Employment Newsletter (May-June 2026)

1. Labour Codes: Development And Where Things Stand

 2. Central Government notifies central rules under the Labour Codes

The Ministry of Labour and Employment (“MoLE”) notified the central rules under the Labour Codes through a notification dated May 08, 2026.  

(i) Key provisions of the Code on Wages (Central) Rules, 2026 (“Wage Code Rules”) include:

1. Minimum Wage Calculation: The minimum wage rate will be determined on a per-day basis. Where a daily rate is fixed, the hourly rate is obtained by dividing it by 8, and the monthly rate by multiplying it by 26. The Variable Dearness Allowance payable to employees will be revised twice a year, i.e., before April 1 and before October 1, and will be based on the average Consumer Price Index for industrial workers published by the Labour Bureau.
2. Normal working day: For employees paid on a daily basis, the normal working day is 8 hours. For other employees, total weekly working hours must not exceed 48 hours.
3. Weekly rest day: Every employee will be entitled to 1 rest day per week. In a 6 day work week, Sunday is ordinarily the rest day; in work weeks of less than 6 days, Saturday and Sunday are rest days. No employee may be required to work more than 10 consecutive days without a rest day. If an employee is required to work on a weekly rest day, they are entitled to a substituted rest day and twice the normal wage rate for the work performed on that day.
4. Floor wage determination: The Central Government may consult the Central Advisory Board when determining the floor wage, taking into account food, clothing, housing, and a minimum standard of living. The floor wage is to be revised at intervals of generally not more than 5 years.
5. Bonus payment by principal employers: Where a contractor fails to pay the minimum bonus due under the Code on Wages, 2019, the principal employer must pay the minimum bonus directly to the affected employees upon receiving written notice and confirmation of the contractor's failure. While the Wage Code Rules do not expressly provide a mechanism for the principal employer for recovery of such payments, the general statutory position is that amounts paid by the principal employer on behalf of the contractor may be adjusted, subject to the terms of such contract.

(ii)Key provisions of the Industrial Relations (Central) Rules, 2026 (“IR Code Rules”) include:

1. Settlement memoranda: Settlements reached during conciliation proceedings, or otherwise between employers and workers, must be recorded in the prescribed Form-I under the IR Code Rules and signed by the employers, and on the workers' side, by the prescribed office-bearers of the relevant trade union or by 5 duly authorised worker representatives.
2. Works Committees: Every industrial establishment covered by a Central Government order (as and when issued) must constitute a Works Committee for the purpose of promoting measures for securing and preserving amity and good relations between the employer and workers. The Works Committee must have maximum 20 members in total, with workers' representatives being at least equal to employer representatives. Representation of women workers must be proportionate to their share of the total workforce. Workers must be at least 19 years of age and have at least 1 year of continuous service to be eligible as candidates.
3. Grievance Redressal Committee (“GRC”): Industrial establishments employing 20 or more workers must constitute a GRC for the purpose of resolving individual grievances of workers arising in the course of their employment. The GRC must be comprised of equal numbers of employer and worker representatives (not exceeding 10 members in total). An aggrieved worker may file an application before the GRC within 1 year of the cause of action. If the matter is not resolved within 30 days, the worker may approach the jurisdictional conciliation officer within the following 60 days.
4. Recognition of sole negotiating unions/negotiating councils: Detailed procedures are prescribed for recognising a sole negotiating union or a negotiating council. Where only one registered trade union exists and has at least 30% membership of the total workforce, the employer must recognise it as the sole negotiating union. A government-appointed verification officer shall verify membership within a timeframe determined by the Central Government, with costs borne by the employer. Recognition is valid for 3 years and may be extended by mutual agreement up to a total of 5 years. Matters available for collective bargaining include worker classifications, wages, working hours, leave, promotion and transfer policies, and disciplinary procedures.

(iii) Key provisions of the Occupational Safety, Health and Working Conditions Rules, 2026 (“OSH Code Rules”) include:

1. Registration: Registration applications must be filed electronically on the Shram Suvidha Portal in the prescribed form, along with establishment details and proof of identity and address. If a registration certificate is not issued within 7 days of a complete application, registration is deemed to have occurred automatically. Employers already registered under any other central labour law must update their details in the prescribed form within 6 months of the OSH Code Rules coming into force. 
2. Appointment Letters: Employers must issue a written appointment letter to every employee before they start work. The letter should include details such as name, date of birth, designation, employment type (regular, fixed-term, or contractual), skill category, joining date, wages, and applicable social security benefits.
3. Working Hours and Overtime: Workers cannot be required to work for more than 48 hours in a week, or overtime exceeding 144 hours in any quarter. Overtime wages are payable at the end of each wage period. In calculating overtime, fractions of 15 to 30 minutes count as 30 minutes; fractions exceeding 30 minutes count as 1 full hour. 
4. Annual Health Check Up: Employers in dock, mines, construction, and other construction-related work must arrange free medical examinations for every employee who has completed 40 years of age. Employers may use the Employee State Insurance Corporation (“ESIC”)facilities for this purpose.
5. Welfare Facilities: Employers in factories, mines, building and other construction work, motor transport undertakings, dock work, and plantations must provide adequate washing facilities for all employees. Employers in these sectors who employ 100 or more workers must also maintain a canteen. 
6. Additional Compliance: Establishments employing 50 or more workers in factories, mines, construction establishments, beedi and cigar manufacturing, motor transport, dock work, and plantations must additionally provide crèche facilities. Safety Committees are mandatory for establishments employing 500 or more workers (factories and other specified categories), or 250 or more workers (building and other construction work), or 100 or more workers (mines).

(iv) Key provisions of the Social Security (Central) Rules, 2026 (“SS Code Rules”) include:

1. Registration: Employers must obtain registration under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”). An establishment already registered under the OSH Code is deemed to be registered under the Social Security Code, 2020 (“SS Code”) as well.
2. Gig and Platform Workers: Every gig and platform worker aged 16 years or older must register on the designated portal using Aadhaar, on a self-declaration basis. Upon registration, a digital or physical identity card bearing the worker's photograph shall be issued to them. Every aggregator must, within 45 days of the SS Code Rules coming into force, share details of all engaged gig and platform workers via API or other electronic means on the designated portal, for the purpose of generating Universal Account Numbers (“UAN”). New workers must be registered in real time or on a daily basis.

To be eligible for social security scheme benefits, a gig or platform worker must have been engaged for at least 90 days with a single aggregator, or at least 120 days across multiple aggregators, in the preceding financial year. A worker engaged with 3 aggregators on the same calendar day is counted as 3 days of engagement. Days of engagement across multiple aggregators are aggregated cumulatively. Contribution is assessed as either a percentage of annual turnover (as notified) or 5% of the total amount paid or payable to gig and platform workers — including through associate, holding, subsidiary companies, LLPs, or third-party intermediaries, whichever is applicable. Interest at 1% per month on delayed contributions is payable. 

Please also refer to our FAQs on the central rules issued under the Labour Codes here.

3. MoLE notifies the Model Standing Orders, 2026

On May 08, 2026, the MoLE notified the Model Standing Orders, 2026, under the Industrial Relations Code. Separate model standing orders have been issued for establishments in the mining, manufacturing, and service sectors. Key provisions common to all 3 are as follows:

1. Classification of Workers: Workers are classified into 7 categories: permanent, temporary, apprentice, probationer, substitute, fixed-term employment, and casual. Fixed-term employees are entitled to all statutory benefits on a pro-rata basis and are eligible for gratuity upon completion of 1 year of service at the rate of 15 days' wages per completed year. Termination upon expiry of a fixed-term contract does not constitute "retrenchment" under the Industrial Relations Code. 
2. Identity Cards: Every worker must be issued an identity badge or card containing their full name, designation, worker number, blood group, contact number, emergency contact details, and a recent photograph.
3. Working Hours and Wages: Working hours for all categories of workers, shift details, and wage rates must be displayed on notice boards, electronic boards, and the establishment's portal in Hindi, English, and the local language.
4. Attendance and Leave: A worker who fails to attend duty without written permission is deemed absent. A worker who habitually reports late or remains absent without cause is liable to wage deductions. Earned leave cannot be claimed as a matter of right.
5. Payment of Wages: All wages must be paid electronically, directly to the worker's bank account. Where a worker is dismissed, discharged, retrenched, or has resigned, wages must be paid within 2 working days.
6. Exclusive Service: No worker shall act against the interests of the establishment or take up additional employment that adversely affects the employer's interests.
7. Suspension: Where disciplinary or criminal proceedings are pending or being contemplated, the employer may suspend the worker by written order. A statement of reasons for the suspension must be provided to the worker within 1 week. A suspended worker is entitled to 50% of wages as a subsistence allowance, provided they do not take up any other employment during the suspension.
8. Retirement Age: The retirement or superannuation age must be mutually agreed in writing between the employer and the worker, or as specified in a settlement or award. In the absence of any such agreement, the retirement age is 58 years.

4. Employees' State Insurance Corporation publishes Draft ESI (General) Regulations, 2026

The Employees' State Insurance Corporation has published the Draft Employees' State Insurance (General) Regulations, 2026 (“Draft Regulations”), for stakeholder consultation.  The Draft Regulations, once implemented, will replace the Employees' State Insurance (General) Regulations, 1950. Key provisions of the Draft Regulations are set out as follows:

1. Contribution and Benefit Periods: 2 contribution periods are prescribed under the Draft Regulations: 1 April to 30 September, with a corresponding benefit period of 1 January to 30 June of the following year; and 1 October to 31 March, with a corresponding benefit period of 1 July to 31 December. For an employee covered under the Social Security Code for the first time, the corresponding benefit period commences upon the expiry of 9 months from the date of first employment within the relevant contribution period.
2. Timeline for Contributions: Contributions must be paid within 15 days of the last day of the calendar month in which they fall due. Failure to pay contributions within the defined timeframe attracts simple interest at 12% per annum for each day of default. In addition, the ESIC may levy damages at a rate of 1% per month on the outstanding amount.
3. Monthly Return of Contributions: Every employer must file monthly returns of contributions on the specified portal within 15 days from the end of the month, covering all directly employed or contractor-engaged employees for whom contributions are payable. All monthly returns for a contribution period must, in any case, be filed within 45 days of the end of that contribution period. On the permanent closure of an establishment, all outstanding returns must be filed within 15 days of the date of closure.
4. Registration of Employees: For establishments covered by ESI obligations on the day the regulations commence, the employer must require every employee to provide their correct particulars, along with a photograph of themselves and their family members, for registration on the specified portal. Before engaging any new employee after the regulations come into force, the employer must similarly require that employee to furnish equivalent particulars for portal registration, unless the person already holds an insured person card.
5. Changes in Family: An insured person must notify their employer electronically or otherwise of any changes in family membership as soon as the change occurs.

5. The MoLE issues multiple notifications under the Labour Codes

The MoLE issued several notifications under the Labour Codes on May 28, 2026. Key notifications include the following. Key notifications include:

1. Re-skilling Fund. The MoLE issued a notification setting up the Re-skilling Fund under the IR Code.
2. Interest for defaults under the SS Code. The MoLE has specified that an employer is liable to pay simple interest at 12% per annum on any amount due under the SS Code, for the period of default. The notification is deemed to have come into force retrospectively on November 21, 2025. 
3. Wage ceiling for Provident Fund. The MoLE has notified INR 15,000 per month as the wage ceiling for the purposes of the Provident Fund provisions under the SS Code.

6. Central Government notifies the Employees' Provident Fund Scheme, 2026, and the Employees' Pension Scheme, 2026

The MoLE notified new schemes under the SS Code on June 29, 2026, superseding predecessor schemes under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Key provisions of each scheme are set out below.

(i) Employees' Provident Fund Scheme, 2026 ("EPF Scheme, 2026")

1. Shift from "basic wages" to "wages": Under the old schemes, PF contributions were calculated on a restricted wage component. The EPF Scheme, 2026, extends contribution calculation to "wages" as defined in the SS Code, aligning the position with the Labour Codes framework. The rate of contribution is set at 12%.
2. Joint opt-in for higher wage contribution — streamlined: Any employee and employer may jointly opt in writing to enrol such employee as a member or allow contribution on wages exceeding the wage ceiling. Unlike the Old Scheme, this is now a bilateral exercise between the employer and employee without requiring a Commissioner's order. The employer's obligation to pay additional administrative charges on such higher wages is now expressly codified.
3. Graduated damages for contribution defaults — replacing flat 1% rate: The flat 1% per month rate (applied since June 2024 under the Old Scheme) is replaced with a graduated 3-tier structure:

d. Enhanced obligations for exempted establishments (“PF Trusts”): Establishments running their own PF Trusts face a significantly upgraded compliance framework, including: (i) all claims for withdrawals, advances, and transfers must be filed electronically; (ii) minutes of meetings of the Board of Trustees must be submitted to the Regional Provident Fund Commissioner in specified form; (iii) the interest rate declared by the Board of Trustees must not exceed 200 basis points above the rate declared by the Central Government; (iv) trustees must maintain accounts electronically and issue annual statements within 2 months of the close of the financial year; (v) all securities must be in dematerialised form held through SEBI-approved depository participants; (vi) a tiered late filing fee applies — INR 200 per day for first default after notice, and INR 500 per day for further contraventions, capped at monthly inspection charges; (vii) all inoperative and non-KYC account balances must be transferred to Employees’ Provident Fund Organization within 1 month; and (viii) exemption orders now operate for an initial period of 3 years, with renewal normally being automatic if conditions continue to be satisfied and positive net worth is maintained. 

e. Principal employer and contractor obligations: Principal employers must declare all engaged contractors on the portal at the time of registration. Contractors must, within 10 days of the close of each month, electronically inform the principal employer the name, UAN, wages, and contributions payable for each contract employee. Principal employers must submit a monthly abstract to the Commissioner within 20 days of the close of the month. 

(ii) Employees' Pension Scheme, 2026 ("EPS, 2026")

1. Pension formula: For members other than existing members, the monthly pension is calculated as: Monthly Member Pension = (Pensionable Wages × Pensionable Service) / 70. Pensionable wages are the average monthly wages received during the 60-month period preceding cessation of membership (subject to the applicable wage ceiling). Where a member has completed 20 or more years of pensionable service upon attaining superannuation age, 2 years are added to the pensionable service for pension computation purposes.
2. Minimum pension: Every existing and future member's monthly pension, including any relief payable, shall not be less than INR 1,000 per month (subject to deductions for commutation, return of capital, and early pension).
3. Early and deferred pension: A member may draw early pension from a date earlier than the superannuation age, but not earlier than 50 years of age, with a reduction of 4% for every year short of superannuation age. Conversely, a member may defer drawing a pension beyond superannuation age up to 60 years, with an increase of 4% per completed year. A member deferring pension may also continue contributing to the Pension Fund during the deferment period.
4. Pensionary benefits guaranteed: No pensionary benefits under the EPS, 2026 shall be denied to any member or beneficiary on account of non-compliance by the employer with contribution requirements. The employer's statutory liability is, however, not absolved.

7. India–UK Trade Deal to Enter into Force on July 15, 2026

India and the United Kingdom have announced that landmark Comprehensive Economic and Trade Agreement, along with the Agreement on Social Security (also referred to as the Double Contribution Convention, will come into force on July 15, 2026. Under the new framework, eligible employees who are deputed by their employer to the other country will remain covered by their home country's social security system and will be exempt from making social security contributions in the host country for up to 60 months (5 years). 

To claim the exemption, employees will be required to obtain a Certificate of Coverage from the social security authorities in their home country.

8. The MoLE directs aggregators to onboard on the e-Shram Portal

The MoLE issued a directive on June 1, 2026, under the SS Code Rules, requiring online aggregators to complete onboarding on the e-Shram Portal and integrate their systems via API by June 21, 2026.  Aggregators are required to register platform workers on the portal, upload quarterly worker engagement data, and notify the portal of worker exits.

The directive applies to aggregators across 9 categories: ride-sharing services, food and grocery delivery, logistics, e-marketplaces (wholesale/retail, B2B/B2C), professional services, healthcare, travel and hospitality, and content and media services.

9. Transgender Persons (Protection of Rights) Amendment Act, 2026 comes into force

As discussed in our previous newsletter update on the Transgender Persons (Protection of Rights) Amendment Act, 2026 (“Amendment Act”) (available here), the Amendment Act introduced significant changes to the legal framework governing recognition of transgender persons, including revisions to the definition of "transgender person", the certification process, and provisions relating to change of name and gender identity documents.

By a notification dated May 22, 2026, the Central Government appointed May 25, 2026, as the date on which the Amendment Act come into force.

While constitutional challenges to certain provisions remain pending, the Amendment Act is now operational and has immediate implications for the transgender community.

1. Government of Maharashtra authorises officers for inspection of workplaces under the POSH Act, 2013

The Government of Maharashtra, by a circular dated May 14, 2026, authorised various officers and officials to conduct inspections of establishments for monitoring compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). Key aspects of the circular are set out below:

1. Authorised officers and inspection framework: The circular authorises district officers, concerned officers of the Women and Child Development Department, District WCD officers, District Program Officers, Child Development Project Officers and other designated officials to conduct inspections of establishments for assessing compliance with the POSH Act. Such inspections are to be carried out in accordance with a prescribed compliance checklist and under the supervision of the State Nodal Officer and other designated authorities. 
2. POSH compliance checklist: The prescribed checklist covers key compliance requirements under the POSH Act, including adoption and dissemination of a POSH policy, constitution of Internal Committees (“IC”), appointment of external members, complaint handling procedures, support to aggrieved woman, confidentiality obligations, employee awareness programmes, training of IC members, maintenance of records, filing of annual reports, other responsibilities of the employer and compliance with the SHe-Box portal requirements.

2. Government of Karnataka notifies revised minimum wages

On May 22, 2026, the Government of Karnataka notified revised minimum rates of wages for various scheduled employments under the Minimum Wages Act, 1948 ("Minimum Wages Notification"). The Minimum Wages Notification defines – “Highly Skilled” “Skilled”, “Semi-Skilled” and “Unskilled” based on which the concerned employees are required to be classified. 

The Karnataka Employers' Association ("KEA"), in a circular dated May 23, 2026, has stated that the Minimum Wages Notification may be open to legal challenge, primarily on the ground that it has been issued under the Minimum Wages Act, 1948, which stands repealed following the implementation of the Wage Code. The KEA has also noted that the Minimum Wages Notification continues to follow the framework of scheduled employments under the repealed law. 

While the Minimum Wages Notification has been challenged before the Karnataka High Court, it continues to remain in force unless stayed, set aside or otherwise modified by the Government or the Court.

3. Bihar repeals the Bihar Shops and Establishments Act, 2025

On June 01, 2026, the Governor of Bihar promulgated the Bihar Shops and Establishments (Regulation of Employment and Conditions of Service) (Repeal) Ordinance, 2026 ("Repeal Ordinance"), which repeals the Bihar Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2025 ("BSEA").

The BSEA has been repealed in view of the implementation of the OSH Code, and the overlap between the provisions of the OSH Code and the BSEA with respect to the regulation of employment and conditions of service. 

The Repeal Ordinance came into force immediately upon promulgation. However, any proceedings initiated under the BSEA prior to its repeal will continue under the BSEA.

4. Government of Haryana exempts establishments registered under the OSH Code from registration requirements under the Haryana Shops and Commercial Establishments Act, 1958

On May 4, 2026, the Government of Haryana issued a notification exempting establishments registered under the OSH Code from registration requirements under the Haryana Shops and Commercial Establishments Act, 1958 ("HSEA").

The exemption has been granted to avoid duplication of registration and compliance processes. The notification also clarifies that establishments must continue to comply with the other provisions of the HSEA to the extent that they are not inconsistent with the provisions of the OSH Code. This will be implemented once the rules are notified by the Government of Haryana under the OSH Code.

5. Gujarat publishes draft amendments to the Gujarat Shops and Establishments Rules relating to employment of women during night shifts

The Government of Gujarat, on June 11, 2026, published the draft Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) (Amendment) Rules, 2025 ("Draft Amendment Rules") under the Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2019 ("GSEA"). 

The Draft Amendment Rules amends the Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) Rules, 2020 to revise the conditions for employment of women during night shifts in shops and establishments. Any failure to comply with the prescribed conditions may attract penalties under the GSEA. Key changes proposed under the Draft Amendment Rules are set out below:

1. Employment of women during night shifts: Shops and establishments covered under the GSEA are permitted to employ women employees between 9:00 PM and 6:00 AM, subject to prescribed conditions.
2. Consent and minimum representation: Employers must obtain the written consent of women employees willing to work during night shifts in the prescribed form and ensure the presence of at least 3 women employees during such shifts, which may include a woman employer working on-site.
3. Safety and transportation measures: Employers engaging women employees during night shifts are required to provide transportation facilities with GPS tracking to pick-up and drop off women employees from/ to their residence and obtain police verification and biodata of drivers of night transportation.
4. Self-declaration requirement: Employers engaging women employees during night shifts are required to submit a self-declaration in the prescribed form to the concerned inspector confirming compliance with the GSEA and undertaking responsibility for the safety, security and dignity of women employees.

1. UK Crime & Policing Act 2026 expands Corporate Criminal Liability

The UK Crime & Policing Act 2026 ("CAPA"), which took effect on June 29, 2026, significantly expands corporate criminal liability for senior management's actions. CAPA replaces the narrower regime under the Economic Crime and Corporate Transparency Act 2023 ("ECCTA"), extending liability from specified economic crimes to any UK criminal offence. Importantly, it applies to non-UK companies with a sufficient UK nexus.

Corporate liability arises where a "senior manager" — defined broadly to include anyone with significant responsibility for directing or managing a substantial part of the organisation's activities, irrespective of job title — commits an offence within their actual or apparent authority. Offences in areas such as sanctions, environmental compliance, health and safety, data protection, competition law, and modern slavery may now give rise to direct corporate criminal liability. Unlike certain UK "failure to prevent" offences, CAPA provides no "reasonable procedures" defence for senior manager conduct. A robust compliance programme may mitigate enforcement risk but cannot alone prevent liability. Multinationals with UK operations, supply chains, customers, or regulatory touchpoints face enhanced exposure across all these areas.

2. UK Serious Fraud Office secures its first Deferred Prosecution Agreement in almost five years

The UK Serious Fraud Office (“SFO”) has secured its first Deferred Prosecution Agreement (“DPA”) in almost five years, following approval by the Crown Court on May 1, 2026, in respect of Ultra Electronics Holdings Limited (“UEH”). The agreement relates to three counts of failure to prevent bribery under section 7 of the Bribery Act 2010 and provides important insight into the SFO’s current enforcement priorities, approach to cooperation, and expectations of corporate compliance.

The case arises from an SFO investigation, initiated after UEH's 2018 self-report, into alleged bribery involving employees and third-party agents across multiple jurisdictions. The misconduct included payments linked to airport IT contracts in Oman and alleged bribery of officials in Algeria via consultancy arrangements tied to tender processes.

UEH accepted that, at the relevant time, it lacked adequate anti-bribery and corruption controls, including insufficient risk assessments, weak oversight of intermediaries, and policies not tailored to high-risk markets. 

The DPA, which will remain in force for 3 years, imposes the following key obligations: Financial penalty, approximating to GBP 10 million, reflecting high culpability (including corruption of public officials over a sustained period); Costs, approximating to GBP 4.8 million payable to the SFO; and Ongoing obligations, including continued cooperation and annual reporting to the SFO on compliance systems, particularly in relation to intermediaries and joint ventures. 

No disgorgement was required as UEH did not profit from the relevant contracts. A 45% discount was applied to the penalty to account for self-reporting and cooperation.

The Court found that a DPA was in the interests of justice, highlighting several factors:

1. Transformational change post-acquisition: Following its 2022 acquisition, UEH replaced senior management and undertook a significant compliance overhaul;
2. Exemplary cooperation (post-acquisition): The company provided detailed investigative material, facilitated witness interviews, and enabled access to historical data; and
3. Collateral consequences: Prosecution could have disrupted sensitive defence contracts and caused wider economic impacts, including on employees and supply chains.

3. EU Anti-Corruption Directive 2026: New Compliance Expectations for UK and Global Businesses

The EU has adopted an Anti-Corruption Directive (“Directive”) establishing a harmonised anti-corruption criminal law framework across Member States. It covers public and private sector bribery, misappropriation, abuse of functions, obstruction of justice, concealment of proceeds, and unlawful enrichment. It also criminalises “trading in influence” — offering, requesting, or receiving undue advantages to improperly influence public officials. Liability may arise even if the influence was never exercised or achieved.

Under the Directive, corporate liability can arise where offences are committed by individuals in leading positions, or where inadequate supervision enables misconduct benefiting the company. Sanctions for legal entities are substantial. Member States must set maximum penalties of at least 5% of worldwide turnover or EUR 40 million for offences such as bribery and misappropriation. Others, including trading in influence and obstruction of justice, may attract penalties of at least 3% of turnover or EUR 24 million. 

Although an EU initiative, the Directive has implications beyond the bloc. Non-EU companies may face enforcement risks where conduct benefits an EU subsidiary, relates to EU business activities, or falls within Member States' jurisdictional scoping the Directive. UK and other multinationals with European operations should therefore treat it as a cross-border compliance issue, not a purely regional one.

While many businesses already run compliance programmes meeting the UK Bribery Act 2010 and other anti-corruption laws, the Directive introduces new concepts and enforcement expectations. In particular, the criminalisation of trading in influence and harmonised corporate liability approach may require organisations to revisit risk assessments and third-party controls relating to politically connected intermediaries, consultants, and agents.