Focus on race diversity: how employers can implement change

There has been little change in the number of black workers in senior professional roles since 2014, according to a new report from Business in the Community, a business-led membership organisation dedicated to responsible business.

According to the report, only 1.5% of managers, directors and senior officials in the UK are black. This is despite the fact that black people make up more than 3% of the population in England and Wales.

How can employers implement change to increase the representation of black workers in more senior positions, and also generally within their workforces where there is a wider representation issue?

Certainly the recent spotlight which has been thrown on racial diversity has increased the focus on this issue for employers.  Whilst many employers have been taking steps and dealing with diversity from a sex and gender perspective, particularly following the advent of gender pay gap reporting, the focus on diversity cannot start and stop there.   

With Parliament set to debate mandatory ethnicity pay gap reporting in light of a recent petition called for its introduction passed 100,000 signatures, this article looks at where we have got to on this, and what employers can be doing now to look to implement change to improve racial diversity in the workplace.   

Positive Action,  and how it can be used lawfully to help racial diversity

If an employer treats an employee, worker or job applicant less favourably  because of their race, this is unlawful – because it is an act of direct discrimination.

This means that treating someone more favourably because of their race would be unlawful direct discrimination against the person of a different race who is consequently treated less favourably.  A company cannot, therefore, simply seek to deal with diversity issues by, for example, promoting individuals from an under-represented group; or only hiring people from an under-represented group.  This is known as "positive discrimination", and is unlawful.

However, "positive action" is lawful, and can be used where an employer reasonably considers that persons of a particular race are disadvantaged, have different needs or are disproportionately under-represented in the workforce. 

There are two types of positive action:

• General positive action. An employer can take proportionate measures to improve racial equality in its workplace. For example if an employer's records show that employees from a particular ethnic minority are under-represented in management roles, that employer can start a mentoring programme targeted at that group of employees to seek to encourage and support them in applying for management roles. However care needs to be taken in not stepping over the line into positive discrimination (which as set out above is unlawful) – so when it comes to the application process for a management role which becomes available, all candidates should be treated equally in that process (regardless as to their race).
• Positive action in recruitment and promotion. An employer can treat a person of a particular race more favourably than others as long as that person is as qualified as the other candidates. This involves a high level of risk because if an employer recruits or promotes a person of a particular race in preference to another better-qualified candidate, this will constitute automatic direct discrimination. Therefore, employers should only use positive action in recruitment and promotion as a 'tie-breaker' i.e. when faced with two or more candidates who are of equal merit. Below are some examples of positive action in practice
  • A police service employs disproportionately low numbers of people from an ethnic minority background. It identifies a number of candidates who are as qualified as each other for recruitment to a post, including a candidate from an under-represented ethnic minority background. It would be lawful for the police service to give preferential treatment to that candidate, provided the comparative merits of other candidates were also taken into consideration (example taken from the explanatory notes to the Equality Act 2010)
  • A counselling service for teenagers has no Muslim employees, but is in an area with a high Muslim population. Two job candidates of equal merit are in a tie-breaker situation; one candidate is Muslim and the other candidate is not. The service manager could choose to offer the job to the Muslim candidate, provided that this is a proportionate means of achieving the aim of increasing the number of the under-represented group employed (example taken from the supplement to the EHRC Code of Practice: Employment).

Where are we on Ethnicity Pay Reporting?

Mandatory Ethnicity Pay Reporting (namely the compulsory publication by large employers of a breakdown of employees by race and pay band) was first proposed in February 2017 by Baroness McGregor-Smith who led a review, "Race in the Workplace". To date, this has not happened. Nonetheless, there has been some limited progress:

• In February 2017, in response to the McGregor-Smith Review, the government stated that they preferred that businesses should voluntarily report on ethnicity.
• In March 2017, Business in the Community, launched the first Best Employers for Race Listing, identifying businesses which take action to build a diverse and inclusive workplace. A year later in March 2018, it published "the Scorecard Report 2018", which concluded that limited progress had been made in eradicating obstacles to admission and advancement in the workplace for all ethnicities.
• Meanwhile, in October 2017, the government published the Race Disparity Audit showing how people of different ethnicities were treated across public services and emphasising the need for change. This audit is frequently updated on the Ethnicity Facts and Figures website.
• From October 2018 to January 2019, the government ran a public consultation to explore the merits of mandatory ethnicity pay reporting as few businesses had signed up to voluntarily publishing their ethnicity pay gap. Although this consultation closed 18 months ago, there has been no further progress.
• In February 2020, the Parker Review Committee updated its Report into the Ethnic Diversity of UK Boards which it first published in October 2017. The 2017 review examined the profile of the FTSE 350 Boards, and identified institutional and structural bias. It also reiterated the importance of ethnicity pay reporting.

Mandatory Gender Pay Gap Reporting, introduced in April 2017, is helping to maintain a real focus on any disparities in pay between genders. Should mandatory ethnic pay reporting be introduced, it is likely that this will create and sustain a similar level of focus.  Such a focus will commonly lead to a focus on any under-representation at senior levels, because that can be a key cause and driver of pay differentials on a statistically averaged basis.  And that can then lead to a focus on positive action to assist in addressing under-representation.

How to achieve diversity monitoring in light of GDPR?

While ethnicity pay reporting remains a work in progress, diversity monitoring can serve as an effective way for employers to first identify where they may have under-representation.  It is only having identified any such under-representation that positive action can then be considered.  Monitoring is necessary to enable you to understand what your diversity currently is, and to assist you in deciding on where you want to focus.

However, there are a number of considerations to take into account when conducting diversity monitoring, not least the impact of the data protection laws – namely the General Data Protection Regulation (GDPR) and the Data Protection Act 2018.

The data protection laws allow employers to process employee personal data where it is for the purpose of monitoring diversity and equality of opportunity or treatment.  However, strict parameters apply when doing so.

Diversity monitoring involves processing employees' 'special categories' of data. This is the most sensitive form of personal data as it includes information about race, ethnic origin, health and sexual orientation.  An employee's explicit consent is not needed to collect this data, provided it is only collected for its proper purpose and is proportionate.  This can be difficult for employers to judge, and employers will be wary of any potential penalties for getting it wrong.  However, the following are some tips and tricks which can help employers both minimise risk and maximise the potential offered by the data collected (given that diversity monitoring is a must going forwards in any attempt to tackle diversity):

• Anonymise the data. By doing this, the data will no longer constitute 'personal data' under the data protection laws, so will be easier to manage. Additionally, this will help mitigate the risk of harm to employees should the data be accidentally leaked or disclosed, as it will no longer relate to specific, identifiable individuals;
• 'Use it or lose it'. Employers should not collect the data unless they are genuinely going to use for diversity monitoring. If the data is not put to good use for a real and meaningful diversity monitoring exercise, there is a real risk of losing the legal basis for processing the data, and therefore falling foul of data protection law; and
• Document what you are doing with the data and why. One of the most effective forms of protection for employers against non-compliance with data protection law is to have a document trail showing the process taken to deal with the data properly. This means having a written policy governing how the diversity data is handled, and may also include carrying out a data protection impact assessment on the data collection exercise.

Also, employers should bring employees with them. Clearly documenting what you are doing with data, and why, is not only a must for GDPR compliance, but also assists in employee relations and communicating with your employees what you are doing.

Diversity monitoring is one of the most effective ways for employers to manage and promote diversity in the workplace, and as long as employers ensure that they are complying with data protection law, should serve as one of the key tools for employers to use to combat discrimination.

What employers should be doing to make an impact?

Potential steps include:

• Communicating with your employees what you are doing in relation to diversity;
• Reviewing your diversity and inclusion policies, and also your grievance policies, to make sure they are fit for purpose and ensure that, should they need it, employees have a clear and confidential route in which to raise any concerns about diversity or inclusion;
• Consider transparency, or greater transparency in relation to remuneration, including:
  • Publishing data about the demographics that make up their workforce, and:
    • Their pay;
    • Their positions;
  • Publishing targets, how they hope to achieve those targets, and in what time frame;
• Considering positive action and how it can be used;
• Reviewing recruitment practices, including anonymised recruitment,;
• Creating a network or networks to encourage and promote learning on diversity;
• Supporting charities / organisations that support and assist individuals from underrepresented groups;
• Providing unconscious bias training for all staff.

If you have any questions or would like advice on any of the issues raised here, please get in touch with your usual Clyde & Co contact.

Written by Chris Holme, Suzanne Staunton, Jeremy Charles and Ruth Moffett.