UK: new government guidance on positive action and ethnicity pay gap reporting

Enabling equality of opportunity is a key moral and strategic opportunity for any organisation, but the uncertain boundaries around lawful positive action and the complexity of ethnicity reporting has discouraged their adoption.  The Government has now published guidance in the hope of giving employers confidence to implement these steps appropriately.

Positive action guidance (here)

In brief, employers lawfully can (but are not obliged to) take two types of positive action:

1. general positive action: where an employer reasonably thinks that a group of people who share a particular protected characteristic suffer disadvantage connected to that characteristic, have different needs compared to others without that characteristic, or are underrepresented in certain activities, the employer can treat that group more favourably by taking proportionate measures to reduce the disadvantage/address the need/increase participation in the activity, for example by providing targeted training or mentoring.
2. positive action in relation to recruitment and promotion (the 'tiebreaker' provision): if an employer reasonably thinks that a group of people with a protected characteristic are underrepresented in the workforce, or suffer a disadvantage connected to that protected characteristic, and they are choosing between two or more candidates of equal merit, then they may be able lawfully to choose the individual with the protected characteristic provided this is proportionate.

The guidance explains the thought processes an employer should go through and record, the evidence they should obtain (eg workforce data showing under-representation, or potentially more informal staff engagement in the absence of workforce data) and the types of action that might be proportionate, including some helpful worked examples.

The meaning of 'equal merit' is discussed and the guidance makes clear that, while an employer must not adopt policies or practices designed to routinely favour candidates with a certain protected characteristic, they can have a routine policy of being prepared to use positive action where it is appropriate for them to do so (provided that the need for the action is routinely reviewed to ensure it remains necessary and proportionate).  Setting quotas (as opposed to targets) to recruit or promote a particular number or proportion of people with protected characteristics irrespective of merit would not be lawful, and the guidance warns that actions which might be lawful in other jurisdictions will not necessarily be so here (for example, US affirmative action).

The guidance highlights the importance of monitoring and reviewing progress (otherwise continued action may cease to be proportionate and lawful) and of consulting and communicating with staff. It also notes that positive action could give rise to complaints from others and so advises that legal advice is taken. Employers are referred to the further detail in the EHRC's statutory code on positive action here.

Positive action is one of the trickiest aspects of the Equality Act to get right, to avoid straying from lawful positive action into unlawful positive discrimination. Employers will be assisted by this guidance when assessing where that line is to be drawn.

Ethnicity pay reporting guidance (here)

In March 2022 the government announced that it did not intend to go ahead with its 2018 proposals to introduce mandatory ethnicity pay gap reporting for large employers, despite the widespread support from industry and union bodies and a petition with over 130,000 signatures, as it wanted to avoid imposing new burdens on businesses as they recover from the pandemic.  Instead, guidance on voluntary reporting was to be produced in summer 2022. That guidance was finally published on 17 April 2023.  It would be prudent for those employers who wish to report to review and follow as much of the guidance as is appropriate, given that it is likely to form the basis of any future mandatory requirement (which is probably only a matter of time - notably Labour has committed to making ethnicity pay gap reporting mandatory for employers with at least 250 employees).  A consistent approach by employers will also allow for more meaningful comparisons.

The guidance covers how to collect ethnicity and payroll data and make the calculations, how to analyse and understand the results, and how to develop an action plan to address any identified disparities.  There is no suggestion that the government intends to make it a legislative requirement for any employer who voluntarily reports to also publish a diagnosis and action plan (which is how some commentators had interpreted the March 2022 announcement).

Much of the guidance on the required pay data and calculations mirrors the approach for gender pay gap reporting.  It recommends using the detailed ethnicity classifications from the 2021 census, along with the option of 'prefer not to say'.  To ensure that individuals cannot be identified and that the data is statistically robust, it recommends that there should be a minimum number of employees per group analysed of between 5 and 20 employees for internal analysis and at least 50 employees if publishing the data. Subject to this, as many ethnic groups as possible should be shown, although the guidance notes that for some workforces it will only be possible to use aggregated groups (eg, Asian, black, mixed, white, other or even just white/white British and other) - if this is the case, it should be kept under review with a view to more granular reporting in future years.  There are links to additional resources on presenting the data and writing about ethnic groups.

The final section of the guidance sets out questions to consider when seeking to understand the cause of a pay gap, and recommends that any action plan commits to addressing the specific issues identified as likely causes rather than setting arbitrary targets. Improving the diversity of the talent pipeline is likely to be key, as will encouraging employees to disclose their ethnicity data to maximise the quality of the statistics.

The government intends to launch an Inclusion at Work panel in spring 2023 which will develop and disseminate advice on evidence-based actions employers can take to improve inclusion and fairness in the workplace.  Employers will be able to sign up to a new voluntary Inclusion Confident Scheme to demonstrate their commitment to adopting the most effective diversity and inclusion measures in the workplace.

Please do get in touch with your usual HSF contact if you would like to discuss implementing either of these initiatives in your organisation.