April 2023 employment news round-up

Ethnicity pay gap – new guidance published

In the Government’s March 2022 response to the Report of the Commission on Race and Ethnic Disparities, it confirmed that it would not be introducing mandatory ethnicity pay reporting for employers. Instead, it would support employers to report on a voluntary basis by publishing guidance, which was expected in summer 2022.

The new guidance was finally published on 17 April 2023, and covers the following areas:

• collecting ethnicity pay data for employees
• data issues such as confidentiality, aggregating ethnic groups and the location of employees
• recommended calculations and step-by-step instructions on how to do them
• reporting the findings
• further analysis to understand the underlying causes of any disparities
• the importance of taking an evidence-based approach towards actions.

The guidance recommends that the calculation of the ethnicity pay gap should mirror the approach of the gender pay gap reporting regime. However, it will be a more complicated exercise if employers conduct the data analysis and calculation across different ethnic groups, which is the recommended approach, rather than adopting a binary comparison between white/white British and other ethnic minorities. The guidance recommends adopting the harmonised ethnicity standard currently used by the public sector and recommends a minimum category size of between 5 and 20 employees for internal reporting and a minimum of 50 employees for external reporting. This will help to ensure that the calculations produce a more robust result, without being distorted by a very small sample size.

It had previously been suggested that those employers who undertake ethnicity pay gap calculations may be obligated to report their findings and produce an action plan to address any disparities. However, this is not a requirement, and the guidance recognises that not all employers will want to publish their figures. 

Employers who do decide to publish their ethnicity pay gaps should consider adding a supporting narrative with a summary of why the employer believes any pay disparities exist. The guidance also suggests that employers should consider publishing an action plan setting out clear and measurable but realistic targets for reducing any gaps. If employers undertake to voluntarily conduct an ethnicity pay analysis, the logical next step would be to consider how to address pay disparities.

Alongside the new ethnicity pay gap reporting guidance, the Government has also published new guidance on positive action in the workplace. This sets out what type of measures are permitted under the positive action provisions of the Equality Act 2010 for employers to help people overcome certain barriers and improve representation in the workplace. Such measures may assist in reducing any identified pay gaps, whether on gender, ethnicity or other grounds.

National Minimum Wage – enforcement and compliance

The Department for Business and Trade (DBT, formerly BEIS) has published a report on enforcement and compliance with the national minimum wage (NMW) and national living wage (NLW) for the 2021-22 financial year.

During that period, arrears of £16.3 million were identified, affecting over 120,000 workers. HMRC issued almost 700 penalties, totalling £13.2 million. HMRC also introduced the Geographical Compliance Approach, designed to facilitate compliance with NMW rules through support and education of employers. The GCA targets employers by geographical region, seeking to “improve compliance by increasing communication between HRMC and businesses, promoting and supporting self-correction where possible”. The NMW naming scheme, which publically exposes breaches of NMW by employers, saw 399 employers named, relating to £3.3million minimum wage arrears owed to 46,000 workers.  

The LPC has also published a report on increases to the national minimum wage taking effect from April 2023. The new rates are consistent with achieving the Government’s target for the NLW to reach two-thirds of median hourly pay by October 2024. Employers should note that from April 2024 workers aged 21 to 22 who are currently entitled to be paid at the standard NMW rate, are due to be moved onto the NLW.

Defining ‘sex’ in the Equality Act 2010

The Equality and Human Rights Commission (EHRC) has recommended that the Government consider redefining ‘sex’ in the Equality Act 2010 to mean ‘biological sex’.

Following a request from Kemi Badenoch MP, Minister for Women and Equalities, to consider whether the legislation as currently drafted was sufficiently clear, the EHRC published its response on 4 April 2023.

It notes that since the Equality Act 2010 came into force, society has evolved considerably in relation to the protected characteristics of sex and gender reassignment. Some of the language currently used in the Act is now considered outdated (for example, referring to ‘transsexuals’) and the protection it offers unclear. The meaning of ‘sex’ in law has become particularly contested, making it difficult to apply in practice.

The EHRC considers that redefining ‘sex’ as ‘biological sex’ would bring greater legal clarity in many areas, although it also recognises that it could cause ambiguity in some other areas. On balance, it believes that it merits further consideration by the Government provided that the implications of such a change are carefully considered, including any possible disadvantages for trans people.

The Government has not yet indicated whether it proposes to take the EHRC’s recommendation any further, so at this stage there are no confirmed changes to the existing legislation. It is a highly contentious topic, with the EHRC proposal already attracting criticism from transgender campaigners and supporters. Any future consultation is likely to generate robust responses from both sides of the debate, which will make it difficult for the Government to achieve any consensus on the best way to proceed.

New guidance on reasonable adjustments

Acas has published new guidance on making reasonable adjustments for those with mental health conditions, aimed at both employers and employees.

The guidance covers:

• what reasonable adjustments for mental health are
• examples of reasonable adjustments for mental health
• requesting reasonable adjustments for mental health
• responding to reasonable adjustments for mental health requests
• managing employees with reasonable adjustments for mental health
• reviewing policies with mental health in mind.

Employers are legally required under the Equality Act 2010 to make reasonable adjustments if they know (or could reasonably be expected to know) that a member of staff is disabled. However, the guidance encourages employers to make adjustments even where there is no disability, and therefore no legal obligation, in order to help staff maintain their mental health and to reduce absences.

The guidance includes suggestions for employees on how to prepare for a meeting with their employer to discuss their mental health and to request reasonable adjustments. It also provides advice for employers on how to respond to a request and agree to reasonable adjustments with the employee. It recommends a trial period and monitoring of any agreed adjustments.

Previous guidance on reasonable adjustments has often focused on making physical adjustments or providing adapted equipment for those employees with physical disabilities. This new Acas guidance is very helpful in highlighting what types of adjustments might be appropriate for those with mental health conditions, although the guidance makes it clear that every situation is different and what works for one employee might not work for another. It also highlights the fluctuating nature of mental health. 

Alongside the guidance, Acas has also published a selection of case studies showing how different organisations have helped staff with reasonable adjustments for mental health.