Analysis: Ethnicity pay gap reporting - getting the ball rolling

Over recent months, the pressure on improving transparency has intensified as Black Lives Matter supporters around the world have joined protests and marches to voice their outrage and promote the BLM movement message, which calls for freedom, liberation and justice for the black community.

Within UK insurance, this year has seen Lloyd’s apologise for links to the historic slave trade and launch its ethnicity in the workplace survey, while RSA acknowledged “aspects of its history” that no longer reflect its current values. Senior industry figures, from Marsh & McLennan CEO Dan Glaser to Chubb CEO Evan Greenberg, have spoken up against racism.

In June, Post revealed that 30 Fenchurch Street, the EC3 home to offices of Accenture, Arch, Axis Capital, Beazley, BLM, Chaucer Syndicates, Munich Re and QBE, would no longer be known by the moniker ‘Plantation Place’ in a move widely backed by tenants.

Against this backdrop, calls to measure experiences relating to ethnicity in the workplace have intensified.

Mandatory reporting

A petition calling for the introduction of mandatory Black, Asian and minority ethnic pay gap reporting has picked up more than 130,000 signatures since April.

In response, on 30 July the government confirmed it is assessing responses to its consultation on mandatory ethnicity pay gap reporting.

The government said: “Building a fairer economy means ensuring the UK’s organisations reflect the nation’s diversity – from factory floor to boardroom. We are committed to working closely with the business community to consider the steps that can be taken to build more inclusive workplaces, including reporting on diversity.”

We may well be a couple of years away from compulsory ethnicity pay gap reporting. However, experts are clear that it is not necessary for proactive firms to wait around for a government order.

The BLM movement has “really helped to bring this issue [ethnicity pay gap reporting] into focus”, according to Jason Groves, chair of global insurance diversity and inclusion event Dive In.

Groves said: “Firms look to respond to that, and look how they can be more inclusive of their black colleagues and encourage more recruitment from more diverse backgrounds. Making sure they have all the information they need to address any ethnicity pay gap is something that more forward thinking firms will want to do.”

“Firms need to build trust to show that they’re genuinely engaged and wanting to create an inclusive environment, it shouldn’t be a tick box exercise. It shouldn’t be because there’s government legislation, it should be because firms want to affirm the value to their bottom line of more diverse workforces and see that the more inclusive workplaces are ones where their colleagues are more productive,” he added.

Maxine Goddard, Zurich strategic operations leader and inclusion advocate who sits on the committee of the Insurance Cultural Awareness Network, said: “Many companies can go ahead and publish [ethnicity pay gap] before it’s mandatory, which signals positive intent.”

The challenge for the industry is “not that we’re unwilling, it’s that we don’t have the data”, Goddard said.

She added: “Where employers do have the data, BAME employees make up 5% to 10% of the workforce. A common problem for analysing data, however, is that people from BAME backgrounds may not always feel comfortable filling in a self-declaration form.”

Declaration rates for most companies range from 40% to 80%, according to Goddard.

Insurers say they are engaging and looking for solutions to the data drought.

Dr Yvonne Braun, director of policy, long-term savings and protection at the Association of British Insurers, said: “We are discussing with our members what more can and needs to be done in this area, including collecting meaningful data.

“Initiatives such as Zurich publishing its own ethnicity pay gap for its employees shows the industry’s commitment to tackling this issue.”

Leading the way

Zurich became the first insurer to publish ethnicity pay gap data earlier this year, showing a 9.8% ethnicity pay gap for mean average hourly pay in 2020 – an improvement of two percentage points on the prior year’s 11.8%. 

Steve Collinson head of HR at Zurich, said: “Tackling any inequality - inequality in pay and barriers to career progression for all employees - requires effective action.”

He pointed out that transparency of information and data is “a good first step” and it would be a “shame if it takes legislation, as it did with the gender pay gap for people to share this information”.

He added: “It comes down to a matter of trust. As long as you can encourage people to trust you with their data and to show to them that something will happen as a result of them declaring their ethnicity, then it’s a good thing. Once you have that information on the ethnic background, it’s very easy to calculate the pay gap.” 

Last year, the Chartered Insurance Institute published its ethnicity pay gap report, revealing a mean ethnicity pay gap of 1%, and a median ethnicity pay gap of -15.71%, meaning the median favoured BAME colleagues.

Keith Richards, managing director of engagement for the CII, explained: “This was due to there being a higher proportion of BAME colleagues paid in the highest pay quartile, than the proportion of white colleagues paid in this quartile.”

The institute had self-identified ethnicity definitions for 70% of its 230-strong UK workforce in 2019 and is working on bringing engagement to 100%.

“Some of the cohorts within each cluster have very small numbers of representatives, which, when combined with the current 70% voluntary responses, meant the data may not accurately reflect a true picture of where we are which is why we have set our sights on 100% participation,” Richards acknowledged.

The CII is piloting a two-year leadership and management programme and has introduced accountability and individual sponsoring at executive level for our diversity and inclusion plan, Richards highlighted.

He added: “We report on our ethnicity pay gap as we are committed to fully understand where any inequity exists within the CII and addressing it. As an organisation with a standing commitment to diversity and inclusion, data is seen to be a fundamental starting point to ensuring any actions are targeted appropriately and of course, measuring effectiveness of previous actions.”

Diving in

At an ICan Dive In panel last September, four insurance c-suite executives took part in a session on the BAME pay gap, alongside guests Baroness Ruby McGregor-Smith, former Mitie CEO, and chair Heather Melville, PWC head of client experience. Post reached out to the insurance panelists to find out what they learned from the session, how the industry needs to prepare and what progress they have pushed for.

Delegates had expressed frustration at the event over a lack of industry progress and c-suite executives dropping out on being informed of the topic, described as “sensitive” by chair Melville. (see box ‘Dive In Panel’)

Zurich Municipal managing director’s Andrew Jepp told Post: “I’m afraid we’ve been on a journey for some time. What [BLM] has done is created added in focus and just as a matter of interest we’ve seen a significant increase in membership of our cultural awareness network since George Floyd’s death. There’s also recognition that the company is really committed to making a difference and really committed to equality and removing bias. It helps us as people realise that we’re committed.”

There’s no reason for companies not to publish their ethnicity pay gap data, Jepp suggested.

He said: “I can’t see why [firms] wouldn’t be willing to publish the data. What do they have to hide?

“It is likely that the government will actually mandate this at some point in time, but we do collect the data, it’s not as accurate as the gender pay gap will be because it relies on people self-declaring.”

Jepp added that, with 14% of Zurich workforce that haven’t declared their ethnicity, and 7% of workforce identifying themselves as BAME compared to national average of 14% its clear “we have got some work to do to encourage people to declare”.

“Ethnicity is just one of the issues around equal opportunities and avoiding bias. The gender pay gap, disability, LGBT and ethnicity are all among issues we are working on,” Jepp said.

Data

Collecting ethnicity pay gap data is not as simple as the gender pay gap for a number of reasons. Current barriers cited by the government to publishing BAME pay gap data includes poor response rates from employees and ensuring employees anonymity, as well as skews in the data when collection becomes too granular.

Michael Burke, CEO of Aon Human Capital Solutions, said: “The big challenge that we’ve got with ethnicity is it’s a little more complicated and less binary than [the gender pay gap]. People have to self-declare and most organisations are struggling to get that. There’s a concern that self-declaration might be used to discriminate.”

Growing awareness of the BLM movement has sped up data collection at Aon.

Julie Page, CEO of Aon UK, told Post: “From Aon’s perspective, we are working very hard and we’ve been using programme called “Me, Myself and I” which is encouraging dialogue around being confident in who you are, being strong enough to give us the data that is going to allow us to measure the impact of the programmes that we have got running to drive for equitable outcomes for colleagues.

“The BLM movement has lifted the conversation to such level that we have capitalised on that and our data is now of at gathering pace at a point where we think we will have sufficiently statistical relevant data to start properly measuring outcomes for colleagues and all the programmes we’re running.”

Page added that the pay gap challenge is something “we need to think carefully about how we go about doing, because for gender pay gap it’s male or female. That’s a very easy calculation to do. Every variation becomes complicated, but we need to find a way.”

Engagement

Post reached out to the 10 largest UK brokers and insurers to ask to what extent the ethnicity pay gap was on their radar.

Their responses suggest that the industry is starting to take notice, with 13 of the companies contacted committed to reporting in the future and 10 saying they were already collecting the data. A further four said they had plans to start collating it but had not started yet.

Insurers in the sample were more likely to be collecting and committed to sharing data than brokers.

However, brokers are beginning to engage more with D&I efforts, according to British Insurance Brokers’ Association CEO Steve White, who also sat on the panel.

White said: “Since last year’s Dive In festival Biba launched the responsibility part of its site with information on a number of topics around corporate social responsibility including D&I. Since then there have been a total of 450 unique visits to the pages around diversity so we are seeing more involvement in this side of brokers’ business.”

Biba pushed out the Inclusion at Lloyd’s toolkit to members following the event, seeing a 10% click through rate.

With Covid restrictions easing, White said: “We are now turning to more business as usual promotion […] and as we move towards the next Dive In festival we are highlighting the festival, inviting members to participate in the Inclusion@Lloyd’s BAME survey and also in general pointing members to D&I resources to help them with implementing positive D&I cultures.”

With the potential for a BAME pay gap to become mandatory within a couple of years, and perhaps more importantly pressure from colleagues to get measuring and ‘do the right thing’, insurers and brokers will want to get initiatives in place to encourage staff to share data sooner rather than later.