Here are two related questions from our What’s Next webinar of a fortnight ago, both arising out of government consultations in connection with possible further diversity reporting obligations.

Since the webinar the government has issued a response to the consultation around ethnicity pay reporting which implies strongly that there won’t be any legislation on that front for the near future.  One for the “too difficult” pile, I suspect. Nonetheless, there is reference to proposed guidance for those employers which do wish to enter that particular minefield regardless.  That is not to disparage at all the very worthy aims of ethnicity pay reporting, but merely a reflection that administratively (and therefore legislatively), reporting on ethnicity pay relativities with anything approaching the, not to put too fine a point on it, utterly pointless degree of accuracy aimed at by the gender pay gap rules would be next best thing to impossible.  Alternatively, any legislation would have to go to the other extreme and simply divide workforces into white and non-white.  While that would probably have the same positive agenda-raising effect as the gender pay gap regulations, the message that the government views all ethnic minorities as one indivisible lump is going to be a hard one to sell.

Which takes us to the first of our questions:

If employers wish or are obliged at some point to start reporting ethnicity pay gaps, will that effectively oblige employees in turn to disclose their ethnic background?

Almost certainly not, and therein lies one of the problems in compulsory ethnicity pay reporting, i.e. that the underlying data required may not be forthcoming from the employees in question.  Of course, if those who “preferred not to say” were simply excluded from the report (perhaps merely noted in any accompanying narrative) then the final product would still easily show the extent of any discrepancy near enough for the employer to take any necessary messages from it.  While there is obviously a greater public interest in uncovering pay discrimination between whites and others (or rather, since pay reporting does not necessarily do that, differences in seniority and progression) I do not see that as sufficient to justify any legal compulsion on employees to disclose personal ethnicity information of potentially considerable sensitivity.

But less us say that through reporting or some other route, inequities in your workforce are uncovered – what then?  And so to the other question:

Do we expect the government to impose any quota-based approach to ironing them out?

In guidance and corporate aspiration, yes, but in law, no.  We have been this way before, at one time imposing a quota on the employment of disabled people, though that rule had more holes in it than Downing Street’s position on Christmas parties, and was dropped in the mid-1990s as effectively unenforceable.

The basic problem with quotas based on race or sex is that by definition they entail consideration of a candidate’s protected characteristics in circumstances where recruitment should usually be blind to them or risk being found discriminatory.  Perhaps the starkest case of this was of an employer which went to great lengths to drill into its hiring managers that “more must be done to ensure the reality of the statement that we are an equal opportunities employer“.  The organisation duly hired a woman for a particular role.  It was then successfully sued for sex discrimination by a male candidate on the basis that the recruiters had been so swayed by the guidance they had received that they had overlooked the fact that he was actually better qualified for the role.  The name of the employer?  Acas.

The more that roles can be alleged to be filled in pursuit of quotas rather than of talent or suitability alone, the greater that risk and indeed it already exists to some extent when senior executives are expressly appraised and/or rewarded on the diversity of their companies or department. The issue is reduced but not removed by the use of quotas in recruitment short-lists (as distinct from actual hires), since it will still be possible for someone to allege loss of a chance through exclusion from that list to make room for a minority candidate. Discrimination, even for the best possible reasons, is still discrimination.

There is a limited exception to this which may now attract more attention than it has – the right of an employer in certain circumstances to apply positive discrimination to its recruitment and promotion programmes to the benefit of under-represented minorities (s159 Equality Act).  Unfortunately those certain circumstances are effectively such as to neuter the benefit of that provision, since they include the requirement that in all other respects the two candidates are equally qualified for the role.  Be honest – at the sort of senior levels where the recruitment or promotion would be likely to make a difference to your ethnicity pay gap, how often have you genuinely been able to say that you have no preference at all as between the top two candidates?  Being “as qualified” is not measured at that seniority solely by length of service or class of Degree or technical certificates, but also by aptitude, personality and “fit”.  The obvious problem is that if you seek to satisfy a quota by hiring an under-represented minority and it turns out that they and the rejected candidate were not in fact equally qualified on those vital but intangible measures, there is then no denying that your hire was on race or gender grounds.

The other problem with mandatory quotas, especially as regards questions of race and ethnicity, is that they may pay little heed to the surrounding population.  A given level of ethnically diverse representation could at the same time be unachievable in some areas and evidence of overt discrimination in others.

Much better perhaps to require employers above a certain size to report on what they are doing to increase diversity within their workforces, something akin to the commentary required under the Modern Slavery Act.  That would provide something for relevant stakeholders to chew on (press, shareholders, employees, management, candidates, investors, etc.), and would probably also lead to the same sort of moral “arms race” which the MSA requirement and other ESG reporting initiatives are designed to spark.  That could lead in turn to employers taking more steps to level playing-fields through ease of access to training, flexible working, etc.  That would be a much safer and more sustainable route to reducing minority pay gaps in the longer term than generating all the hostages to fortune implicit in recruiting with one eye on a quota.