Got a gap? How organisations can benefit from addressing their ethnicity and disability pay gaps.

Gender pay gap reporting has become a staple of the UK business calendar. But the organisations who are really building their DEI reputation aren't stopping there.

This article will help you understand why diversity, equity and inclusion (DEI) is back in the news, why the Financial Conduct Authority are championing DEI, what's holding DEI back and the key considerations you need to think about if you’d like to extend your DEI ambitions.

March 2024 has been a month of mixed news for diversity, equity, and inclusion. In the wake of a funding crisis, local authorities have been told to cut their diversity spending. But there has also been good news. One example comes from Lloyds of London, who have just released their fifth Market Policies and Practices return.

This report looks at the broader business culture of firms within the Lloyds marketplace. In the last year, this group has seen a three-percentage point rise in the number of women in leadership roles. It's also seen a four-percentage point rise in the number of new hires from ethnically diverse backgrounds.

These figures reflect how the corporate landscape is evolving, with the DEI expectations of employees and regulatory authorities continuing to grow. A good illustration of this came, in September 2023, when the Financial Conduct Authority set out their proposals to boost DEI, with Chief Executive Nikhil Rathi saying:

"For UK financial services to be competitive and for the companies in it to be well run with healthy work environments, it's vital they attract, retain, and promote the best talent. The data suggests this isn't happening. Our proposals will encourage the largest firms to put in place plans and report against their delivery.

"UK financial services has long been a magnet for best-in-class talent globally. Increasing levels of diversity within firms can help attract and unlock talent, supporting the sector's international competitiveness."

A competitive win

Rathi's link between DEI and high performance is explicit. The two go hand-in-hand, playing a vital role in attracting global talent. In today's world, you need to invest in a strategic roll-out of impactful D&I activity if you're an organisation that:

· Is competing for talent

· Needs to boost creativity and productivity by avoiding groupthink

· Wants to raise employee engagement

· Wants to do the right thing

So, why does progress remain slow? 

DEI obstacles

One answer is cost. Another is complexity. Identifying and addressing systemic inequalities requires long-term commitment and sustained action. A third is the lack of legal impetus. 

In the UK the only form of pay gap reporting that's legally required is reporting on the gender pay gap. The result? It's a win for DEI. The gender pay gap is gradually declining. 

However, the ethnicity pay gap remained static between 2012 and 2022 (the most recent figures available), and the disability pay gap actually widened between 2014 and 2021. One potential factor behind this, is that reporting on these pay gaps isn't mandatory.

But while the lack of legal demand may seem like a reason not to act on these pay gaps, the most forward-thinking organisations are taking a different perspective. They're acting now and positioning themselves ahead of the curve. 

A genuine commitment to tackling gender, ethnicity, and disability inequalities within the workplace brings multiple benefits including talent attraction and retention, employee engagement and growing corporate reputation. It also recognises an important truth. Reporting on these pay gaps may not be mandatory now, but that may change – and proactive businesses will fare better than reactive ones. 

Do you want to start widening your DEI commitments? 

Here are some questions to consider:

1. Who will own this work? 

To embed DEI initiatives successfully, you need the ongoing support of senior leadership, but you also need a DEI lead to focus on gathering data, creating strategy, aligning with HR, and coordinating comms. 

2. What are your rates of disclosure? 

One significant challenge in addressing ethnicity and disability pay gaps is the lack of comprehensive data. Employees are not required to disclose their ethnicity or disability status, which can make it difficult to obtain accurate insights. Your starting point may have to be working to build your disclosure rates so that you have sufficiently robust data to create a meaningful strategy. 

3. What metrics will you use to measure success? 

Metrics and benchmarks are vital for measuring and communicating the long-term, step-by-step change that characterises DEI transformation. Useful metrics include the diversity of your C-suite, diversity of candidate slates and hiring panels, and data indicating which demographic groups are accessing learning and development opportunities. 

4. How will your pay gap initiatives align with your broader organisational goals and objectives? 

It's important to create a clear communication framework that sets out consistent and impactful messaging about the links between your DEI goals, your purpose, your values, and your broader business priorities. 

5. How will you make this work meaningful for all colleagues? 

Diversity initiatives can be challenging for employees who fear their actions favour other cohorts and may disadvantage them. How will you ensure that all colleagues feel supportive of the work? 

Driving meaningful DEI change is a long-term ambition. Deep-rooted social factors feed into workplace structures. But creating an authentic, thoughtful strategy for addressing and ending pay gaps builds trust, enhances the employee experience, and – slowly – leads to positive change. 

These are actions worth taking. They benefit us all.

For more insights on diversity, equity, and inclusion – or any other aspect of the employee experience - follow our LinkedIn page or visit our blog and website. Or get in touch to find out what we can offer you. 

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