Bloomberg Photo Service 'Best of the Week': Visitors look at employment opportunities displayed on a job board at the Connecticum job fair for students, graduates and young professionals at Tempelhof airport in Berlin, Germany, on Tuesday, May 6, 2014. German unemployment fell more than twice as much as forecast in April in a sign that Europe's largest economy will continue to lead the recovery in the euro area. Photographer: Krisztian Bocsi/Bloomberg
A jobs fair at Tempelhof airport in Berlin, Germany. Jobless rates in some eastern states are higher than in 2008 © Bloomberg

Diversity in UK business — or the lack of it — came sharply into focus in 2018, as companies took stock of the first year of mandatory gender pay gap reporting.

The scrutiny is likely to continue this year, starting with the government’s consultation on ethnicity pay reporting, completed in January. It has sought to understand from employers what information companies should disclose to tackle inequality in the workplace.

For some businesses, new regulations may not necessarily be a welcome addition to the increasing demands of corporate reporting. But, as the gender pay gap rules have shown, transparency can play a critical role in encouraging change.

When Deloitte first voluntarily reported its gender pay gap in 2015, I was struck by the overwhelmingly positive response we received from our employees and clients. Our people wanted us to be open, to talk about why the gender pay gap exists in our company but — just as importantly — the actions we would take to address it.

Being open about our pay gap, and the lack of female leaders in the firm, encouraged discussions with other big organisations to share experiences and good ideas. We don’t have all the answers but our focus over the past four years has seen results.

I am convinced that mandatory ethnicity pay gap reporting will have a similar effect. Deloitte voluntarily reported this gap in 2017 and does so again today.

All companies should not only publish their ethnicity pay gap, but also explain the factors driving the divide and how they plan to close it. There will be no one-size-fits-all solution — it’s important that each organisation carefully considers the most appropriate action for their business in order to ensure that change is meaningful and sustainable.

Ethnicity pay gap reporting has its challenges. For example, unlike gender, not all employees will choose to disclose their ethnic background. At Deloitte, we have tried to achieve maximum disclosure — we encourage all new joiners (of which we have around 4,000 per year) to provide such details and regularly repeat this request to our employees.

Even so, we still have fluctuating disclosure rates that make like-for-like comparison between reporting years difficult. For example, this year’s ethnicity pay gap report will be based on a disclosure rate of 75.4 per cent compared with 83.1 per cent in 2017. I believe that willingness to disclose is, in the main, based on workplace culture. It takes time for people who have recently joined an organisation to trust that what they hear and read about corporate culture matches reality. For Deloitte, that means respectful behaviour and the assurance that everyone will only ever be judged on the value they can — or could — bring. It also means mandatory respect and inclusion training for the whole firm, and action taken when people voice concerns. So our focus in the coming year — alongside delivering on our black and minority ethnic action plan — is to find ways to encourage greater disclosure.

The next question is over what information is disclosed. Which ethnicity classifications should be used? One of the benefits of gender pay gap reporting is that it enables like-for-like comparisons, so it is critical that organisations not only have high enough disclosure rates, but are also consistent in terms of the information they report.

Finally, it is important that companies clearly articulate their plans to close the gap. Gender pay gap reporting has seen some businesses provide a detailed narrative, some a high-level overview and others nothing at all. If we are to take closing a pay gap seriously, we should understand why it exists and decide what action to take. This may not make for comfortable reading, but it is the only way to drive change.

The government believes that reporting ethnicity pay information will enable employers to identify and tackle the problems behind the gap in earnings. I completely agree. Gender pay gap reporting shines a light on where organisations stand and what they are doing to change things. It has enabled future recruits to see how seriously the organisation takes efforts to narrow the gap. I would now like to see the same from an ethnicity perspective.

The writer is Deloitte’s managing partner for talent

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