DE&I View - July 2023

We set out below some of the key diversity, equity and inclusion developments from the past three months.

1. Inclusive Britain update report - tackling racial disparities

On 17 April 2023, the government published an updated report on its progress in delivering the Inclusive Britain action plan. The two-year action plan, published in March 2022, was set up to tackle persistent, unfair disparities, promote unity and build a fairer Britain. The report summarises progress under three themes: trust and fairness, opportunity and agency, and inclusion. Some of the report's key progress updates include:

• Guidance on voluntary ethnicity pay gap reporting. The government decided against introducing mandatory ethnicity pay gap reporting. Instead it published guidance for employers on how to measure, report on and address ethnicity pay differences in the workforce.

• Positive action guidance. Noting that positive action promotes greater representation and inclusivity, the government has issued guidance to support employers (particularly smaller organisations) to understand how to use positive action while avoiding discrimination. While it largely repeats previous guidance, it provides some additional guidance.        

• Accuracy in language and reporting about ethnic minorities. The government has reported progress on communicating more effectively and avoiding "lumping together" different ethnic minority groups. It has stopped using the term "BAME" in government communications and taken steps to embed this across the public sector. To encourage accuracy in reporting on race and ethnicity, the Equality Hub has published revised standards for ethnicity data to be used when collecting, analysing and reporting ethnicity data.

This report follows the Parker Review Committee's update report on Improving Ethnic Diversity of UK Business, which was published earlier this year. It reported that 96 FTSE 100 companies now have at least one minority ethnic director on their boards. The Review set new objectives and calls on each FTSE 350 company to set a percentage target, by December 2023, for senior management positions that will be occupied by ethnic minority executives in December 2027.

2. Acas guidance on mental health and wellbeing in the workplace

Acas has published new guidance notes on making reasonable adjustments for mental health and managing stress at work. The introduction of the new guidance mirrors the increasing importance that we see employers placing on wellbeing at work. The guidance focuses on identifying causes and signs of stress, understanding the law, supporting employees, and prevention of work-related stress.

Against the startling statistics regarding work-related stress and wellbeing, we expect employers will welcome the new guidance. For example, HSE's annual statistics last year show an estimated 17 million working days were lost due to work-related stress, depression or anxiety in 2021/22.

3. FCA and non-financial misconduct

The FCA has responded to the Treasury Select Committee here on the question of how the FCA deals with issues of non-financial misconduct and sexual misconduct in particular. The FCA remains clear in its view that sexual misconduct and non-financial misconduct generally is directly relevant to the culture of firms, including the ability of staff to speak up and challenge, decision making and risk management. The FCA doesn't purport to replace existing mechanisms for dealing with these issues but says that it will continue to take enforcement action in appropriate cases and will be issuing guidance on non-financial misconduct and conduct rules later this year.

There is much that can be done to improve culture and the risk of misconduct in firms, as well as in the fair handling of these issues when they arise: from whistleblowing processes, to conduct risk training and reviews, to robust investigation processes, dedicated and experienced teams who can handle sensitive misconduct cases, appropriate escalation and reporting procedures, as well as safeguards to ensure that any victims raising these types of concerns are treated with the utmost sensitivity and protection.

4. Long Covid and disability support

The TUC, alongside the charity Long Covid Support, has co-authored a joint report on Workers' experience of Long Covid. The report, which summarises the finding of 3,097 people who had Long Covid in September and October 2022, makes 16 recommendations, including that Long Covid is a specified as a disability. The report reveals that two out of three of those surveyed felt they have been treated unfairly in the workplace and one in seven reported that they had lost their job because of reasons connected to Long Covid.

The report also provides practical advice on how the government and employers can provide support.

5. DWP announces the Buckland Review of Autism Employment

On 2 April 2023 the Department for Work and Pensions announced a new Autism Employment Review designed to boost the employment prospects of autistic people. Currently, fewer than 3 in 10 people with autism are in work. The review will focus on supporting employers to recruit and retain a neurodiverse workforce.

The recommendations are due to be issued to the Secretary of State in September 2023.

6. Equal pay for equal work

On 17 May 2023, Directive (EU) 2023/970 was published in the Official Journal of the European Union, introducing measures to make pay systems more transparent and to improve the enforceability of rights and obligations relating to equal pay. Employers will be required to disclose information that enables employees to compare salaries more easily, exposing gender pay gaps. Where this gap is 5% or more, employers will be required, in certain circumstances, to conduct pay assessments, and compensation schemes should be in place for those who have suffered pay discrimination. EU member states are required to bring local laws and provisions into place necessary to comply with the Directive and larger employers will start reporting by 7 June 2026.

In the UK, analysis published by the Financial Times highlighted that nearly 80% of UK employers paid men more than women in 2022-23, with the average highest pay gap standing at 22% in the finance and education sectors.

7. Sex and gender recognition rights

There are ongoing debates in relation to sex and gender based rights. In April 2023, the EHRC published a letter to the Minister for Women and Equalities on the definition of the protected characteristic of "sex" in the Equality Act 2010 (the Act). In response to the EHRC, on 28 April 2023 the TUC wrote to the Minister for Women and Equalities arguing that there is no evidence this change is needed.

8. Benchmarking of diversity practices under CRD and IFD

On 24 April 2023, the EBA published a consultation paper on draft guidelines on the benchmarking of diversity practices under the CRD IV Directive (2013/36/EU) and the Investment Firms Directive ((EU) 2019/2034). The consultation paper explains that the guidelines are necessary to ensure harmonised benchmarking of diversity practices, which will allow competent authorities to monitor diversity trends over time.

The consultation is open until 24 July 2023, and the new reporting format is expected to apply for the collection of data in 2025 for the 2024 financial year.

9. Pensions Regulator guidance on diversity, equity and inclusion

On 28 March 2023, the Pensions Regulator issued guidance for governing bodies and employers on diversity, equity and inclusion.

10. FCA Primary Market Bulletin - D&I disclosure requirements for listed companies

On 20 March 2023, the FCA published Primary Market Bulletin 44 which addresses disclosure requirements relevant to companies subject to the listing rules relating to diversity and inclusion on Boards and within executive management. It confirms that under the recently introduced rules, relevant companies are required to make annual diversity and inclusion disclosures in their financial report on a comply or explain basis, and are required to publish standardised data. Should a company fail to disclose the required information, the FCA will request that the company publishes this and the FCA confirms it will use its full suite of powers and sanctions in the event of non-compliance.

11. International developments

In this and future editions of DEI View, we will be spotlighting some of the DE&I developments across our international network.

• Singapore's first workplace discrimination legislation - In February 2023, the Tripartite Committee on Workplace Fairness (comprising the Singapore Ministry of Manpower, the Singapore National Employers Federation and the National Trades Union Congress) published their long-awaited Interim Report on Workplace Fairness. The Interim Report outlines a series of 20 recommendations by the Committee which will form the basis of the first workplace fairness legislation in Singapore, to be enacted sometime in 2024. The Interim Report recommends, amongst other things, protection from workplace discrimination in respect of the following protected characteristics: (i) age, (ii) nationality, (iii) sex, marital status, pregnancy status, caregiving responsibilities, (iv) race, religion, language, and (v) disability and mental health conditions. Protections from retaliation have also been recommended, which are particularly pertinent given Singapore does not yet have any overarching whistleblowing protections.

• New German legislation promotes an inclusive job market - In June 2023, a new Act was adopted by the German parliament to promote inclusion in the workplace. In Germany, all employers with at least 20 employees are already obliged to fill at least 5% of their job positions with severely disabled employees (schwerbehinderte Arbeitnehmer, as defined in the legislation), with financial consequences for companies that do not meet this quota. Under the new legislation these financial consequences have become more severe, with up to EUR 750 payable to the state per mandatory position not filled as required, for employers with more than 60 employees. Employment is further incentivised under the legislation through the cancellation of the existing limit on wage subsidy by the Integration Office for Employers. In specific cases, employers can now receive 100% of the salary (previously 75%) for employing a severely disabled employee. In order to combat lengthy approval procedures, the legislation also sets out a new presumption of approval if the Integration Office does not make a decision within six weeks of an application for support/compensation costs.

• Equal opportunities legislation adopted in the Netherlands - On 14 March 2023, the Equal Opportunity in Recruitment and Selection Act was adopted by the House of Representatives. The Act obliges employers and intermediaries to establish internal procedures aimed at preventing discrimination in employee recruitment and selection. The procedure must be transparent, verifiable and systematic and will have to indicate, among other things, that the employer's recruitment procedure is based on previously established job requirements relevant to the position. In addition, when hiring workers through an intermediary or agency, the employer or intermediary must ensure that the third party also has a policy aimed at preventing discrimination in employee recruitment and selection, and if an automatic system is used to recruit and select employees, they must also ensure that the results do not constitute discrimination. As the Act entails an amendment to the Working Conditions Act (Arbeidsomstandighedenwet), this obligation also applies to foreign employers who have employees performing work in the Netherlands. The Act is currently under consideration by the Senate and the expectation is that it will come into effect some time in 2024.

We have loved hearing your feedback over the past year, so please do continue to let us know any additional areas you would like us to cover.

For more information on any of the points covered please contact Fiona Bolton, Jonathan Newman, Lauren Dickinson, or Emily Guthrie.