Employment Law Coffee Break | Ethnicity pay gap reporting, other diversity initiatives and the spring statement 

No mandatory ethnicity pay gap reporting: guidance to be published in 2022

The government has published its response to the report of the Commission on Race and Ethnic Disparities which made a number of recommendations to address ethnic and racial disparities across society. The response "Inclusive Britain" sets out over 70 actions in response to these recommendations, grouped under three main themes: trust and fairness, opportunity and agency, and inclusion. Together, these actions set out an inclusion strategy for Britain in an era of rapidly changing demographics, social media, increasing ethnic diversity and advances in artificial intelligence (AI).

The response states that mandatory ethnicity pay gap reporting will not be introduced, as "it may not be the most appropriate tool for every type of employer seeking to ensure fairness in the workplace" and the government also "want to avoid imposing new reporting burdens on businesses as they recover from the pandemic". Instead, the government will be supporting employers with voluntary reporting and will publish guidance in summer 2022 to include case studies of those companies who are already reporting, and will give employers the tools to understand and tackle pay gaps within their organisations and build trust with employees. The response states that "once employers are equipped with a trustworthy, consistent standard for reporting, we would expect them to take meaningful action to identify and then tackle the causes of disparate pay".  

The response acknowledges that with so much emerging technology, it is not yet fully understood how the use of AI will impact ethnic disparities, but that it is known that bias can enter AI just like any other process: through data, modelling (where unfair rules may be unknowingly embedded into a system), and through system decision-making. The Equality and Human Rights Commission (EHRC) will be advising on the safeguards needed and will issue guidance that explains how to apply the Equality Act to algorithmic decision-making. Also, to address the potential risks and opportunities presented by AI, the Office for AI will develop a national position on governing and regulating AI, and set this out in a white paper in 2022. This will include how to address potential racial bias in algorithmic decision-making.

To support employers and industry sectors to create opportunity for groups that are underrepresented in their workforce, the Government Equalities Office will also create new updated guidance on positive action by December 2022.

The response concluded that the term "BAME" has become increasingly irrelevant and even counterproductive to ethnic minority progress and obscures important disparities between different ethnic groups, and instances where some groups are actually doing better than average; and that it allows organisations to claim they are making progress when in fact only certain ethnic groups may be advancing. Therefore, the government is proposing to be more granular and specific in how it talks about ethnicity and will only where it is absolutely necessary draw a binary distinction between the ethnic majority and ethnic minorities, who will be referred to as "people from ethnic minority backgrounds". Employers considering their own diversity and inclusion data may wish to review their own measures of ethnic diversity, as using the same parameters may be helpful if considering voluntary reporting, to gather more consistent data and to be well prepared should mandatory reporting be introduced later down the line.

Our recent webinar series "Dipping into Data" considered the processing of diversity-related data and looked at the data protection considerations businesses need to be aware of, particularly when approaching this on an international basis.

Other diversity developments

The deadline for responding to the government's consultation on disability workforce reporting has been extended to 8 April 2022.

The government's LGBT+ Business Champion is calling for global and UK-based organisations to provide examples of how they are improving LGBT+ inclusivity in their workplace and wider environment. The government wants to hear from employers, staff networks, trade unions and civil society organisations about their experience of creating LGBT+ inclusive workplaces and supporting LGBT+ inclusion in their wider environment. The questions posed include:

• What is your organisation doing to improve the collection of LGBT+ diversity and inclusion data of employees?
• What is your organisation doing to improve the outcomes and experiences of LGBT+ employees in the workplace?
• For organisations which operate in countries where LGBT+ people routinely experience discrimination, what is your organisation doing to support the safety and advocacy of LGBT+ staff?
• How does your organisation have a positive social and economic impact on LGBT+ equality, including in countries where LGBT+ people routinely experience discrimination (where relevant)?

This consultation closes on 28 April 2022.

Employers should also note that the next deadline for complying with their statutory gender pay gap reporting obligations is on 4 April 2022. It will be interesting to see how Covid-19 has impacted on gender pay data over the last year, as the pandemic is reported to have affected women more severely than men and younger employees more severely than older workers. The current gender pay gap reporting measures are currently being reviewed by the government and any changes will not apply until at least 2023. This is an area where the government remains focused, with an initiative to seek to improve pay transparency in recruitment processes to help businesses who want to attract women to their positions launched on International Women's Day. Participating employers will be asked to list salary details on job adverts and to stop asking about salary history during recruitment – read more here. 

Spring statement - what does it mean for employers? 

Yesterday (23 March) the Chancellor of the Exchequer delivered his spring statement "unveiling a new Tax Plan to ease the rising cost of living and to deliver the biggest cut to personal taxes in a quarter of a century", against the backdrop of "higher than expected global energy and goods prices" leading to "an unavoidable increase to the cost of living in the UK". While it is stated that "the UK economy has emerged from the pandemic in a strong position", the invasion of Ukraine will "increase inflation further in the coming months, with the long-term consequences not yet being clear"; the government has therefore taken some measures intended to help with the cost of living.

Employers should note that the planned temporary 1.25% rise in National Insurance Contributions (NICs) will go ahead in April.  To ease the impact, the Chancellor announced that the National Insurance Primary Threshold and Lower Profits Limit would be increased from £9,880 to £12,570, from July 2022. This is intended to allow payroll providers and employers some time to update their systems to reflect the change in the threshold, and will align it with the income tax personal allowance. The Chancellor indicated that "this simplification means that, from July, 70% of workers who pay NICs will pay less of it… , even after accounting for the Health and Social Care Levy. Of those who benefit from the threshold increase, 2.2 million people will be taken out of paying NICs altogether".  

As a reminder, the new Health and Social Care Levy is effectively introduced from this April with the temporary 1.25% increase in NICs for employees, the self-employed and employers.  HMRC is asking employers to include a message for their employees on all payslips between 6 April 2022 and 5 April 2023 stating "1.25% uplift in NICs funds NHS, health & social care". From April 2023, the levy will be formally separated out from NICs, and NICs rates will return to 2021 to 2022 levels. Read more in our Insight.

Training to prepare employees for the new world of work remains high on the government's agenda. With UK employers spending just half the European average on training their employees, the Chancellor has also stated that he will examine how the tax system, including the operation of the Apprenticeship Levy, can be used to encourage employers to invest in adult training.

The government has also announced that it will review whether the tax-advantaged company share option scheme should be reformed, to support companies as they grow beyond the scope of the popular enterprise management incentive scheme.

For further information, see our Insight on the wider business measures and the government's tax plan.