DEI View - May 2024

Welcome to our latest edition of the DE&I View. As we approach half-year – and hopefully some sunshine – we are here to provide you with the key diversity, equity and inclusion updates from the year so far, as well as looking ahead to the big developments still to come.

1. Family friendly regulations

New family friendly regulations have come into force:

• Paternity leave: As of 8 March 2024, employees are able to split paternity leave into two separate blocks of one week of leave, which they can take at any time during the first year after birth or adoption. The regulations also amend the notice requirements for paternity leave on the birth of a child, and the arrangements for varying the dates of leave.

• Flexible working: As of 6 April 2024, employees have the right to request flexible working from day one of their employment. Employees are able to make two flexible working requests in a 12 month period (up from one) and no longer need to explain the impact of their request on the business or how it might be dealt with. Employers will have two months to respond to any request and will be required to consult with employees.

• Carers’ leave: As of 6 April 2024, employees with dependants with long-term care needs have the right to take up to 1 week of unpaid leave in each rolling twelve month period.

2. Parker Review 2024 update on ethnic diversity of boards and senior management

On 11 March 2024, the Parker Review Committee published an update report, including survey results in relation to ethnic diversity of boards and senior management of FTSE 350 companies and large private companies. Among other things, the report finds:

• 96% of FTSE 100 companies, 70% of FTSE 250 companies and 44% of private companies have at least one ethnic minority board director;
• The percentage of board directorships represented by ethnic minority directors is 19% in FTSE 100 companies, 13.5% in FTSE 250 companies and 11% in private companies); and
• The average percentage of ethnic minority representation in senior management is 13% in FTSE 100 companies and 12% in FTSE 250 companies.

3. Sexism in the City

On 8 March 2024, the Treasury Committee published its report into Sexism in the City concluding “many of the barriers identified in 2018 remain stubbornly in place”. The Committee predominantly attribute this to the lack of cultural change driven by senior leadership and Boards. The report considers sexual harassment and bullying in financial services, with particular concern over the misuse of NDAs. The report expresses concerns about firms treating DE&I as a tick-box exercise, rather than a moral imperative and a competitive advantage. The Committee are supportive of the FCA and PRA’s strengthening of Non-Financial Misconduct-specific rules (NFM).

However, the Committee notes concern regarding the FCA’s proposals “to require firms to implement strategies, collect and report data and set targets”, which it considers costly, and likely to create a tick-box culture with no clear benefit. The Committee suggests that the FCA and PRA should drop prescriptive plans for data reporting and target setting, focussing more on getting Boards and senior leadership to take greater responsibility for improving DE&I.

4. Sexism in the City Report: responses of HM Treasury, PRA and FCA

HM Treasury, the PRA and the FCA have formally responded to the Treasury Select Committee’s report and the FCA has been in the hot seat again this month, giving evidence to the Treasury Committee as part of Parliament’s ongoing scrutiny of the regulator.

The FCA is now clear that it will prioritise work on NFM, including sexual harassment and bullying, and the guidance around it. In oral evidence here, the FCA indicated that it is not “prioritising” moving forwards with the D&I proposals at this stage because it needs time to understand the extensive responses received and the recommendations from the TSC. It is therefore likely that the NFM guidance and D&I proposals will be separated, with the D&I proposals to follow.

In a recent speech for brokers, Emily Shepperd, FCA COO, talked about the industry policing NFM and promoting healthy work cultures and emphasised the role of senior management setting examples and informing culture from the top down. The FCA have also said that they may decide to issue a similar NFM survey to the ones wholesale banks, insurers and brokers received earlier this year to other sectors in the industry.

In its response, the government makes limited commitments towards taking action in relation to the TCS’s recommendations. It expressly states that it does not support expanding the scope of the Women in Finance Charter which would require signatories to submit additional data, increasing the burden on firms and potentially making the Charter less attractive to new signatories. It also believes it is too soon to make changes to the pay gap reporting regulations and does not believe that mandatory action plans for specific subsets of employers would be fair or effective. However, the government response does note that it is currently reviewing the existing whistleblowing framework and legislation in relation to the abusive use of non-disclosure agreements (NDAs) given concerns that (despite efforts to improve clarity and make carve outs clear) they are being used to intimidate victims of discrimination and harassment into silence. This is not the first time that the use of NDAs has been reviewed – the last time we saw representatives of employees and employers both commenting on the value and importance of suitable (and voluntary) confidentiality agreements.

5. Gender balance in FTSE leadership

On 27 February 2024, the FTSE Women Leaders Review published its annual report on gender balance in FTSE leadership. The report found that women held 42.6% of FTSE 100 board positions and nearly three-quarters of all FTSE 100 companies had met or exceeded the target for 40% representation of women on Boards and in Leadership.

Whilst progress has been made in recent years, there is still room for improvement. Recent research by 25x25, a not-for-profit focused on improving executive gender-balance, found that women only account for 19% of FTSE 100 divisional heads, 25% of CFOs and 21% of senior operations and supply roles - the most commonly held positions prior to CEO promotion.

6. Updates to the UK Corporate Governance Code

On 22 January 2024, the Financial Reporting Council published the UK Corporate Governance Code 2024. Changes include an update to Principle J – this previously stated that appointments to board and succession plans should promote “diversity of gender, social and ethnic backgrounds, cognitive and personal strengths”, whereas this now applies more broadly to “diversity, inclusion and equal opportunity”.

For a general summary on the changes to the Code, see our Spring 2024 update here.

7. EHRC guidance on menopause in the workplace

On 22 February 2024, the EHRC published guidance for employers on menopause in the workplace. The guidance aims to help employers understand their legal obligations and provide top tips for supporting workers experiencing menopause.

8. Neuroinclusion at work

On 20 February 2024, the CIPD published a guide on neuroinclusion at work. The guide which, among other things emphasises the significance of HR and DE&I specialists, sets out seven key principles for creating a neuroinclusive organisation.

On 7 May 2024, the City & Guilds Foundation published its 2024 Neurodiversity Index report. The report found that 50% of individual respondents had been off work during 2023 due to neurodivergent-related challenges. A number of recommendations are made throughout the report, covering recruitment practices, workplace accommodations, employee resource groups, employment policies and neurodivergent representation.

9. Retaining, retraining and recruiting workers over 50

The 50 Plus Choices Employer Taskforce has published a report on flexible working for the over 50s. The report calls on government to monitor the uptake and effectiveness of flexible working at various ages, and provide practical examples of its use in retaining, retraining and recruiting workers over 50. The report calls on employers to provide flexible work options to all employees at all stages of their careers.

10. Inclusive Britain – Inclusion at Work Panel publishes first report

The Inclusion at Work Panel (IAWP), created under the government’s Inclusive Britain action plan, has published its first report on improving diversity and inclusion in the workplace. The report identifies several topical issues, including the difficulties faced by managers and leaders in navigating the Equality Act 2010 and understanding complex demographic, historical and socio-economic inclusion issues. This report notes a need for a new approach to DE&I due to “well-meant” but “counterproductive and, in some cases, unlawful” practices. The report concludes that more and better data around the efficacy of DE&I initiatives would improve nationwide strategies and intervention.

11. International developments - equal opportunities legislation pending in the Dutch Senate

This quarter, our focus is on a development in The Netherlands. On 26 March 2024, after weeks of critical debate, the Dutch Senate voted against the legislative proposal for the Equal Opportunities in Recruitment and Selection (Supervision) Act. As a result, it is unlikely that employers in the Netherlands will become subject to stricter legislation on labour market discrimination in the foreseeable future. It was uncertain whether the Act would receive sufficient votes until the very last minute. If the Act had been adopted, then – among other things – employers and intermediaries would have been required to create and apply a written procedure aimed at combatting labour market discrimination during recruitment and selection.

Initially, the proposal for the Act was met with almost no resistance and was expected to be passed with relative ease. However, during the plenary discussions in the Senate, the first critiques were issued (and gained ground over the past few weeks). Among other things, there were doubts whether the proposed measures, especially the enforcement methods, were too invasive. One proposed enforcement method involved the publication of employer’s offences and the names of associated employers. The critique also focused on the administrative burden for employers and the risk of the Act becoming a “paper tiger” rather than reducing labour market discrimination.

We hope you’ve enjoyed this edition and we look forward to providing you with further updates throughout the year. In the meantime, if you have any DE&I related questions, please contact Fiona Bolton, Sahib Sidhu, Emily Guthrie or Sarah Blake.