Fair Work action plan: becoming a leading Fair Work nation by 2025

2. Executive summary

The issue

Fair Work is for everyone. The right to just and favourable conditions of work, including pay, is established in the United Nation’s Universal Declaration of Human Rights, and as such, the Scottish Government’s commitment to Fair Work is central to our economic strategy.

Our vision, shared with the Fair Work Convention, is for Scotland to be a leading Fair Work Nation by 2025, where fair work drives success, wellbeing and prosperity for individuals, businesses, organisations, and society.

This means better Fair Work outcomes for all, as well as specific improvements in the experience of work and the workplace for women, disabled people, and people from racialised minorities.

We are making progress in achieving our vision:

• the Disability Employment Gap is 31.2 percentage points, the lowest it has been since our baseline year in 2016 when it was 37.4 percentage points;
• the latest 2022 Gender Pay Gap figures for full-time employees (3.7 per cent) show that we are still outperforming the UK as a whole (8.3 per cent) and have been since 2003. The gender pay gap for all employees (12.2 per cent) is also below the UK gap (14.9 per cent) and has been since 1997; and^[2]
• Scotland has over 2,900 accredited real Living Wage employers, which is proportionately five times as many as in the rest of the UK with 91 per cent of workers in Scotland now earning at least the real Living Wage.

Employment Rate Gap in Percentage Points

Gender 2020 = 4.7

Gender 2021 = 5.1

Disability 2020 = 33.4

Disability 2021 31.2

Minority Ethnic 2020 = 9.7

Minority Ethnic 2021 = 11.7

However, evidence tells us there is more to do:

• Only 35 per cent of those on the lowest salaries say they can keep up with bills and credit commitments without any difficulties;^[3]
• 61 per cent of employees are reporting some levels of overwork, with 14 per cent of employees saying they work 15+ hours a week more than they would like to;^[4]
• 29 per cent of employees feel their work impacts negatively on their mental health, with 24 per cent reporting negative impacts on their physical health;^[5]
• Disabled people still experience an employment rate that is 31.2 percentage points lower than that of non-disabled people;^[6]
• The unemployment rate for minority ethnic people was estimated at 6.5 per cent^[7] compared to 3.8 per cent for white people and there has been no sustained progress to reduce this disparity over recent years;
• The median gender pay gap for full-time employees in Scotland has increased from 3.0 per cent in 2021 to 3.7 per cent in 2022. This is below the gap of 7.2 per cent in 2019 and so continues the longer-term downward trend seen prior to the Covid-19 pandemic.
• The median gender pay gap for all employees in Scotland increased from 11.2 per cent in 2021 to 12.2 per cent in 2022. This is below the gap of 14.4 per cent in 2019 continuing the longer-term downward trend seen prior to the Covid-19 pandemic. The gap remains high when full-time and part-time employees are combined as more women work in lower paid part-time jobs;
• In 2022, although women make up 50.9 per cent^[8] of all employees (18+) in Scotland, they account for 61.2 per cent^[9] of employees (18+) earning below the real living wage.

Achieving our vision is a journey which demands a continuing culture and values shift in our approach to work and workplaces. EU Exit, Covid-19, and the ongoing cost of living crisis are placing huge burdens on business and individuals, especially for women,^[10] and those living with multiple inequalities including racially minoritised women and disabled women.^[11] The cost of doing business has increased dramatically, with consequential costs passing to consumers and customers. This can exacerbate existing structural inequalities in the labour market and hinder our progress to become a leading Fair Work nation.

It has long been advocated that tackling inequality supports economic growth.^[12] People in unequal societies are unable to live up to their potential, which can cause weaker demand today and lower growth in the future.^[13] Evidence from the OECD and the IMF suggests that income inequality has a large and significant negative impact on economic growth^[14] and can harm the pace and sustainability of economic growth.^[15]

Evidence

Research from McKinsey^[16] indicates that companies in the top quartile for gender diversity on executive teams were 25% more likely to experience above-average profitability. In the case of ethnic and cultural diversity, they found that the most diverse companies outperformed the least diverse companies by 36% in terms of profitability.

Fair Work is underpinned by the principles of equity and equality of opportunity for all. We know, however, that structural barriers persist in and beyond our labour market, and not everyone benefits from the same opportunities. Systemic racism, disablism,^[17] sexism,^[18] and ageism are still a real experience for many people.

Stereotyping is one of the mechanisms that creates inequity from an early age and drives occupational segregation that moves people into certain industrial sectors, or limits expectations of what some groups of people can achieve. For example:

• Women are often driven into sectors with lower pay (for example, social care and retail), as these sectors provide part-time positions that facilitate a woman’s traditional role as primary carer in a household.
• Disabled people are often portrayed as passive recipients of care, rather than active contributors to our communities and economy, which limits employment opportunities.
• People from racialised minorities are often stereotyped as people with low levels of literacy or educational attainment which can impact on their employment opportunities.

Unless these mechanisms are addressed, inequity will continue to exist and will continue to show in gaps in pay and employment.

The persistence of such gaps reflects the fact that inequalities are deeply embedded in our society, permeating throughout our social structures and institutions.^[19]

Accessing and sustaining Fair Work can be even harder for people who face intersecting inequalities, for example, disabled racialised minorities, or women over 50. This is why we have taken an intersectional approach to this refreshed action plan, seeking to ensure the actions being taken can benefit as many people as possible, and level the playing field for those most disadvantaged by inequality.

Full employment powers would support the drive towards an inclusive, wellbeing economy that works for everyone in Scotland. This would mean a better, fairer working life, including improved access to flexible working which provides flexibility for many workers, especially women who try to balance care or health responsibilities with work, greater job security through strengthened workplace rights and, if you are a young person, the same minimum wage as everybody else. The Scottish Government will do all it can within devolved powers to promote and embed fair and inclusive working practices. Our approach is built on collaboration, engagement and using our wider powers and strategic influence to put Fair Work at the heart of our economic and social programme driving a just transition to a net zero wellbeing economy.

The Scottish Government will continue to press the UK Government to adopt a fair work approach to employment reforms and oppose any regression of employment and trade union rights. This includes continuing to urge the UK Government to improve statutory provisions on pay and leave for parents, including maternity and paternity pay, shared parental leave, introduce paid miscarriage leave, and improve protections from sexual harassment. We will also lobby the UK Parliament for key changes to reserved legislation to address racialised systemic inequity, including mandating employers to report their ethnicity pay gap.

Using the levers we have available, to date we have:

• Increased the number of accredited real Living Wage employers from 14 in 2014 to over 2,900 in 2022 – that’s proportionately 5 times as many as in the rest of the UK. Over 59,000 workers have seen a pay rise as a result of their employer gaining accreditation.
• Outperformed the UK as a whole on the full-time median Gender Pay Gap. since 2003 and the overall median pay gap since 1997.
• Reduced the Disability Employment Gap to its lowest level since our 2016 baseline year, ensuring we are on course to meet the target of it being halved to 18.7 percentage points by 2038.
• Attached Fair Work First criteria to some £4 billion of public funding since 2019. This includes criteria to create more diverse and inclusive workplaces.
• Progressed Fair Work in procurement:
  • In October 2021, we started routinely mandating payment of the real Living Wage in Scottish Government procurement contracts.
  • In May 2022, we published updated Statutory Guidance under the Procurement Reform (Scotland) Act 2014 to reflect this change and the extension of Fair Work First criteria to include specific reference to provision of flexible working and of no use of fire and rehire practices.
  • We have developed model invitation to tender questions to make it easier for public bodies to mandate the real Living Wage in relevant contracts.

Pay Gap (%)

Gender 2020 = 3

Gender 2021 = 3.7

Disabled People 2020 = 17.4

Disabled People 2021 = 18.5

Minority Ethnic 2018 = 10.2

Minority Ethnic 2019 = 10.3

Our aims

Fair work must be at the core of the approach any employer takes, not only to address inequalities, but also to maximise the opportunities presented by a fairly rewarded, healthy, diverse and inclusive workforce; central to this is providing effective voice. Security of pay and benefits, health, safety and wellbeing, quality job design, and work-life balance, all have a positive impact on productivity.^[20]

We will:

• Work with industry leadership groups, employee representatives, trade unions and other partners to expand the voice of Scotland’s workers, encouraging employers to offer appropriate effective voice channels;
  • Support strong trade unions and promote collective bargaining – particularly in underrepresented sectors, building on the mapping exercise the STUC commissioned in 2021.
• Continue to increase the proportion of people earning at least the real Living Wage (currently 91 per cent of employees), and build upon 2021/22 success of 696 newly accredited employers, and 7,613 employees uplifted to real Living Wage. We will continue to encourage employers to seek real Living Wage and Living Hours accreditation, including a targeted approach to low-paid sectors of the economy.
• Continue to apply Fair Work conditionality to as much of our public spending as we can, within the limits on devolved competence.
• Reduce the gender pay gap in Scotland by the end of this parliamentary term (May 2026), and maintain or where possible improve our position relative to the UK as a whole and our international neighbours.
• At least halve the disability employment gap by 2038 to 18.7 percentage points from the 2016 baseline of 37.4 percentage points.
• Improve labour market outcomes for people from racialised minorities and increase the number and impact of actions taken forward by employers to address racial inequality, as set out in our new strategy A Fairer Scotland for All: An Anti-Racist Employment Strategy.^[21]
• Continue to increase the proportion of people earning at least the real Living Wage (currently 91 per cent of employees), and build upon 2021/22 success of 696 newly accredited employers, and 7,613 employees uplifted to real Living Wage. We will continue to encourage employers to seek real Living Wage and Living Hours accreditation, including a targeted approach to low-paid sectors of the economy.

The Action Plan

This refreshed action plan brings together and takes forward our existing work to drive fair work practice across the labour market and reduce the Gender Pay Gap^[22] and Disability Employment Gap,^[23] and sits alongside our new Anti-Racist Employment Strategy. It draws on the conclusions from our Fair Work Nation Consultation, as well as extensive engagement with stakeholders on the actions needed to realise our vision.

The Scottish Government will continue to provide leadership as an employer and through our policies, including applying conditionality to public sector investment. The transformative power and potential of the public sector through embedding Fair Work practices is clear. In 2022, there were 594,700 people employed in the public sector in Scotland, over a fifth (22.1 per cent) of Scotland’s total employment.^[24] Public spending in Scotland in 2021/22 alone was over £99 billion. Public sector funding should leverage wider community and societal benefits – supporting a sustainable economic recovery and a successful wellbeing economy over the long term.

In addition, this action plan asks employers right across Scotland to play their part, while setting out what support is available to help them realise the benefits of fair, diverse, and inclusive workplace practices. The plan includes actions to support people in preparing for, accessing and sustaining Fair Work, especially for people most disadvantaged in the labour market. Importantly, the plan focuses on making Fair Work the norm across all sectors of Scotland’s economy, and how we will continue to build on the evidence base to demonstrate the intrinsic value of a Fair Work approach.

The Fair Work Action Plan is organised into five sections, each with headline actions:

• Public sector and the role of leadership:
  • We will lead by example on the Fair Work agenda, including sharing and learning of practice, by 2025.
  • We will continue to embed Fair Work in public sector investment wherever possible, setting out clear priorities in the roles and responsibilities of public bodies.
  • We will continue to use conditionality to further embed Fair Work in all forms of financial support, within the limits of devolved competence.
• Our ask of employers and support available:
  • Working with partners, we will support employers to utilise the resources and support available to embed Fair Work in their organisations. We will work collaboratively to develop these resources to support and build capability among employers, employability providers and partners.
• Support for people to prepare for, access and sustain fair work:
  • We will work collaboratively with key partners to develop resources to support workers to access, remain, and progress in fair work.
• Making Fair Work the norm:
  • We will work collaboratively across government with employers and partners to promote and embed fair work practice across the Scottish economy.
• Building on the evidence base:
  • We will continue to build on and review the evidence base to identify and address barriers to Fair Work.

We have also set out how we will monitor and report on our progress in taking forward actions to ensure they are contributing to our strategic aims, including the Fair Work and Business National Outcome in our National Performance Framework.^[25] In addition, we have also published supporting annexes which provide:

• A full list of actions;
• An overview of actions from the previous individual action plans and those supporting delivery of the new Anti-Racist Employment Strategy, and
• Detail of Fair Work related actions being taken forward by other areas in the Scottish Government.

The Action Plan has been informed by the following impact assessments:

• Business and Regulatory Impact Assessment (BRIA)
• Equality Impact Assessment (EQIA)
• Child Rights and Wellbeing Impact Assessment (CRWIA)
• Data Protection Impact Assessment
• Fairer Scotland Duty Assessment (FSDA)
• Islands Communities Impact Assessment (ICIA)
• Strategic Environment Assessment (SEA).

These assessments will be kept under review, with new data analysed and continued stakeholder engagement planned for post publication, to ensure we improve the evidence base for continuous learning and development to monitor the impact of the strategy on workers, employers and wider context in which they operate.