COMPLIANCE
They must expect that changes will need to be made and understand that executive buy-in will be needed to successfully support the adjustments required to report the relevant data. There may be additional support needed within any human resource and payroll software used, to allow the business to access the relevant data. Additional budget will need to be approved to facilitate this. It’s important to remember that this extra reporting could be a great way to develop and evolve a company’s brand in an effort to attract the best talent to their organisation. Employee engagement Employee engagement is the first big step. There’s no legal requirement for an employee to disclose their ethnicity, or whether they’re disabled, so without employees engaging and providing their classification data, you could end up with very out of reality data regarding any possible pay gaps. There’s no minimum or maximum number of responses needed from your employees, but the more you have, the more accurate the report will be. 75% is a good target point, but with the right engagement, you could be aiming for nearer 90%. I know people who’ll openly discuss and disclose that their condition fits within the definition of disabled under the Equality Act 2010, but who have said they’ll never tick a box to state this for their employer. How do you overcome this, and how do you encourage someone to disclose their ethnicity or whether they’re disabled if they don’t want to? It’s all down to employee engagement. Being truly open and honest about what you need, why you need it and exactly how the information will be used will go a long way to starting the conversation. You could try the following: l engaging with, and gaining support from, employee-led networks / groups l sending out effective employee communication, using all your channels and literature types l hosting drop-in sessions to answer any questions staff may have l promoting trust, by restricting data access to only those who need the data, and having strict usage controls in place l being able to easily anonymise the data. When it comes to the box employees will be asked to tick, it’s important the
employee knows that it isn’t going to define them, be used against them or used for inappropriate purposes. You may wish to review how you collect this data from your new starters and assess whether there’s any way to use software. Remember that just because a person is new to the business when they’re filling in new starter details, doesn’t mean that you shouldn’t engage with them on the same level as those already employed by the business. By using some of the actions outlined above, one company has confirmed they have increased their employee engagement from 75% to 86% for current employees and to 90% for new recruits. Data Once you have buy-in and engagement, you need to look at the data you wish to report, and how you’re going to define categories. Ethnic reporting is much more in-depth than the reporting used for the gender pay gap. You may wish to review the current ethnic pay categories within your system and possibly align them with the five Office for National Statistics categories (https://ow.ly/lybr50VXBUh) used in the 2021 census. Or you may wish to drill down further and use the 19 individual categories within these sections. The guidance on ethnicity pay gap reporting recommends that organisations use detailed ethnicity classifications wherever possible, but when considering which categories to use it’s imperative that you don’t inadvertently make it easy to identify individuals. The guidance also recommends some additional figures to report on, as follows: l percentage of employees in different ethnic groups in each hourly pay quarter l mean (average) and median ethnicity pay gap using hourly pay l representation of ethnic groups in your organisation l percentage of employees whose ethnicity is ‘unknown’ or ‘prefer not to say’ l percentage of employees in different ethnic groups receiving bonus pay l the mean (average) ethnicity pay gap for bonus pay l the median ethnicity pay gap for bonus pay. There’s no such guidance regarding disability reporting, but it’s generally only a binary comparison. However, as neurodiversity is becoming much
more widely understood and many neurodivergent people don’t identify as being ‘disabled’, you may wish to consider breaking this data down and being able to report on a range of categories. For this, you’d need functionality within your software to record the separate categories. EU Pay Transparency Directive Although we’re no longer part of the EU following Brexit, and aren’t governed by the EU Pay Transparency Directive, there are many international companies in the UK who have European entities / owners. These companies may not separate their reporting out of the UK, to support them in their global mobility and for commonality in business practices. As this reporting is so much more comprehensive and has rules on areas such as pay on job adverts, employers may wish to consider what their competitors may report on. Would it harm the business and recruitment if a business’s direct competitors were much more transparent than them? Some UK experts have confirmed they expect our current Government to follow this in part, and it will only be a matter of time, so it’s well worth spending the time now and seeing if any of this can easily be brought into an employer’s pay gap processes and reporting.
PROFESSI NAL in Payroll, Pensions and Reward
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June 2025 | Issue 111
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