Ethnicity pay gap reporting ‘a challenge’ for multinational firms

As you may have seen in the news the government has published extensive ethnicity pay gap reporting guidance issued for UK employers. It had been expected last summer but has now been published as part of the government’s wider progress report on the Inclusive Britain strategy. The guidance is voluntary but it’s worth noting that in response to the publication of this guidance Labour repeated its commitment to make ethnicity pay gap reporting mandatory for most employers if they win next year’s general election.

The relevance of the guidance to UK employers is covered in some detail by Susi Donaldson and Shuabe Shabudin in their article for Out-Law. They highlight how the guidance ‘strongly discourages’ binary reporting, which is the approach currently adopted by most businesses, because of the way it tends to ‘mask detail and nuance’ which might be vital for understanding ethnicity pay gaps. They also explain the approach needed to collecting and analysing data and ways to avoid low response rates which can often be an issue. 
The government’s guidance is, naturally, focused on UK businesses not multinationals but, of course, many of our clients are multinationals and are already addressing this issue, gathering data across a number of jurisdictions which, obviously, poses a number of significant challenges. 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. I put it to Susi that this must be a big challenge: 

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: “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.”
Susi and Shuabe’s article on the government’s guidance as it affects UK employers is called: ‘Extensive’ ethnicity pay gap reporting guidance issued to UK employers’ and we have put a link to it in the transcript of this programme along with a link to the guidance itself.

LINKS
- Link to guidance for employers on ethnicity pay gap reporting
- Link to Out-Law article: ‘Extensive’ ethnicity pay gap reporting guidance issued to UK employers’