Ethnicity pay gap reporting ‘especially challenging’ for multinational firms

New laws on ethnicity pay gap reporting are expected in the UK at some point, and they will present a particular challenge for firms with a global presence. This is in the news after a parliamentary debate in response to a petition calling for ethnicity pay gap reporting to become a mandatory duty for businesses. The CIPD has called for mandatory ethnicity pay gap reporting by 2023 at the latest, saying the transparency it will bring will create ‘fairer workplaces and societies’. They point to data showing that just 13 FTSE 100 companies have, in the absence of legislation, reported on a voluntary basis. 

The challenge facing UK businesses is one we covered in our programme a fortnight ago: ‘MPs debate on ethnicity pay gap reporting highlights the challenges’. Personnel Today followed the debate and gave the headlines to Paul Scully the minister for small business who was said ethnicity pay gap reporting is ‘far from straightforward’ and how there needs to be a method that allows for meaningful interpretation for businesses. He flagged 5 big issues: (1) Statistical robustness, (2) Anonymity of data, (3) Data collection barriers, (4) The wide range of ethnic groups within the UK; and (5) The potential for results to be skewed. 

Scully is the minister for small businesses so it’s understandable his focus was not on multinationals but, of course, many of our clients fall into that category and are already addressing this issue, gathering data across a number of jurisdictions ahead of any new legislation imposing a mandatory duty. So let’s hear more about that - why they’re gathering the data and the challenges they’re facing doing it. Susi Donaldson is currently helping a number of clients with this exercise and she joined me by phone from Glasgow to discuss it:

Susi Donaldson: “Obviously we haven't seen the draft regulations yet and there's no mandatory obligation to report on ethnicity pay gap, although many organisations are doing so on a voluntary basis. However, there are clients who we are assisting with this issue in terms of running the calculations for them, helping them with the diversity data collection exercises so they can take stock of things and get a clear picture of how their pay gaps are looking, how the representation of their different ethnic minorities is looking across the business in order that they can be ready and, if possible, take corrective action in advance of all of this becoming public knowledge and, of course, there is the advantage of being able to do that on a legally privileged basis at this point in time.”

Joe Glavina: “This must be a big challenge for multinationals?” 

Susi Donaldson: “Yes, it has been a huge issue, actually, because many of the clients that we work with operate on a global level and, of course, they're very keen to take a consistent approach to their diversity data collection and to be using consistent categorisations across the business in order that they then have a consistent point for comparison but, in reality, that's very difficult because what is an ethnic minority in the UK may not be an ethnic minority in Asia, for example. So you need to make sure that the ethnicity classifications that you use in a particular jurisdiction are relevant otherwise employees are not going to respond, or aren't going to respond meaningfully. So what some of our clients have been doing, for example, is asking a more general question: do you consider yourself an ethnic minority in the location in which you work and, if so, please specify”

Joe Glavina: “Yes, I see how that more general style of questioning is a better way to go, so adapting the questionnaires?”

Susi Donaldson: “Yes, many employers who've embarked on this exercise have done so with the overrising objective of using consistent classifications that are consistent questions right across their business, but I think they've realised that in many cases that's not going to be possible if they want to obtain meaningful data and they may need to adjust their questionnaire depending on the jurisdiction that it's going to.”

Joe Glavina: “The MPs debate highlighted two big issues with this exercise – data protection and anonymity. I guess the data is far more useful if you can put a name to it, but there’s data protection to think about.”

Susi Donaldson: “Yes, obviously given that this information is sensitive data, assuming that this is not being obtained on an anonymous basis, and I would say more and more so, employers are trying to link the information to the individual rather than doing it on an anonymous basis because it's so much more useful, you can use it for purposes like ethnicity pay gap reporting, for example, if you can identify the individual and obviously that's not possible if it's done in an anonymous basis. But where you collect information on that basis you need to be absolutely clear with your employees about what you're using it for. So most employers are having to be very open with employees about the purpose for which they are obtaining this this data and how it will be used and I would say that most organisations are using it to inform their internal decision making and to inform their wider D&I strategy.”

The government has still not reported back following its consultation which closed in January 2019 so we still don’t know the timetable for any new legislation. Recognising that, the CIPD has published guidance to help employers measure and report their ethnicity pay gap in the absence of legislation – that came out last month. We have put a link to it in the transcript of this programme.

LINKS
- Link to CIPD’s Ethnicity pay reporting: a guide for UK employers