Last reviewed 21 November 2018

The phenomenon of Brexit paralysis, whereby any new Government initiatives are suspended or delayed while the details of the UK’s departure from the EU are endlessly debated, has been much commented upon. Even at relatively minor levels of detail, those in local government who have been waiting for the exit payments capping and recovery regulations to be approved by Parliament have seen evidence of the delays. However, one area which does not seem to have been blighted is activity to tackle pay gaps. Reporting requirements on the gender gap were imposed on larger employers earlier this year, and the Government has now proposed extending reporting requirements to cover the ethnicity pay gap. Steve Vale, HR consultant, reviews actions to date around the gender gap, and looks at the proposals on the ethnicity gap.

Background

The gender pay gap reporting requirements were introduced by two sets of regulations under the Equality Act 2010. Under these regulations all public and private sector organisations with more than 250 employees must report their gender pay gap statistics on an annual basis. The dates on which they were first required to report were 4 April 2018, in respect of private and voluntary sector organisations, and 30 March 2018 for public sector employers; the dates to which the first sets of figures refer (the “snapshot dates”) are the equivalent dates in 2017. Organisations are required to publish their statistics and upload them on to a dedicated and searchable Government website.

Compliance with the reporting requirements

In spite of the publicity surrounding the imminent reporting deadline, many organisations left it to the last minute to publish their gender pay gap data. It was widely estimated that around 9000 organisations were due to report. By 20 February, six weeks before the deadline, only 7% of the UK’s 500 listed companies had done so, and only 1691 companies had reported by the start of March. Consequently, in the early part of 2018, there were fears that large numbers of organisations would be in breach of the new requirements.

In the event, by 4 April, 9718 employers had submitted their statistics. The Equality and Human Rights Commission (EHRC), which is charged with enforcing the regulations, still estimated at this stage that 1456 employers had failed to do so on time. On 9 April, the EHRC wrote to them to confirm they were in scope of the requirements and asked them to comply. In the end, 10,528 employers reported for 2017/18 and the EHRC has now reported that all employers believed to be in scope of the regulations have published their gender pay gap figures.

The House of Commons Business, Energy and Industrial Strategy Committee has noted that, given the initial pace of reporting, and the lack of clarity of the regulations, the eventual compliance rate appears to have been very good. At the same time, it said that it is impossible to be definitive about the extent of compliance: the actual number of qualifying organisations is ever-changing as numbers of employees fluctuate and companies start up and fail; and there is no established list of the organisations that are subject to the new regulations. It has advised that “It is impossible to enforce any law without accurate information on those that are subject to it. In order to safeguard the integrity of the new reporting requirements and to facilitate effective scrutiny of compliance, we agree with witnesses who suggested that there should be a public register of organisations falling within the scope of the regulations. We welcome that full compliance has apparently been achieved, after effective dispute resolution by the EHRC. However, we need to be confident that full compliance can be achieved each year; and this can only be guaranteed if all qualifying organisations are known, and that the list is kept up to date.”

The Committee recommends that the Government publish and maintain a definitive list of all organisations that fall within the scope of the Gender Pay Gap Regulations.

The outcomes of gender pay gap reporting

The gender pay gap measures the difference in hourly earnings of men and women, and the data reported shows that, at an aggregate level, the gap remains considerable. The gap has been well established: the median gap for all employees across the whole economy is 18% in favour of men. (Provisional figures from the Office for National Statistics (ONS) at the end of October suggested that this has shrunk to 17.9%.) At an organisational level, the new figures revealed some alarming truths: gender pay gaps of over 40% are not uncommon in some sectors; 78% of organisations reporting have gender pay gaps in favour of men; 1377 employers (13% of the total), including many household names, have gender pay gaps of over 30%. The UK has one of the highest gender pay gaps in Europe.

The Local Government Association (LGA) has published aggregated figures for local government in England (excluding school staff), based on the reports submitted by 322 local authorities. These showed that:

  • on average, women were paid 6.8 % less than men, and the median gap is 5%

  • the gap in individual authorities varied between +14.1% (women were paid more than men) and -31.7%

  • women were, on average, paid less than men in 264 authorities; in 55, the reverse was true

  • across the whole economy:

    • 78% of all organisations paid men more than women, compared with 66% of local authorities

    • 34% of all organisations had a majority of women in the highest quartile pay band, compared with 62% of local authorities

  • the Civil Service median gender pay gap was 12.7% in 2017 compared with 5% in local authorities

  • the NHS mean gender pay gap was around 23%, compared with 6.8% in local authorities.

Developments since the reporting of gender pay gap data

Since the publication of the data, the UK Government has a list of suggested employer actions to close the pay gap on its website (see gender-pay-gap.service.gov.uk).

These are based on “the best available evidence currently”, although “high quality evidence is currently scarce in the field of gender equality in the workplace”. (The Government says that it is encouraging researchers and employers to evaluate the actions they take to improve gender equality in the workplace and that the Government Equalities Office (GEO) will be working with employers to build more evidence on what works, seeking to partner with organisations with 4000 or more employees.)

The list of actions has been subdivided into three sections, in descending order of current effectiveness — effective actions, promising actions and actions with mixed results.

Effective actions to close the gender pay gap

These are listed as follows.

  1. Include multiple women in shortlists for recruitment and promotions

    When putting together a shortlist of qualified candidates, make sure more than one woman is included. Shortlists with only one woman do not increase the chance of a woman being selected.

  2. Use skill-based assessment tasks in recruitment

    Rather than relying only on interviews, ask candidates to perform tasks they would be expected to perform in the role they are applying for. Use their performance on those tasks to assess their suitability for the role. Standardise the tasks and how they are scored to ensure fairness across candidates.

  3. Use structured interviews for recruitment and promotions

    Structured and unstructured interviews both have strengths and weaknesses, but unstructured interviews are more likely to allow unfair bias to creep in and influence decisions. Use structured interviews that:

    1. ask exactly the same questions of all candidates in a predetermined order and format

    2. grade the responses using pre-specified, standardised criteria; this makes the responses comparable and reduces the impact of unconscious bias.

  4. Encourage salary negotiation by showing salary ranges

    Women are less likely to negotiate their pay. This is partly because women are put off if they are not sure about what a reasonable offer is. Employers should clearly communicate the salary range on offer for a role to encourage women to negotiate their salary. This helps the applicant know what they can reasonably expect. If the salary for a role is negotiable, employers should state this clearly as this can also encourage women to negotiate. If women negotiate their salaries more, they will end up with salaries that more closely match the salaries of men.

  5. Introduce transparency to promotion, pay and reward processes

    Transparency means being open about processes, policies and criteria for decision-making. This means employees are clear what is involved, and that managers understand that their decisions need to be objective and evidence-based because those decisions can be reviewed by others. Introducing transparency to promotion, pay and reward processes can reduce pay inequalities.

  6. Appoint diversity managers and/or diversity task forces

    Diversity managers and task forces monitor talent management processes (such as recruitment or promotions) and diversity within the organisation. They can reduce biased decisions in recruitment and promotion because people who make decisions know that their decision may be reviewed. This accountability can improve the representation of women in an organisation. Diversity managers should:

    a) have a senior/executive role within the organisation

    b) have visibility of internal data

    c) be in the position to ask for more information on why decisions were made

    d) be empowered to develop and implement diversity strategies and policies.

By and large, these actions are already widely deployed in the public and local government sectors and have been used for some years, insofar as they are applicable (the scope for salary negotiation is very limited, for example). It could therefore be argued that the fact that across the local government sector there is still a 6.8% gap, despite these measures being substantially in place, shows their limitations in fully addressing the problem. A more sophisticated approach needs to be identified, which takes account of other factors which affect the pay of women, notably employee development issues, the impact of family and caring responsibilities, and part-time working.

Promising actions to close the gender pay gap

These are identified as follows.

  1. Improve workplace flexibility for men and women

    1. Advertise and offer all jobs as having flexible working options, such as part-time work, remote working, job sharing or compressed hours

    2. Allow people to work flexibly, where possible

    3. Encourage senior leaders to role model working flexibly and to champion flexible working

    4. Encourage men to work flexibly, so that it isn’t seen as only a female benefit.

  2. Encourage the uptake of shared parental leave

    The gender pay gap widens dramatically after women have children but this could be reduced if men and women were able to share childcare more equally. Shared parental leave and pay enables working parents to share up to 50 weeks of leave and up to 37 weeks of pay in their child’s first year. Encourage take up of shared parental leave. For example:

    a) inform future fathers that it’s their legal right to request shared parental leave

    b) provide future parents with guidance and personal support to understand the scheme

    c) share and promote examples of senior leaders who have taken shared parental leave in your organisation.

  3. Recruit returners

    Returners are people who have taken an extended career break for caring or other reasons and who are either not currently employed or are working in roles for which they are over-qualified. Attract and hire returners. For example:

    a) target places where returners are likely to be looking

    b) ensure the recruitment process is returner-friendly

    c) offer support before and during the assessment.

  4. Offer mentoring and sponsorship

    Although quite similar roles, mentors provide guidance and advice to their mentee, while sponsors support the advancement and visibility of the person they are sponsoring. Some evidence suggests that mentoring programmes work very well for some women but not for others. It is not clear based on existing evidence whether sponsorships are more effective than mentoring, or how best to run mentoring and sponsorship programmes so they are effective.

  5. Offer networking programmes

    Some evidence suggests that formal networking programmes where members meet and share information and career advice can be helpful for some women but not others. More work is needed to understand the effects of networking programmes, and whether they need to have particular features in order to be successful.

  6. Set internal targets

    It is important to ensure employers’ equality goals are clear and realistic, and that progress towards them can be tracked. "improving gender equality at my organisation" or "reducing my organisation's gender pay gap" can be overarching goals, but they are not specific and they therefore risk being unsuccessful. One way of increasing the likelihood that goals will be reached is by setting specific, time-bound targets: what change will be achieved, and by when?

The Government is keen to draw attention to its own initiatives in some of the above areas, but, again, there are few initiatives listed above that local authority employers will not have at least considered, if not implemented. And there are indications in the sector, as well as in the wider economy, that the effectiveness of some of the above initiatives is already questionable. Recruiting women to part-time work, remote working, job sharing or compressed hours, or allowing them to move into such roles is the easy bit. Ensuring that their career development, and therefore pay level, does not suffer as a result is much more difficult. The uptake of shared parental leave has been poor, and the point may have been reached where its effectiveness as a policy initiative needs to be reviewed and questioned.

Actions with mixed results

These actions are listed as having been shown to have a positive impact, sometimes and at other times a negative impact. The Government says that, due to the mixed evidence, it cannot yet make a general recommendation that these are good ways to reduce gender inequality.

  1. Unconscious bias training

    Unconscious biases can influence a person’s judgment without them being aware of it. Unconscious bias training in the workplace aims to make people aware of potentially harmful unconscious biases and to reduce the impact of those biases. While some types of unconscious bias training may have some limited positive effects, there is currently no evidence that this training changes behaviour or improves workplace equality.

  2. Diversity training

    Diversity training can help raise awareness but is unlikely to change behaviour. Some research in the US has found that mandatory diversity training either does not change the number of women in management positions, or actually reduces it. This backfiring may be for a number of reasons. It may be because people resent being made to do something and so do not take the training seriously. The training might also bring to mind unhelpful stereotypes which people then act upon, or the training might make people think that the organisation has now solved its diversity problems.

  3. Leadership development training

    Leadership development programmes aim to teach qualities including management skills and self-confidence. While there are some very small-scale studies of the effects of leadership training programmes for women, particularly in medicine and academia, there is currently no high-quality evidence that such programmes help women progress. Some people feel that these programmes imply that the women themselves are the problem.

  4. Use performance self-assessments

    In terms of performance in the workplace, there is some evidence that women underestimate their abilities or are more conservative in their assessment of their abilities than men are. The size of this gender difference can vary depending on the type of performance people are asked to self-assess. We do not have enough evidence to know how differences in self-assessment affect women’s progression at work.

  5. Diverse selection panels

    Having selection panels with a mix of men and women seems to help women's prospects sometimes and harm them at other times. Some studies show that the more women there are on a panel, the more likely women are to be selected for a role, while some studies find the opposite. The effect can also depend on the role being recruited for or the role of women on the committee. More research is needed to understand the conditions under which a diverse selection panel is or isn’t effective for improving gender equality.

The above list again includes initiatives that are widely used in the local government sector, and it would be interesting to know whether the councils which use them would support, or argue with, the Government’s caveats about their effectiveness. Some of the initiatives have wider applications and may be valuable in other contexts (eg the first two listed have service delivery implications). By branding them “mixed results” there is a danger that they will all be dismissed in the future, when, in fact, there are valid arguments that some of these are no less (if no more) effective that some of the things in the “effective” and “promising” categories.

A more sophisticated approach is needed

The problem with lists of items on three shopping lists is that they are bound to appear simplistic. The key probably lies not in any one initiative but in the way they are combined to tackle the pay gap problems of a particular organisation, and how they can dovetail with other needs and initiatives the organisation is pursuing.

For example, a district council with a relatively high gender pay gap also has recruitment and retention problems in technical and professional posts, and sees developing its own employees as a more effective route to tackle these than simply increasing remuneration. An obvious way forward is to target and support women employees in particular through apprenticeship and employee development programmes in ways designed to increase the proportions of women employees in better-paid positions.

Government consultation on ethnic pay reporting — background

The Government clearly sees its initiative on gender pay gap reporting as a success, at least in terms of highlighting a problem, if not necessarily being able to pinpoint solutions. This has led to it publishing a consultation paper on the possible introduction of mandatory ethnic pay reporting, issued in October 2018 and seeking views and comments by 11 January 2019.

The consultation paper’s ministerial foreword states that transparency is a vital first step towards harnessing the power of a diverse workforce, as evidenced by transparency in gender pay gap reporting. It applauds those organisations who already publish ethnicity pay information. It says that reporting ethnicity pay information enables employers to identify — and then tackle — barriers to creating a truly diverse workforce.

It refers to the Race Disparity Audit’s Ethnicity Facts and Figures website, created in 2017, which brings together ethnicity information published by Government in one place. It also refers to Baroness McGregor-Smith’s 2017 report Race in the Workplace which examined the barriers faced by people from ethnic minorities in the workplace and set out a range of actions for business and the Government to take forward to help improve their employment and career prospects.

One of Baroness McGregor-Smith's recommendations was that the Government should legislate for mandatory reporting of ethnicity pay data by £20,000 pay band. In the Government’s initial response to the report, it said that it was persuaded that the case had been made for ethnicity pay reporting, but that it expected business to lead in taking this forward voluntarily.

But a “one year on” review of the McGregor-Smith report in February 2018 showed that little progress had been made, so that the Government is now consulting on a mandatory approach to ethnicity pay reporting. The consultation invites views on a number of questions, including what information should be published to allow for meaningful and proportionate action to be taken without adding undue costs to business.

The consultation paper clarifies that, unless stated otherwise and for the purposes of the consultation, the term “people from ethnic minorities” refers to all ethnic minority groups excluding people from white ethnic minorities.

The context

The country is becoming increasingly ethnically diverse; the proportion of individuals who identified themselves as White British in England and Wales decreased from 87.4% in 2001 to 80.5% in 2011. However, differences in labour market participation remain; in 2016, around 1 in 10 adults from a Black, Pakistani, Bangladeshi or mixed background were unemployed compared to 1 in 25 White British people.

There are wide variations in gross earnings from employment between ethnic groups. Data on hourly pay broken down by ethnicity collected through the Labour Force Survey indicates that, generally speaking, ethnic minority groups earn less per hour than white employees. The finding is not uniform across all ethnic minority groups, with some groups outperforming white employees in hourly pay.

The McGregor-Smith review indicated that full representation of ethnic minority groups across the labour market, through improved participation and progression, would result in increased output of around £24 billion a year (around 1.3% of GDP).

Given the current equalities legislation, ethnic pay disparities are not likely to be primarily about those from a white background and other ethnic groups being paid differently for the same job. Thus, pay disparities between ethnic groups are likely to be due to other factors that impose a disadvantage on people from ethnic minorities without being explicitly discriminatory.

Evidence shows that, once in work, people from ethnic minorities progress less far and earn less money than their white counterparts. Baroness McGregor-Smith’s review indicated that 10% of the workforce was from an ethnic minority background, but that only 6% of top management positions were held by people from such a background.

The McGregor-Smith report noted that “even when overt discrimination is not present, there remains a lingering bias within the system which continues to disadvantage certain groups”.

The benefits of gathering, monitoring and publishing ethnicity data, and the nature of the data to be collected

The consultation paper outlines the benefits of requiring the collection and publication of data in a standard format as:

  • providing employers with robust data to both establish a baseline and measure the impact of positive action

  • making it easier for employers and employees to understand what the data is showing and what action should be taken as a result.

Therefore, it aims to agree a consistent methodological approach which drives meaningful action, while at the same time asks employers themselves to comment on what they see as the main benefits. It also asks the following.

What ethnicity pay information should be reported?

Among numerous options, this could take the form of:

  • one pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees, with the advantage of mirroring the gender pay gap reporting requirement, but the disadvantage of rolling all classifications of ethnic minority groups into one

  • several pay gap figures comparing average hourly earnings of different groups of ethnic minority employees as a percentage of white employees, although it proposes that there would still be some grouping into broad categories of Asian, Black, Mixed, White, Other, and Unknown Ethnic Groups. (See also Ethnicity data and classifications, below)

  • ethnicity pay information by pay band or quartile, showing the proportion of employees from different ethnic groups by £20,000 pay bands or by pay quartiles, allowing employers to consider where ethnic minorities are concentrated in terms of pay and identify any apparent barriers to progression.

What contextual information should be reported or available?

Additional information could help employers understand more about the drivers of disparities or provide important context to employees about the data reported. Such information could include data about:

  • geographical factors: the distribution of ethnic minority groups across different regions of the UK, and regional differences in pay levels across the UK

  • age: to enable judgments to be made over whether age factors are affecting pay outcomes for ethnic minority employees (given that people from ethnic minorities are generally younger than the white population, and we know that pay generally increases with age)

  • gender: to enable the interplay between the differences in pay based on gender and ethnicity to be examined.

Narrative and action plans

The consultation paper notes that, for gender pay gap reporting, it is not a mandatory obligation for employers to publish a narrative or action plan alongside their data, although employers are encouraged to do so. (Around 50% of employers published a narrative with some form of action plan in the first year of gender pay gap reporting.)

It says that a narrative with an action plan helps anyone reading the statement to understand the organisation’s view of why a gender pay gap is present and what the organisation intends to do to close it. Although many employers have diversity and inclusion strategies in place, some argue that it should be mandatory to publish action plans alongside any ethnicity pay reporting. This could make clear to current and potential employees that employers are committed to taking action to address disparities.

It therefore asks whether employees should be required to publish action plans to address ethnicity pay gaps.

Ethnicity data and classifications

The paper notes that there are a number of challenges around collecting, analysing and reporting ethnicity pay information in a meaningful way, principally because there is currently no legal obligation:

  • for individuals to disclose which ethnic group they identify themselves with

  • on employers to collect ethnicity information — research carried out by EHRC suggests that just 60% of larger employers (250+ employees) collect data on ethnicity

  • to use specific ethnic classifications.

It does not put forward any definitive proposal on these issues at this stage, but asks respondents to indicate whether they currently collect ethnicity data and, if so, whether they use standard ethnicity classifications for reporting and, if so, which ones they use (bearing in mind that these varied between the 2001 and 2011 censuses).

It also asks for employers to help identify the most effective approaches for employers to improve employee self-reporting or declaration rates, noting that some employers have already put significant effort into understanding what works in encouraging employees to provide information on ethnicity, with considerable success.

On the classification issue, the paper notes that employers who collect ethnicity data often use different classifications from each other and may also use different ethnicity classifications for different aspects of their business. Taking a more standardised approach to classifying ethnicity across organisations is likely to result in additional costs to employers where changes to systems are required and the paper requests information about the estimated cost of changing HR systems to allow for new classifications.

The 2011 ONS census classification grouped individuals into 18 detailed ethnic groups, which comprise five broad ethnic groups: White, Asian, Black, Mixed and Other. However, even within these groups, there are unique cultural differences which need to be clearly defined. For example, the white category groups together White British with individuals from other white backgrounds who may face different levels of disadvantage as a result of their ethnicity.

The question asked in the consultation paper is: For a consistent approach to ethnicity pay reporting across companies, should a standardised approach to classifications of ethnicity be used? What would be the costs to your organisation?

Data handling and anonymity

The paper notes that any information relating to an individual’s racial or ethnic origin is classified personal data, and that organisations who collect ethnicity data need to take care to ensure the anonymity of those who provide it (even if it is provided anonymously). For example, the Civil Service workforce statistics suppress values based on five or fewer responses, in order to protect confidentiality. The Government is seeking views on what the equivalent approach could be for employers in other sectors.

The extent of mandatory reporting and of help for employers

The consultation paper concludes by reiterating the Government’s view that, because only a small number of employers have chosen to publish ethnicity pay data voluntarily, it is time to move to mandatory ethnicity pay reporting. Questions remain, however, over the following.

Which employers should report ethnicity pay information?

Whether the threshold of employers with 250+ employees which applies to gender pay gap reporting should be applied, or whether a lower threshold of (say) 50 employees should be applied, as Baroness McGregor-Smith originally recommended.

Support for employers

In the case of gender pay gap reporting, the Government provided a package of support to help employers calculate and address their gender pay gap, including guidance and factsheets developed by the GEO and Acas. For ethnicity pay reporting, support could include similar tools, and the sharing of best practice and guidance on measures to improve ethnic minority representation and remove barriers to progression in the workplace.

Implementation on a trial or phased basis

It is possible that the Government could work with “early adopters” across the public and private sector to test approaches before mandatory reporting is required — for example with the Civil Service and NHS England. The Government is also aware that some businesses are developing their work in this area.

Conclusions

Continued Government efforts on exposing and eliminating pay gaps can only be welcomed in the current climate, particularly by sectors like local government, which have already taken so much action on pay equality and remain committed to it.

However, the success of mandatory gender pay gap reporting in initiating wide-scale change is questionable, and the effectiveness of some of the actions the Government is currently suggesting that employers should be taking to close the gap will appear questionable to organisations that have been using similar approaches for some time (eg local authorities), without necessarily seeing the desired progress or outcomes.

Against this background, it seems odd that the consultation paper on ethnic pay reporting raises the issues of requiring employer action plans to tackle the ethnicity gap, but that there appears to be no moves to return to the consideration of compulsory action plans on the gender gap.

The consultation paper on ethnic pay reporting rightly recognises that mandatory reporting on ethnicity is more complex than on gender (although, hopefully, this will not be used as an excuse for taking no action). The key issues appear to be which classifications to use and whether to collect data in a way which will allow the interplay between the gender and ethnic gaps to be explored and understood. So far as classification is concerned, it is perhaps hard to see the case for using anything other than the standard census classifications.

Many local authorities will (at this stage) want to continue with the ethnic monitoring they already undertake in terms of pay levels and pay gaps, and, given the time it will take the Government to react to the responses to the consultation, this will make sense, especially if that monitoring is attuned to local geographical and demographic factors affecting their local community in a way that uniform national monitoring is unlikely to replicate.

References

House of Commons Business, Energy and Industrial Strategy Committee,Gender Pay Gap Reporting, Thirteenth Report of Session 2017–19, July 2018

Office for National Statistics, Statistical Bulletin: Gender Pay Gap in the UK: 2018, October 2018

GOV.UK, Gender Pay Gap Service, Actions to Close the Gender Pay Gap

Department for Business, Energy and Industrial Strategy, Ethnicity Pay Reporting, Government Consultation, October 2018

GOV.UK, Research and Analysis: Race Disparity Audit, last updated October 2018,

Race in the Workplace, The McGregor-Smith Review, February 2017