ResponsibleBusiness
Should whistleblowers be paid?
Highlighting wrongdoing in the workplace can be stressful and potentially career-limiting, so providing financial rewards can help cushion the blow. But could there be unintended consequences? Neil Johnson examines the pros and cons.
Whistleblowing is currently a hot topic in the UK. High-profile cases in the NHS and the Post Office scandal are just the tip of a growing iceberg, with changes to help protect those disclosing the information potentially on the horizon.
Image: Getty
Current protections and government review
Whistleblower protections in the UK have remained largely unchanged since the Public Interest Disclosure Act (PIDA) 1998, which has been described as “a paper shield”. But the Department of Business and Trade launched a review in 2023, with evidence gathering ending in the autumn of that year and the outcome not yet published.
Existing UK rewards
It is likely that any conclusions will include comment on the concept of rewarding whistleblowers – something the UK already does, though only lightly in comparison with other countries.
In the UK in 2017, the Competition and Markets Authority (CMA) began paying up to £100,000 for information on illegal cartels (notably it increased this level to £250,000 in 2023 due to lack of take-up). HMRC pays informants up to several hundred thousand pounds per year, though these payments are not publicised.
Gold rush in US
The Dodd-Frank Act of 2010 in the US introduced cash payments for information leading to Securities and Exchange Commission (SEC) sanctions exceeding $1m, with whistleblowers netting 10-30% of whatever the authorities collect. Last year, the SEC announced its biggest whistleblower reward to date of $279m.
UK’s dilemma on whistleblowing payouts
For
- They encourage the disclosure of information otherwise hidden that helps law enforcement agencies to intercept crimes and prevent public harm
- They can recover large sums of money from fraud that can be reinvested in public services
- They seek to compensate whistleblowers for exposing themselves to potentially significant risk and provide a safety net against well-documented hardships faced by many whistleblowers
- They enable whistleblowers to more easily partner with legal representation to support them through what can be arduous legal processes
- They are good for government coffers. WhistleblowersUK (WBUK) CEO Georgina Halford-Hall says: “The UK government has got such a financial black hole to fill that this is an open goal, and in a very short period of time we would start to see the success that the US has enjoyed with people speaking up, if they feel they're safe to do so.”
Against
- It’s not British – rewards are unjust and immoral. UK whistleblowers shouldn’t do it for the money, you do it because it’s the right thing to do
- Rewards might lead to frivolous filings and waste government resources
- Encouraging whistleblowers to bring information to the government will discourage internal reporting and undermine internal ethics and compliance programmes
- A reward culture might create perverse incentives, whereby whistleblowers hold off on reporting concerns for a bigger fine/reward
- Incentives currently focus on financial crime, for which fines and rewards are easier to quantify than for non-monetary concerns such as discrimination, abuse or malpractice
- Incentive schemes can also fall prey to ‘capture’ by law firms, where a large portion of rewards end up going to legal fees
- A reward scheme could become a taxpayer burden through the cost of the government running more investigations and the payment of rewards
Winds of change?
Attitudes in the UK have been somewhat dismissive of greater rewards for whistleblowers. Research in 2014 by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) on the potential impact of a US-style rewards scheme said that “introducing financial incentives for whistleblowers would be unlikely to increase the number or quality of the disclosures we receive from them”.
But the mood may be changing, with several voices calling for incentives in one form or another. As mentioned above, the CMA doubled down on rewards by increasing its maximum payout to £250,000 in 2023. This came after a 70% drop in reports in the first six years of the programme and, while it’s too early to say if it has worked, it points to a continued faith in the premise.
Furthermore, in a speech in February, new Serious Fraud Office director Nick Ephgrave was unequivocal, saying: “I think we should pay whistleblowers. If you look at the example of the US, their system allows that, and I think 86% of the $2.2bn in civil settlements and judgments recovered by the US Department of Justice were based on whistleblower information. I would invite us to think about whether or not we want to consider incentivising whistleblowers. It has many benefits.”
UK whistleblowing charity Protect concluded an article on the topic last year by pushing for a whistleblower compensation scheme, but highlighting the current grey around how to do it. “Too often, whistleblowing comes at great personal and financial cost to whistleblowers,” it said. “Some may never be able to find work in their industry again, for no other reason than that they spoke up about wrongdoing. It is clearly in the public interest that there is a system in place to compensate whistleblowers for the risks they take in exposing malpractice and risk. Whether that should be through statutory employment rights, a programme of regulator rewards, or a mix of both, is an unsettled question.”
Office of the Whistleblower
WBUK is calling for an Office of the Whistleblower as part of any future bill, and it is not alone. In a recent survey by WBUK of money laundering reporting officers in the financial services sector, 97% said they would welcome such a centralised office, while a survey of regulators was even higher at 99%.
Such an office would act as an ongoing contact point for whistleblowers; be a co-ordinating hub on the matter for all regulators; broadly promote and publicise whistleblowing and its importance to society; encourage employers to implement internal systems by communicating the value of whistleblowers and upholding legislation concerning whistleblower mistreatment; and determine how and how much to incentivise whistleblowers, while broadly publicising whistleblower protections and modes of recourse.
Broadly speaking, this is being advocated for in the UK. “Whistleblowers are a vital element of a transparent society. It is therefore wrong that they carry the burden and bear the consequences of doing the right thing, sometimes for the rest of their lives,” says Tessa Munt, the Liberal Democrat MP for Wells and Mendip Hills, and former chair of WBUK.
“I support calls for an Office of the Whistleblower with the statutory powers to ensure that no one is left worse off after complying with their professional and ethical obligations. It is clear we need the law to incentivise organisations and employers to match the courage of whistleblowers and equally to do the right thing. The Office of the Whistleblower would have the powers and independence to determine what this will look like.”
Cultural adjustment
For Halford-Hall, there is more to incentivising than simply waving cash at people. “We have a chance to improve the culture and the framework. People want to do the right thing. This is a strong incentive in itself, but our culture doesn’t celebrate whistleblowers, the protections aren’t strong enough. PIDA is outdated and insufficient, and the framework is fragmented and can be obscure and confusing to navigate,” she says.
Lottery-win payments?
Halford-Hall doesn’t necessarily think US-style windfall payouts are the right route for the UK. “We’re trying to normalise whistleblowing, and I don’t think large financial incentives are the way to change the culture. You just create another culture where people are looking for things to report, as opposed to feeling compelled to do the right thing,” she says.
This is echoed by former AAT president Christina Earls, herself a whistleblower in the civil service. “We have a society that doesn’t reward service, it rewards high achievers with ever-inflated salaries, so a whistleblower reward scheme needs to be wider than financial. There needs to be a culture change. I’d have been very happy if I was just thanked and recognised for making a real difference in the workplace, rather than being hidden in the corner, bullied, gaslighted and [having my] pay docked,” she says.
Restitution is an option, whereby whistleblowers have any losses covered, and it’s not viewed as an avenue to becoming a multimillionaire overnight. “Let’s say you’re a qualified accountant, doctor or civil servant, you’ve given years to your career, then the rug is pulled out from beneath you and you need to take a lesser role or to retrain. You deserve restitution,” adds Halford-Hall. “I don’t think a reward system should provide lottery wins, it’s not about putting you in a better position, it’s about putting you in the position you would have been in, so there’s effectively no loss of earnings.”
Summary
Watch this space. After years of campaigning by bodies such as WBUK, the UK’s whistleblowing regime looks ripe for change. An effective whistleblowing system should offer robust protections, clear access and incentives to encourage people to come forward with concerns, which arguably isn’t the case at the moment.
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Should whistleblowers be paid?
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Should whistleblowers be paid?
Highlighting wrongdoing in the workplace can be stressful and potentially career-limiting, so providing financial rewards can help cushion the blow. But could there be unintended consequences? Neil Johnson examines the pros and cons.
Whistleblowing is currently a hot topic in the UK. High-profile cases in the NHS and the Post Office scandal are just the tip of a growing iceberg, with changes to help protect those disclosing the information potentially on the horizon.
For
- They encourage the disclosure of information otherwise hidden that helps law enforcement agencies to intercept crimes and prevent public harm
- They can recover large sums of money from fraud that can be reinvested in public services
- They seek to compensate whistleblowers for exposing themselves to potentially significant risk and provide a safety net against well-documented hardships faced by many whistleblowers
- They enable whistleblowers to more easily partner with legal representation to support them through what can be arduous legal processes
- They are good for government coffers. WhistleblowersUK (WBUK) CEO Georgina Halford-Hall says: “The UK government has got such a financial black hole to fill that this is an open goal, and in a very short period of time we would start to see the success that the US has enjoyed with people speaking up, if they feel they're safe to do so.”
Against
- It’s not British – rewards are unjust and immoral. UK whistleblowers shouldn’t do it for the money, you do it because it’s the right thing to do
- Rewards might lead to frivolous filings and waste government resources
- Encouraging whistleblowers to bring information to the government will discourage internal reporting and undermine internal ethics and compliance programmes
- A reward culture might create perverse incentives, whereby whistleblowers hold off on reporting concerns for a bigger fine/reward
- Incentives currently focus on financial crime, for which fines and rewards are easier to quantify than for non-monetary concerns such as discrimination, abuse or malpractice
- Incentive schemes can also fall prey to “capture” by law firms, where a large portion of rewards end up going to legal fees
- A reward scheme could become a taxpayer burden through the cost of the government running more investigations and the payment of rewards