On 6 April 2017, the Gender Pay Regulations (GPR) finally came into force, requiring companies with over 250 workers to monitor and report on their gender pay gap. Besides gender pay, workplace diversity has been rising up the political agenda recently, with studies indicating that diversity improves the likelihood of better business returns. The latest suggestion by the Government is that all FTSE 100 companies should publish their workforce data broken down by ethnicity and pay band.
Gender diversity remains the primary focus with a drive to increase the number of women in senior positions. Last week, the Business, Energy and Industrial Strategy Committee issued a report making a number of recommendations about corporate governance but also making significant recommendations about the need to improve Boardroom diversity. The Committee suggested that the Government should increase the target previously set in 2011 (that by 2015, FTSE 100 companies were to ensure they had at least 25% female board representation) so that from May 2020, at least half of all new appointments to senior and executive management level positions in the FTSE 350 and all listed companies should be women.
Other gender diversity developments include the proposals put forward by the Women and Work All-Parliamentary Group, which recently encouraged the Government to implement legislation requiring employers with 250 or more employees to create paid returner programmes (returnships) to support women wishing to return to work. This would involve guaranteed training, advice and support. To support this programme, in the recent March 2017 Budget, the Government announced a grant of £5 million for returnships. Also under consultation is the government’s plan to extend shared parental leave and pay to working grandparents by 2018, which could assist predominantly older women to stay in the workplace, whereas they might previously have been forced to give up work if they wanted to help to care for grandchildren.
However, gender diversity and the gender pay gap is not the only issue when it comes to diversity. The Fawcett Society has recently reported that race and ethnicity can also play a significant role in pay gaps. The Business, Energy and Industrial Strategy Committee similarly concluded that the Government should legislate to ensure that all FTSE 100 companies publish their workforce data broken down by ethnicity and by pay band. At this stage, this is just a proposal for further discussion but it seems likely to be taken forwards.
This approach mirrors the recommendations in a ‘Race in the Workplace’ review by Baroness McGregor-Smith, suggesting that employment rates amongst people from BME (black and minority ethnic) backgrounds is 12% lower than amongst white people. The Baroness calculated that this costs the economy around £24 billion per year and she suggested that firms with more than 50 people should set aspirational targets to increase diversity and inclusion throughout their organisations; as well as suggesting that companies review the make-up of the area in which they are recruiting, to establish the right targets. The Baroness further suggested that listed companies and all businesses with more than 50 employees should publish a breakdown of employees by race, ideally by pay band, on their website and in their annual report. She has also called for firms to draw up five-year diversity targets and nominate a board member to deliver them. It is estimated that tackling barriers to BME entry and progression could boost GDP by 1.3%.
Race/ethnic pay gap information is likely to be similar to that of the GPR, so to get ahead, employers should consider:
- reviewing recruitment practices, to ensure that a wide range of candidates from diverse backgrounds are considered – e.g. avoid limiting recruitment to attendees of specific universities; and advertising broadly;
- delivering unconscious bias training to managers involved in recruitment and promotion;
- using consistent and objective criteria when shortlisting candidates for recruitment and promotion;
- implementing mentoring and training schemes to ensure that all talented staff are encouraged to progress.
The Government hopes that its ‘naming and shaming’ approach to enforcement would drive change through public pressure. This broadly remains the case, with the Government planning to list the names of non-compliant employers on its website. However, failure to comply with the GPR will constitute an "unlawful act" and the Equality and Human Rights Commission will be able to take enforcement action which could take the form of investigations, making an unlawful act notice, requiring the employer to prepare an action plan (failure to prepare an action plan without reasonable excuse is a criminal offence). For the most part, the Government is relying on the threat of negative publicity (which comes with having to report a high gender pay gap) to motivate businesses to improve; and it seems likely that the same approach will be taken with any extension of reporting to include a race/ethnic origin pay gap.
We can review your recruitment and promotion policies ahead of any legal changes; contact Charles Urquhart for more information.