brighter Directions.

“We do pay for clients' refreshments. As in personal situations, if you invite someone for a meal or drink then you pay for it ― it’s just normal etiquette.

"Because of the new Bribery Act, we now have a company policy for corporate hospitality although it is only senior managers who meet clients and they are experienced enough to know good manners.

"There is so much red tape for small firms it obstructs how businesses manage their client relationship roles, which shouldn’t be the case. With so many other regulations on small businesses, it’s difficult to ensure we are in line with legislation and policies but also deliver a fantastic customer service, which vitally is what drives a business forward.”

“We use gifts to show our appreciation to important clients. We bought one a magnum of vodka which came with its own ice bucket, it was a £200 gift, and he loved it. But we’re worried that could be a grey area in terms of the Bribery Act.” Roger Garcha, managing director of BetterTAX.

“I think we are low risk, but we’re reviewing our client hospitality ahead of the Act and looking at how we reward our agents and bigger clients.

“The situation is still ambiguous as there seems to be mixed advice coming out. Justice Secretary, Ken Clarke, said small firms don’t need to fear that they are suddenly going to need an army of lawyers in order to manage the bribery risks. But then I’ve heard legal experts say if you don’t seek professional advice from a law firm, and put procedures in place so that your employees understand what they can offer and accept, you’re potentially in real trouble.”

“The reforms are news to me, they must have been really badly publicised. I talk to a lot of small-business owners and no one has mentioned the Bribery Act.” Gilbert Hill, owner of web development firm Governor Technology.

“I regularly meet clients for lunch, dinner, drinks after work or the odd sporting event, based on what they are interested in. I’m looking to get into a position of trusted adviser with my clients, so as such many clients become personal friends. If I’m taking a client out to lunch, I’ll actively not make it about who they can put me in touch with or what opportunities they have for me.

“I’m not spending huge amounts on the clients as that’s not what it's about ― it’s about building a relationship with them.”

So, it’s a mixed bag of responses… Different businesses have different approaches to client hospitality and most are unlikely to fall foul of the Act. How will it affect you? Leave your comments below.

Related articles:

• The Bribery Act ― are you affected?
• The Bribery Act quick start guide