Public Sector Equality Duty - operation review: consultation analysis

6 Proposal 3

Extending pay gap reporting to include ethnicity and disability

6.1 Context

The Scottish Government proposes to extend the current duty on gender pay gap reporting to include ethnicity and disability, with an appropriate reporting threshold to ensure that individuals cannot be identified based on their protected characteristics. This would require listed authorities to publish information on their pay gap between disabled people and non-disabled people, and people who fall into a minority racial group and people who do not.

The Scottish Government will also encourage listed authorities to publish disaggregated pay gap information where possible. It is also proposed to improve standardisation by prescribing the formulas listed authorities should use to calculate each of their pay gaps. Listed authorities would also be required to report on how they have met and implemented this duty as part of their overarching mainstreaming reporting duty. Another key driver will be the development of the ethnicity pay gap strategy, which was committed to in the Programme for Government 2021/22^[5] and which will begin to be implemented by the end of 2024.

6.2 Question 3.1 – Ethnicity and Disability Pay Gap

What are your views on our proposal to require listed authorities to publish ethnicity and disability pay gap information?

Almost all respondents answered Question 3.1 (93%). There are mixed views among respondents, although more appear to support the proposal in principle.

6.2.1 Respondents who support the proposal

The themes to emerge from the consultation responses that express support for the proposal to require listed authorities to publish ethnicity and disability pay gap information are outlined below.

Theme 1: A positive step for advancing disability and race equality

There are many comments from respondents (e.g. both listed authorities and equality advocacy groups) that note that: they "agree" with the proposal to require listed authorities to publish ethnicity and disability pay gap information; it is "common-sense"; it is "over-due"; it is "critical" to gather and publish this data; such information is a "useful tool to detect bias and discrimination"; or the proposal is viewed as "a positive step" for advancing disability and race equality.

Theme 2: Greater standardisation and comparability in reporting

A commonly held view among respondents in support of the proposal, is that it would "create greater transparency and hold public bodies accountable" for narrowing the pay gaps that exist in their organisations. Several respondents express support for greater standardisation in relation to reporting methods and suggest this would lead to improved consistency, comparability, and appropriate benchmarking of ethnicity and disability pay gaps reporting across the public sector.

"It is understood that discussions have started across Local Authorities in Scotland, led by The Society for Personnel and Development Scotland (SPDS) to progress this further and build consistency in what is reported. We would ask the Scottish Government to keep abreast with developments taken forward by this group".

Midlothian Council

Theme 3: Clear guidance and supporting documentation

Respondents request clear and detailed guidance and supporting documentation from the Scottish Government on the proposal: to support consistency of approach; to ensure robust and useful data is collected; and to provide clear explanation and understanding of the information to be presented and reported on. The following points are frequently referenced in the consultation responses: the provision of clear and consistent definitions and categories; thresholds for ethnicity and disability pay gap reporting; prescribed formulas listed authorities should use to calculate and report this data; updated data gathering questions and options; and a template for presenting and reporting this information.

Theme 4: Potential to roll the proposal out further

Some support was expressed by respondents (e.g. by equality advocacy groups, other organisations) for the Scottish Government's proposal to be rolled out to other protected characteristics in the future – "Holding the same standards across all protected characteristics in an equitable fashion is important for openness and transparency".

6.2.2 Respondents who raise issues or concerns

While the proposal is viewed positively among most respondents, many highlight issues or concerns they have with the proposal to require listed authorities to publish ethnicity and disability pay gap information. The themes to emerge are summarised below.

Theme 1: Data quality

Many respondents highlight complexities and practical difficulties in implementing the proposal and concerns regarding data quality (e.g. inconsistencies and gaps in data collected on ethnicity and disability when compared to gender). These respondents feel that these issues may affect how complete, meaningful, and robust ethnicity and disability pay gap information would be. They emphasise that listed authorities would need to have a strong awareness and understanding of the General Data Protection Regulation (GDPR) and that data quality issues may have implications for disclosure rates, the publishing and accuracy of data, and for the development and implementation of actions to address disparities in the workplace.

"There needs to be a balance between the difficulties in publishing pay gaps where numbers of representation are low and publishing data where broader categories can be used".

Orkney Islands Council

Theme 2: Prioritising measures to tackle under-representation

Some equality advocacy groups note the proposals do not "mitigate our concerns" and believe that tackling under-representation of disabled people and people who fall into a minority racial group within the workforce, including at senior levels, "should be the primary focus of any legislative amendments intended to address ethnicity and employment/income issues".

"We recommend prioritising measures to tackle under-representation…an explicit requirement to set equality outcomes on inequalities demonstrated by employee information data with associated targets and actions, over the proposed introduction of pay gap reporting on ethnicity".

The Coalition for Racial Equality and Rights (CRER)

"A more overarching issue and priority would be to address racism that EM (ethnic minority) communities face within the labour market, resulting in higher rates of poverty and unemployment. Thus, it is more important to address institutional barriers within employment for EM people and to get them into decent paid jobs.…it is more important to address institutional barriers within employment for ethnic minority people and to get them into decent paid jobs". CEMVO Scotland

6.2.3 Respondents who do not support the proposal

Some respondents (e.g. equality advocacy groups) consider the proposal to extend pay gap reporting to ethnicity and disability may be "insufficient to create change for people with these protected characteristics and are likely to replicate existing problems with the current duty on gender pay gap reporting". The same respondents note that:

• Lessons could be learned from the issues with the gender pay gap.
• Careful disaggregation of data would ensure that it is both meaningful and useful.
• Listed authorities could be required to set out what action they will take to reduce any gaps identified by the data otherwise no meaningful change will be realised. Some equality advocacy groups suggest that more needs to be done to progress under-representation of these groups in the workforce.
• The Scottish Government could consider how the proposal would be enforced and whether sanctions may be required should a listed authority fail to collect data or act on this data.

6.2.4 Further clarification on the proposal requested

Some respondents request further clarity on the proposal or pose questions to the Scottish Government, including for example:

• How intersectionality would be accounted for.
• What happens with this information – how would it be used.
• That action plans could further strengthen the Scottish Government proposal.
• Clarification is requested on the rationale for why pay gap reporting for all protected characteristics has not been proposed.
• That the proposal would need to be considered alongside engagement on proposed Local Government Benchmarking Framework (LGBF) indicators.
• A question raised is whether the Scottish Government would provide best practice, shared resources and training to listed authorities' employees.
• What support, if any, would be provided to help listed authorities improve the quality of employee data they hold on ethnicity and disability. Good quality data gathering is considered essential to inform policy and decision making.

6.3 Question 3.2 – Reporting Threshold

Should the reporting threshold for ethnicity and disability pay gap reporting be the same as the current reporting threshold for gender pay gap reporting (where a listed authority has at least 20 employees)?

A vast majority of respondents answered Question 3.2 (86%). There are mixed views among respondents, although more appear to support the proposal in principle.

6.3.1 Respondents who support the proposal

We have reviewed the consultation responses to identify those respondents who explicitly support the proposal that the reporting threshold for ethnicity and disability pay gap reporting be the same as the current reporting threshold for gender pay gap reporting. This is based on, for example, respondents who use the terms "Yes", "Agree", or "This would be appropriate" in their response.

Based on this approach, it appears that more respondents support the proposal in principle than those who do not. This includes respondents who indicate support for the reporting threshold but who caveat their response in some way.

The main themes to emerge in support of the proposal are outlined below.

Theme 1: Comparability and consistency

The main reason reported by respondents in support of the proposal is for the purposes of comparability and consistency of approach and reporting across listed authorities. Related points include that standardisation would increase openness and transparency across listed authorities, and that it would ensure parity within protected groups.

Theme 2: A lower threshold could risk identification of individuals

Another common theme among respondents in support of the proposal is that a lower reporting threshold (i.e. less than 20 employees) may risk the identification of individuals.

Theme 3: Guidance

Respondents note that the Scottish Government would need to provide comprehensive guidance to listed authorities relating to data protection, data handling, and effective reporting.

6.3.2 Respondents who identify issues or concerns

Many respondents, including but not limited to those who support the proposal, caveat their response or raise concerns about the proposed reporting threshold (i.e. where a listed authority has at least 20 employees). The main themes to emerge from these consultation responses are outlined below.

Theme 1: Data protection

The main concern raised by these respondents relates to data confidentiality and data protection. These respondents suggest that appropriate safeguards would need to be put in place to prevent disclosure and to avoid the identification of individuals (e.g. where staff numbers in categories are low).

Theme 2: Limited value or no information to report

Some respondents note that the value of information obtained from data groups as small as 20 may be limited and/or that some organisations may have no information to report. These respondents suggest that this may present difficulties in providing meaningful and detailed levels of ethnicity and disability pay gap reporting. Other points raised by these respondents include the potential for unreliable and volatile datasets and therefore skewed results.

Theme 3: Further engagement with stakeholders

Some equality advocacy groups suggest that further engagement and consultation between the Scottish Government and experts on the employment inequalities faced by people who share these protected characteristics may be required to help finalise the approach to ethnicity and disability pay gap reporting. A further suggestion is for the Scottish Government to undertake continued engagement with smaller listed authorities to "ensure any new requirements are proportionate and achievable".

Theme 4: A more proportionate approach

A few respondents suggest that a more proportionate approach to reporting may be beneficial – "using a tiered process according to institutional employee populations".

6.3.3 Respondents who do not support the proposal

While all consultation respondents are supportive in principle of ethnicity and disability pay gap reporting, some do not support the reporting threshold proposed by the Scottish Government. The main themes to emerge from those who respond in this way are summarised below.

Theme 1: Reporting threshold could be higher

Some respondents (e.g. some listed authorities and other public bodies) are typically in favour of a higher reporting threshold. Feedback from these respondents varies, with suggestions that the reporting threshold could be increased to those listed authorities that have 50 employees, 100 employees, or 250 employees. Much of the feedback from these respondents relates to: the importance of understanding the local context; data sensitivity issues; challenges in disaggregating data; making sure that the data reported is robust and meaningful; and/or mitigating GDPR concerns.

Theme 2: The threshold could be lower or cover all organisations

A few respondents (e.g. equality advocacy groups and other organisations) feel that the proposal should either:

• Have a lower reporting threshold than that proposed by the Scottish Government. Listed authorities with 10 employees is suggested.
• Cover all organisations, regardless of the number of employees.

"…to allow better transparency and to identify any structural issues with pay gap across the sector. This will help avoid letting smaller recurrent pockets of potential discrimination go unreported".

Central Scotland Regional Equality Council (CSREC)

Theme 3: Pay gap reporting duty needs to be reformed separately

Some equality advocacy groups call for the pay gap reporting duty to be reformed separately, and make a similar comment, as follows:

"Disaggregating data for these protected groups is not as straightforward as disaggregating data based on gender and it is unclear if undertaking this would result in meaningful data being produced….we believe that the pay gap reporting duty needs to be reformed separately in order to require public bodies to use their gender pay gap, occupational segregation and employee data to develop an action plan to close their pay gaps, and to require public bodies to report progress on this action plan".

Scottish Women's Budget Group

6.3.4 Wider points raised

Additional points raised by respondents, but not to any great extent, include the following:

• It would be important that the data gathered is "actually used and seen to be used". The point made by these respondents is that gathering data serves no purpose if it does not then inform actions to mitigate negative effects that have been identified by the data. Some go further and suggest that the pay gap reporting duty may need reformed to require public bodies to use their gender pay gap, occupational segregation and employee data to develop an action plan to close their pay gaps, and to require public bodies to report progress on this action plan.
• As well as having a threshold for an overall workforce, there may need to be consideration and a potential threshold in relation to, for example, the number of minority ethnic colleagues in the organisation, regardless of organisational size (e.g. an organisation with 1,600 employees but only 30 who fall into a minority racial group).
• Some respondents advocate for a relevant threshold for disaggregated data.
• Another comment made is that the Scottish Government could consider the benefit of data to demonstrate the pay gap (if any) for individuals who hold intersecting protected characteristics beyond sex and gender.
• The gender pay gap data started with reporting by larger organisations and then moved to smaller organisations once the principle of reporting and best practice had been established. A suggestion made is that a similar approach could be adopted here.

6.4 Question 3.3 - Formulas

What are your views on the respective formulas that should be used to calculate listed authorities' gender, ethnicity and disability pay gaps?

Around 80% of respondents answered Question 3.3.

6.4.1 Respondents who support the proposal

Most respondents agree with the Scottish Government proposal to improve standardisation by prescribing the formulas listed authorities should use to calculate each of their pay gaps. The main themes to emerge in support of the proposal are outlined below.

Theme 1: Comparability and consistency

These respondents note in their response that improved standardisation by prescribing the formulas listed authorities should use would enable: consistency in reporting; trend analysis; ease of comparability; benchmarking of national performance; and listed authorities to learn from one another and share good practice. A template for reporting is therefore welcomed by these respondents. It is reported that a template would: ensure consistency of presentation and comparability of data; improve progress monitoring; reduce bureaucracy; and encourage cross sector learning/practices.

Some listed authorities point to a Equality and Human Rights Commission (EHRC) report^[6]. These respondents suggest the EHRC report's good practice examples and findings could be used by the Scottish Government to help inform the approach undertaken in Scotland.

Theme 2: Alignment with recognised good practice/existing approaches

Some listed authorities note that the Scottish Government could consider adopting the approach that is used across the rest of the UK (i.e. model derived from the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017). It is suggested that this would allow public bodies to benchmark their progress against other public bodies in Scotland and their counterparts in the rest of the UK.

Other suggestions from these respondents includes the following:

• Close the Gap has produced guidance for gender pay gap reporting, including standardised formulas – it is suggested that this could be replicated for disability and ethnicity.
• That the LGBF approach could be replicated in terms of formulae being clearly laid down with meta data.

These respondents express support for a standardised approach in Scotland to "align with recognised good practice and/or those used elsewhere".

Theme 3: Ensuring anonymity in reporting

Another common theme among respondents is that it would be important that formulae permit for variations where necessary to ensure anonymity in reporting is maintained.

Theme 4: Technical guidance

Similar to responses to other consultation questions, many respondents consider it important that clear and consistent technical guidance is provided by the Scottish Government relating to this proposal. Comments include a request for the guidance to include: clear and consistent formulae; definitions of 'ethnicity' and 'disability' (e.g. clear set of identified groupings and characteristics); best practice examples and approaches; consideration of the impact of using mean or median on the risk of disclosure versus utility and comparability of pay gap statistics; and how listed authorities report intersectionality.

6.4.2 Respondents who identify issues or concerns

Many respondents, including but not limited to those who support the proposal, caveat their response or raise concerns about the proposal. The main theme to emerge from these consultation responses is summarised below.

Theme 1: Similar points to those raised to previous questions

Some respondents restate similar points to those raised earlier. Namely data issues and concerns (e.g. disclosure, availability, completeness, etc). There are said to be differences when looking at gender pay gap calculation and ethnicity and disability pay gap calculations, and that this may result in a lack of accurate and meaningful data and skewed results. Careful consideration of the formula used is felt to be essential by many respondents. Further, respondents consider it important that the information should be used to inform action planning.

Further, some respondents (e.g. some equality advocacy groups) note that the "relatively greater complexity" involved in robustly calculating an ethnicity pay gap may result in more non-compliance. For example, these respondents refer to research undertaken for the EHRC that found that the calculation provided in the regulations for gender pay gap reporting was often not being used, despite being very clear and well promoted.

Additional feedback (e.g. from some listed authorities) is that the "standard formula used in calculations is not prescriptive enough and lacks uniformity" – a respondent adds that "This sometimes ends up with skewed results across listed authorities and makes comparing and bench marking difficult".

It is further suggested that "respective formulas for calculating each protected characteristic pay gap needs to be very specific and the data gathering questions and answers should be fit for purpose and agreed by all listed authorities".

6.4.3 Respondents who do not support the proposal

While some respondents (e.g. some listed authorities) recognise the afore-mentioned benefits in terms of comparability and consistency of approach from the use of standardised formulae, they raise concerns about the implications of the proposal on tried and tested formulae and templates.

"…careful consideration must be given to the potential impact on equality progress by adding additional bureaucracy, costs and potential incomparability of longitudinal data gathered over many years in organisations that are further ahead in this work. Any approach must allow flexibility and recognise the uniqueness of individual institutions".

Scottish Equality Forum for Colleges and Universities (SEFCU)

6.4.4 Further clarification on the proposal requested

Some respondents request further clarity from the Scottish Government on the proposal, including for example:

• More specific details are requested on the prescribed formula and calculations alluded to in the Consultation Paper, including clarity on how the formula is constructed.
• Some respondents call for additional stakeholder consultation on the proposed formulas prior to any changes of legislation.
• Clarification on whether non-compliance with the proposal by listed authorities would result in enforcement action.