Since 2 July 2023, all companies with more than 249 employees must operate a so-called internal reporting office in their company, through which whistleblowers have the possibility to report wrongdoings. From 17 December 2023, this will also apply to companies with 50 or more employees.
While many companies are now or will be legally obliged to set up internal whistleblowing units, more and more companies below the threshold of 50 employees are also recognising the strategic advantages of such a system. But what makes an internal whistleblowing unit so valuable, even if there is no legal obligation? This article looks at the benefits that internal whistleblowing systems offer and why every company, regardless of its size and area of activity, can benefit from them.
The Whistleblower Protection Act serves to protect whistleblowers and promotes the establishment of reporting offices within companies. The protection of whistleblowers applies regardless of whether a company is obliged to implement a whistleblower system. The Whistleblower Protection Act regulates the protection of natural persons who have obtained information about violations in connection with their professional activities or in the run-up to professional activities and report or disclose such information to the reporting bodies provided for under this Act (whistleblowers) (HinSchG §1 para. 1).
Thus, according to the HinSchG, potential whistleblowers have the possibility at any time to also contact external reporting offices with their facts to be disclosed.
This is another reason why the Whistleblower Protection Act has far-reaching implications, not only for companies with 50 or more employees, which are legally obliged to set up an internal reporting office, but also for smaller companies. This is because employees always have the option to file reports. For smaller companies that do not operate their own reporting office, this means that in case of doubt, grievances end up directly with the public authorities.
It is true that the Whistleblower Protection Act stipulates that internal reporting offices are to be used by employees on a prioritised basis, which distinguishes the current law from many drafts from the past. However, if no internal hotline is available, this prioritisation is obsolete. In other words, whistleblowers are now to give preference to internal hotlines over external reports, i.e. reports to official hotlines, if violations can be dealt with effectively internally, which underlines the need to establish an internal complaints procedure.
Internal hotlines serve as a safe channel for employees to raise concerns within the organisation. Internal hotlines are facilities within an organisation where employees can report grievances. They are confidential and the identity of the whistleblower is protected.
In contrast, external hotlines are independent channels established with government agencies where whistleblowers can also report wrongdoing.
This can lead to negative public attention. Moreover, if the whistleblower does not find an internal reporting office or otherwise hear or the whistleblower experiences discrimination, he or she may feel encouraged to turn to external reporting offices. The purpose of the Whistleblower Protection Act is to protect whistleblowers from any form of reprisals or professional discrimination!
Early warning system
An internal whistleblowing system serves as an early warning system that can identify problems before they escalate. It provides a platform for employees to report concerns or misconduct without fear of reprisal. This allows companies to intervene in time and avoid potential crises.
By setting up an internal reporting centre, companies retain control over sensitive information. It allows for the internal handling of tips. This not only protects privacy, but also enables more efficient and targeted problem solving.
More freedom of action
Internal whistleblowers give companies the ability to solve problems themselves. They provide more freedom of action by enabling appropriate action to be taken in a timely manner. This can not only save time and money, but also protect the company's reputation.
Positive corporate culture and image building.
A well-designed whistleblowing unit promotes a culture of openness and trust. Employees feel valued and heard and management can count on an engaged workforce. This not only boosts morale, but also contributes to talent retention.
Without an internal reporting office, whistleblowers could turn to external agencies, resulting in public attention, legal risks, loss of trust and reputation.
That is why it is recommended to establish internal reporting channels and Implement an effective whistleblowing unit, which should be designed to be as attractive as possible. This includes:
A successful whistleblowing system requires careful planning and implementation. This includes:
There are numerous examples of companies that have successfully implemented internal whistleblowing units. These companies report improved corporate culture, faster problem resolution and increased employee confidence.
Here are some hypothetical case studies that might be particularly applicable to small companies with fewer than 50 employees.
The hotline can help prevent scandals by providing a platform where potential violations can be identified and dealt with at an early stage.
Early detection of wrongdoing helps avoid potential reputational damage or financial loss.
An ethical company that promotes transparency can have a competitive advantage in the market.
By identifying problems early, the company can take proactive measures.
Establishing a hotline shows that the company takes customer and stakeholder expectations seriously.
**Compliance with the Whistleblower Protection Act and other relevant regulations is essential for many companies.
Integrating modern technology into the reporting office can increase efficiency.###
Ensuring quality of service.
This case study demonstrates the benefits of a whistleblower channel in an environment such as a nursing facility. It provides a way for staff to raise concerns without having to speak directly to management, which can be particularly useful when there are concerns about management's response.
These case studies highlight the important role that anonymity plays in an internal whistleblowing system. It allows employees to raise serious concerns without fear of reprisal or other negative consequences. In small companies, where confidentiality is often more difficult to maintain, the anonymous reporting option can be particularly important. It promotes a culture of openness and trust and allows the company to respond to potential breaches that might otherwise have gone undetected.
These case studies illustrate how an internal whistleblowing unit can serve as a valuable tool for identifying and resolving ethical and legal violations, even in small companies with fewer than 50 employees.
The intention of the legislator is explicitly that companies first deal with their own grievances before public authorities and the public are involved.
The establishment of an internal complaints procedure in the form of an internal whistleblowing office is not only a legal obligation for some companies, but also a strategic decision that can offer significant benefits beyond mere compliance with legal requirements. It allows companies to respond quickly and effectively to issues without the need to involve external authorities. This not only protects the company's reputation, but can also avoid financial and legal consequences. It promotes risk mitigation, workforce trust, competitive advantage and more.
An internal whistleblowing system becomes an indispensable tool for small businesses to identify and address a wide range of legal and ethical violations. They foster a culture of integrity and transparency and enable companies to act in a timely manner to avoid potential legal, financial and reputational risks. Regardless of the industry or area of activity, the establishment of an internal whistleblowing unit offers clear added value for any company.
From early identification of problems to strengthening corporate culture, the case for implementing such a system is compelling. It is time for every company, regardless of size or industry, to consider the possibilities of an internal whistleblowing system and implement it as part of their ethical and business practices.
Establishing an internal whistleblower office under the Whistleblower Protection Act is much more than a bureaucratic hurdle or a legal requirement. It is a strategic decision and an investment in the long-term health and growth of the company.
At a time when ethical behaviour and transparency are becoming increasingly important, setting up a whistleblowing office sends a clear signal to employees, customers, investors and the general public that the company takes these values seriously.
It also enables the company to identify and address potential problems early on, before they escalate into serious crises. It strengthens employee trust, promotes a culture of openness and integrity, and it can even help protect the company from financial losses and legal problems.
Setting up a hotline is therefore not only a compliance issue, but also a question of corporate culture, risk management strategy and market positioning. It is an investment that can pay off in many ways, both in the short and long term.