Is Legislative Intervention Required to Build an Ethnically Diverse Workforce in the UK?

John M. BenjaminTanya ChadhaBy John M. Benjamin and Tanya Chadha

 

 

Diversity and Inclusion (D&I) is a hot topic for the vast majority of employers.  The benefits of a diverse workforce in today’s society are undeniable both in terms of financial performance and a more integrated workforce.

In the UK, there are no legislative requirements for employing a diverse workforce but many organisations have D&I high on their agendas nonetheless.  D&I is no longer a talking point reserved exclusively for “behind closed door” human resources discussions.  Whether this change has been driven by a moral obligation to “do the right thing” or the ever increasing socio-economic inequalities within diverse communities, the fact remains that employers and employees alike are now actively talking about D&I in the workplace. That is of course good news, but is talking about it enough?

Gender and Ethnicity

 There has certainly been a positive shift in attitude towards employing a diverse workforce.  There have also been some tangible developments.  When it comes to pay gaps between men and women, things are noticeably improving.  For example, the relatively recent legislative requirement for companies to report on gender pay data has resulted in real change for working women by narrowing the gap in pay between their male counterparts.

In April 2017, changes to the Equality Act came into force which required UK companies to openly report gender pay gap figures at the end of every financial year.  Whilst the objective of gender pay gap reporting was to promote and effect equal pay between men and women, it also had the effect of “naming and shaming’ the worst offenders.  The obligation to report this data shone a spotlight on each company and exposed information that may otherwise have remained hidden.

For the first time in history, UK companies were actively scrutinised when it came to the disparity in pay between women and their male counterparts.  For UK companies, the ramifications of scoring badly can be wide ranging.  Top female talent may be dissuaded from applying for job opportunities, companies may lose out on tender opportunities, and negative publicity surrounding the gender pay gap may take over otherwise good new stories.  That notwithstanding, the obligation to report on the gender pay gap has forced companies to review and address this issue in a way that never previously existed.  Government action has certainly driven significant change to a level that would otherwise have been impossible to achieve without this legislative intervention.

On the matter of ethnic diversity however, progress has been slow.  Much slower than society requires.  Much slower than many campaigners demand.

In 2017, the Parker Review laid down certain recommendations in a bid to promote ethnic diversity on UK company boards.  Those recommendations included adopting voluntary targets as follows:

  • each FTSE 100 Board to have at least one director of colour by 2021; and
  • each FTSE 250 board to have at least one director of colour by 2024.

That notwithstanding, the February 2020 Parker Review update revealed some startling findings:

  • FTSE 250 companies – only 5% of directors were people of colour and 78% of companies had failed to meet the target; and
  • For FTSE 100 companies – 9.7% of directors were people of colour and 48% of companies had failed to meet the target.

Whilst things appear to be moving in the right direction, the statistics set out above show that movement is simply not quick enough to reflect modern society.  Voluntary targets are just that.  UK companies do not have to comply, and in the absence of any mandatory reporting requirements on ethnic diversity, cannot be held to account.

Is it now time for the government to step-in and force employers to be transparent when it comes to ethnic diversity data in the same way that they must be when it comes to gender pay data?  Unless and until that happens, will employers really take this issue seriously, or will they just pay lip-service to the benefits of D&I in the workplace without effecting any real change?

Ethnicity Data – how far do we need to go?

 Whilst it would certainly be interesting to see companies report on the ethnic diversity of staff within an organisation, how far would we need to drill-down into the detail in order for the exercise to be meaningful?  Practically, would it be much more difficult for companies to collect data on ethnicity rather than gender?

We often see data capture forms categorise ethnicity very generally and broadly.  For example, the term “Asian” in the UK may be used to include people with Indian, Sri Lankan, Pakistani or Bangladeshi heritage.  Does that tell us enough in order to really effect change and make a difference? Indeed, should we be moving away in general from many of these “umbrella” categorisations which are often unhelpful. Furthermore, the meaning of terms such as this differ across jurisdictions.

In order to really understand the true position as to ethnic diversity, we may well need to know more.  Using the same example in the UK context, there may for instance be a difference between the number of employees from an Indian, Sri Lankan, Pakistani and Bangladeshi background.  To achieve true equality, that difference would need to be addressed.  It is unlikely to be sufficient for companies to take a broad-brush approach when it comes to ethnic diversity, which in turn makes the job much harder.

When considering ethnicity, other factors also come into play.  For example, whether someone is first, second or third generation immigrant is likely to be a significant determining factor for education and employment status.  Certain parts of the UK have a larger minority talent pool than others due to historic patterns of immigration and available opportunities.  Age also plays an important role with things changing much more quickly for the younger generation.  The UK’s Office for National Statistics reported that in 2019, the gender pay gap for those under 40 years old was close to zero.  By contrast, amongst those over 50 years old, the gender pay gap is over 15% and does not appear to be declining strongly.  The position is likely to be very similar on the issue of ethnicity.

In summary, ethnic diversity within organisations is therefore likely to mean different things to different people.  Taking it from the top and understanding at a very basic level the broad ethnic make-up of an organisation’s employees is a good starting point. Some kind of direction will however be needed to achieve parity of categorisation used by organisations.  That is perhaps the most obvious difficulty with accurate statistics.

It is highly likely that ethnicity reporting will become mandatory at some point in the future.  To get one step ahead, companies should turn their attention to this issue now, voluntarily.  Those that choose to pave the way now will inevitably lead the charge in attracting the best diverse talent whilst proving that they are willing to take meaningful action to drive change.

The authors would like to acknowledge the assistance of their colleague Nic Hart in reviewing this article.