Incentives and sanctions

Incentives and sanctions for compliance with rules can have a controlling effect. The use of these control mechanisms is possible internally by the company but also externally by competent authorities.

If companies reward and punish their employees for complying or not complying with rules in the right way, the chance of a good audit result of the compliance management system increases. Conversely, counterparts should not be able to disrupt the effectiveness of a compliance management system through opposing incentives.

The understanding of punitive measures when rule violations are uncovered provides a great deal of pushback on employees. At the same time, the threats make it more difficult to uncover the offences. This conflict requires careful balancing between consistent enforcement and full disclosure..

Incentives and sanctions can be used to encourage and enforce compliance.

Integration of sanctions

Internal company sanctions should be compatible with the regulations of labour law. A company should also work with sanctions and incentives on an ongoing basis and treat all employees equally.

If in a small company it is sufficient for the immediate superior to impose the sanctions, in larger companies it may be better for the legal department and the compliance department to take care of it together with the superior. Therefore, the responsibility for the sanctions procedure should be clarified.

Zero Tolerance Policy

If a company threatens to punish every compliance violation, compliance experts call this a zero-tolerance policy. This approach to violations can be completely correct in one company, but in another company it can make the clarification of violations almost impossible – it depends on the compliance culture.

Possible Penalties

Possible sanctionsFrom termination without notice to a warning, there are a number of sanctions available that are compatible with labour law. If the sanction is provided for in the employment contract, the company can, for example, reclaim the bonuses. Another measure may be that an employee who does not comply with the rules risks his or her promotion or even the job.

The internal investigation should consider the following factors in assessing the violation and the penalty to be determined.

  • What is the function of the employee?
  • What is the function of the employee?
  • Did the employee act intentionally or negligently?
  • Is the employee committing an offence for the first time?
  • Is the employee concerned cooperative in clearing up the case?
  • Has the employee participated in compliance training?

Incentives

A reward system for compliance can be created through financial incentives.

Our corporate law practice is not only there to advise you, but we also support you in the implementation of compliance management, as well as in making our firm available as an external compliance officer..

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