We all have preferences. The House of Lords recognised this natural phenomenon in Nagarajan v London Regional Transport [1999] ICR 877 as: “All human beings have preconceptions, beliefs, attitudes and prejudices on many subjects. It is part of our make-up.”
We’re all individuals. The cause, focus and level of our natural leanings vary from person to person and influence our daily interactions. We make assessments, without consciously thinking or even realising that we’re doing it. Recognising our biases can be challenging and uncomfortable.
Impact on the workplace
We take our preferences to work, where they permeate our decision-making. One of the most common forms is “affinity bias” – preferring to spend time with, work with and socialise with a person because they resemble us. How many times have you heard the decision that a candidate was (or wasn’t) the “right fit” for hiring or promotion? Is it clear to you what this euphemism means? Could the decision maker elucidate their reasoning?
The danger in this approach lies in a less diverse workforce, where businesses overlook more talented individuals in favour of those who share their views or characteristics. This leads to the maintenance of the status quo.
A diverse, inclusive and open workplace ensures a diversity of experience. According to a recent Catalyst report, it is statistically linked to better results and increased productivity. So why is the representation of women and ethnic minorities in the boardroom and executive levels so much lower than in the UK’s population?
Businesses with an employee structure that proportionately reflects the gender and ethnic diversity in our community are able to compete in the increasingly challenging and diverse marketplace, according to a report into the Ethnic Diversity of UK Boards. Yet, despite gender and ethnic diversity-enhancing business success, we still see significant gender and ethnicity pay gaps.
Property businesses face the same challenge: the report found 70.1% of employees in the construction sector have an unconscious racial bias.
Business risks
When decisions (on recruitment, promotions, pay rises and terminations), are based on preferences and preconceptions, it can be difficult for the business to justify that its decision was objective, rational and fair.
Unconscious bias causes further problems for employers where it suggests the decision was linked to a protected characteristic (age, disability, gender, marriage/civil partnership, pregnancy and maternity, race and religion or sexual orientation). Discrimination arises when the basis for a decision is linked to a characteristic.
The intention of the decision maker is irrelevant. It is not about what the person meant, but rather about how the decision was received and the underlying reason (conscious or unconscious) for the treatment.
If, during a promotion round, a manager overlooks the experience and ability of an employee who is a different race to them and promotes a less able employee who is of the same race, that could be discriminatory. It doesn’t matter that the manager did not intentionally discriminate, the promotion needs to be justified for a reason unrelated to race.
The representation of women and ethnic minorities in the boardroom is still low. 29% of FTSE 100 boards now include women. The percentage for BME directors is 8%.
This is rarely a conscious choice or the “old school tie”. We are seeing the confluence of unconscious biases, unrepresentative workforces, low pipelines of talent, lower mentoring rates of women and BME minorities, childcare breaks, lower social mobility, skill gaps, and lack of confidence leading to increased gender and ethnicity disparity at the top.
Tackling gender bias
Introducing the obligation to report gender pay gaps has been a significant step.
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 require businesses with 250 employees or more to publish, by 5 April of each year, six separate pieces of data, including the overall pay gap between men and women, the difference between male and female average hourly pay, the difference in bonuses and how many men and women were paid a bonus.
The information must be displayed on the company’s website and uploaded to a designated government website. The 2018 publications show that women are generally paid less per hour than men. More than 1,500 companies missed the first gender pay gap reporting deadline and may now face enforcement action by the Equalities and Human Rights Commission.
This has led to harsh criticism of some businesses such as Phase Eight, whose pay gap is 64.8% lower for women, and some industries with exceptionally high gender pay gaps, such as the construction and financial sectors. However, it does not tell the whole story. Unilever, for example, pay women 8.8% more than men on average. April 2018 was the first year of publication, so the information is a benchmark for the future years when any gaps should decrease.
The reporting obligation is limited to larger businesses and the calculations are complex, which could lead to differences of approach. Most importantly, it does not solve the difference in gender pay as there is no sanction for pay differentials. Such businesses may be exposed to negative publicity, but the government has stopped short of requiring them to tackle their pay gaps, the underlying reasons for them or enforcing pay parity.
This is in stark contrast to Iceland’s recent approach. The UK model is predicated on historic practices being reconsidered now that the market place (customers, employees and job candidates) will seek change.
Tackling ethnicity bias
In its 2017 election manifesto, the government committed to introduce mandatory race gap reporting. Prime minister Theresa May repeated this last year, yet we have not seen any legislation requiring BME pay transparency or greater BME board representation.
The government has commissioned new research, which will examine what steps employers have been taking to promote more diversity in the workplace. But it has yet to share its findings and provide an update on the proposed legislation. There is no penalty to drive compliance with the Parker Review and, as a result, businesses have focused their resources on increasing women’s representation and pay, to improve the gender pay gap statistics.
The government’s October 2017 Race Disparity Audit, underlined that ethnic disparity in the UK needs to be addressed. It is recognised that ethnicity pay gap reporting will be more involved, as ethnicities can be grouped into multiple categories (the five “main” ethnic groups being white, Asian, black, mixed and “other”, rather than a binary comparison of men/women). Consequently, the results could be meaningless for smaller ethnic minority groups who are not clearly represented.
Some employers (for example PwC) have already started reporting on their ethnicity pay gaps and the actions they are taking to minimise ethnic pay disparity. This suggests engagement and a willingness to resolve inequalities and will give baseline data for when ethnicity reporting is required.
Beating unconscious biases
Increasing gender and ethnic diversity in the workplace is supported by the UK Corporate Governance Code.
Published by the Financial Reporting Council, which sets out standards of good practice for listed companies on board composition and development, remuneration, accountability etc, the Code recommends the annual report “should include a description of the board’s policy on diversity, including gender, any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives”.
This firmly encourages listed companies to tackle (and show they are tackling) gender and ethnicity inequalities. This can be done by:
- training and educating employees in respect of diversity and the impact of bias on the business;
- implementing procedures and templates which limit the influence of an individual’s biases, eg interview feedback forms with the key role requirements being the basis for selection;
- investigations in to potentially biased decisions, to test that the criteria were objectively applied; and
- employees being encouraged to document their reasoning as if to a third party.
The McGregor-Smith Review has made recommendations to tackle race disparity in the UK workplace. These recommendations could equally be applied by those companies not caught under the new law on gender pay gap reporting and include:
- publishing targets and bands for all companies and reporting on these five-year aspirational targets annually;
- offering unconscious bias training to all employees;
- including a clear diversity objective in all leaders’ annual appraisals to ensure they take positive action seriously; and
- critically examining hiring requirements into their business, focusing on potential achievement.
Ultimately, we all harbour our own preferences which it is impossible to eradicate completely. Businesses can therefore minimise the risks by being proactive in their approach, addressing pay gaps and analysing existing biases as first steps. This is sound business sense, increasing diversity, attracting talent and minimising future claims.
Time will tell if the current steps are sufficient to overcome the status quo of gender and ethnicity pay gaps. It is certainly in the interests of business to tackle this challenge now, prior to being forced to do so in future legislation or by financial penalties.
Melanie Stancliffe is an employment partner at Irwin Mitchell
