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The global HR strategist, chapter two: Global diversity data gathering and use

  • United Kingdom
  • Employment law

30-06-2021

With issues of inequality remaining in the public eye and a renewed global focus on accountability and fair business practice, measures to address disparities have continued to be high on the business agenda for many organizations. Building and updating diversity and inclusion strategies has been a consistent part of organizational responses.

Many organizations have taken a two-pronged approach to tackling workplace disparities: strengthening inclusion behaviors within the existing workforce and taking recruitment and retention steps to ensure that the workforce composition is truly diverse at every level. Building intersectionality into initiatives is also gaining momentum, with an acknowledgement that to most effectively tackle issues of equality and fairness, it is necessary to look at the interrelationship, impact and effect of a number of different identity characteristics.

However, without greater insight into data regarding employees and job applicants, the different groups represented within them and the employee experience, including promotion rates, driving meaningful change by designing strategies and monitoring progress is inherently difficult. Obtaining that data comes with a number of challenges, which for multi-national employers has the added complexity of different local laws, cultures and practices across the areas of operation.

Following on from the previous global briefings in this series of materials focusing on considerations for HR strategists on topical issues, in this briefing we consider diversity data. In particular, the business case for collecting and maintaining such data within global workforces, the affirmative action requirements in some jurisdictions and the challenges and restrictions around diversity data gathering and use. In separate materials on this topic, we will focus on specific jurisdictions.

The business case for diversity data gathering

There is now plenty of credible evidence demonstrating that diversity in workplaces has a positive impact on business performance, profitability and productivity. Having in place clear strategies to ensure inclusion and workforce composition from the widest range of different backgrounds has been proven to enrich and improve businesses and help drive strategic agility. However, ensuring such strategies are effective will often demand the availability of data on the identity characteristics of an organization’s workforce.

Aside from the “internal” business case for workforce diversity and the corresponding gathering of data, external influences are also increasingly driving the need for data-based evidence of diversity results.

Procurement processes often now require information on an organization’s diversity and inclusion experience. Historically, this was limited to disclosing information to evidence focus and approach, however has more recently developed into more specific data-focused demonstrations of commitment and success.

Further, investors, suppliers, customers and future recruits are increasingly focusing on diversity and inclusion, with expectations around organizations being able to demonstrate, often with supporting data, diverse leadership and initiatives to ensure ongoing progress in diversity and inclusion across the entire workforce.

Diversity data collection – the legal challenges

Despite the obvious benefits to an employer of being able to review data about the diversity of its workforce and candidate base to (i) inform the plans it needs to put in place to become a more diverse and inclusive employer; and (ii) track progress against those plans, legal constraints will often limit what is possible.

Data privacy laws in the operating location often impact the ability to collect, transfer, analyze and otherwise process personal data regarding diversity. IT and cyber security restrictions can also restrict the ability to transfer data to enable it to be compared and analyzed across locations. Further, labor laws, including anti-discrimination laws, can limit what information can be safely asked for. For example, labor laws in the Czech Republic expressly prohibit employers requesting information about ethnicity, sexual orientation and religion, and in the UK, disability discrimination laws prohibit employers from asking potential recruits for health data, other than for prescribed reasons.

The legal challenges will vary by jurisdiction: in some jurisdictions, data privacy laws will mean that there are significant barriers to gathering diversity data, even with consent. 

Restrictions and limitations on employers asking workers to voluntarily supply ethnicity data – sample jurisdictions

Determining at an early stage the ultimate goal for the collection of diversity data and the specific data needed to meet that goal will be key. For example, is it to comply with a legal obligation on reporting, in which case what is the specific data necessary to meet that legal obligation? Is it to monitor diversity within a business to test the effectiveness of diversity initiatives, in which case is it necessary to collect general diversity data or can it be limited to those identity characteristics on which the initiatives have been focused? Or is it to respond to requests from customers or other third parties, in which case what specific data has been requested and for what purpose will it be used?

With the aim established, understanding any legal limitations around the collection, retention and use of such data, including any available avenues for overcoming such limitations, will help to devise an effective and legally-sound data collection strategy.

Data reporting - affirmative action requirements

Beyond certain information to enable tax and social security obligations to be met, historically there were few jurisdictions that imposed any positive obligation on employers regarding diversity pay transparency or affirmative action on diversity reporting.

There are however an increasing number of exceptions. For example, some countries in Europe, where there are now equality plan and/or gender pay gap reporting obligations,  including obligations to prepare an analysis of remuneration practices and disparities. Belgium is one such example, where employers have a legal obligation to monitor gender pay equality and certain employers must carry out an analysis every two years, including an obligation to negotiate with employee representative bodies ways of eliminating any gender pay disparities.

Other countries require certain diversity details to be reported at the outset of employment, including in the US, where there are requirements to report employees’ race, ethnicity, gender and job classification to the Equal Employment Opportunity Commission. Further, there are obligations in some countries, including Germany and Italy, to hire a specified proportion of disabled workers.

Reporting requirements – sample jurisdictions at-a-glance comparisons

Belgium Brazil China France Germany Hong Kong India Italy Netherlands Singapore South Africa Spain UAE UK USA

Private-sector employer legal requirement to report on gender pay gap/equality measures*

×

×

×

×

×

×

×

×

×

×


*In some jurisdictions, obligation triggered by number of employees

Where there are affirmative action reporting requirements, this can often influence local data privacy rules around the collection of data, allowing data processing that would otherwise be prohibited. In particular, such requirements may help satisfy a suitable lawful basis for the processing of diversity data, which is considered special category data within the EU and therefore typically requires an employment law requirement, express consent or a substantial public interest condition for that processing to be lawful. The UK is one example, where public sector employers have an express legal duty to promote equality of opportunity and a corresponding obligation to publish equality information to demonstrate compliance.

However, even where there is a legal basis for data collection and processing, caution must be exercised to ensure that such processing does not go beyond what is permitted. For example in Brazil, companies are legally required to collect ethnicity and nationality data to comply with reporting and workforce composition requirements, but collecting the data for the different purpose of analyzing the diversity and equal opportunities in the labor environment is not permitted unless separate (freely given, express, unambiguous and informed) consent is obtained. Across the EU, all collection and processing of personal data must be limited to what is necessary for the purpose(s) that have been notified to individuals and collection processes developed must take that into account.

Diversity data collection – voluntary / anonymous data?

It is often assumed that if employees provide diversity information on a voluntary basis or with appropriate consent, including through the use of HR platforms that allow employees to self-identify, this will overcome any legal restrictions on the collection and use of such data. That is not always the case.

Particularly in Europe, implied consent (i.e. providing information voluntarily) will never be lawful, as consent must be active and granular, even for non-special category data. Even active, granular and unbundled consent in the context of an employment relationship may not be effective. This is because EU data privacy laws require that consent must be freely given. The perceived imbalance of power between an employer and employee is often regarded as a reason why employee consent cannot in practice be relied upon. This makes consent problematic to rely upon, but there are other lawful bases (as mentioned above) that businesses can look to validly rely on.

Alongside data privacy laws, there may also be other laws that influence whether data can be voluntarily provided. For example, in France, where the law explicitly allows for the collection of data on employees’ gender in order to ensure equal treatment between men and women, but prohibits the collection of data regarding race / ethnicity.

Anonymizing data will often avoid the data privacy restrictions regarding diversity data. However, often overlooked is that data privacy laws will apply during the process of collecting that data and to the point until it is anonymized. Further, that if there is any way of re-identifying individuals after collection, or if the pools for the data are so narrow that it is possible to identify individuals, then the information will not be truly anonymous and the legal requirements will continue to apply.

From an inclusion perspective, anonymous employee feedback surveys can go some way to identifying broad cultural issues within the workplace and can be a useful way of encouraging voluntary participation. However, particularly for global employers, there are certain limitations around the use of such data. For example, truly anonymous data is often not sufficient to identify and act upon inclusion challenges in particular locations or areas of the business. It also fails to enable any cultural impact of particular locations to be built into the analysis and can inhibit the accurate measurement of progress on initiatives.

Diversity data collection – strategy considerations

Similar to many other cross-border change management programs, having a clear aim for the initiative and ensuring that it is carefully planned, will be key to a smooth and effective process. However, unlike other programs, there are particular elements of data diversity collection initiatives that can catch-out the unwary.

Particularly in those jurisdictions where data privacy laws are more stringent, the focus is often on the legal aspects of diversity data collection. However, with different countries being at different points in legislating against anti-discrimination, varying local diversity profiles and differences in attitudes towards data privacy and equality, ensuring an understanding of the cultural differences across jurisdictions and any local labor relations influences can be equally important to the strategy. Such aspects will inevitably necessitate local engagement and an appreciation that it may be necessary to adapt the process to achieve the essential buy-in at each locality.

In some jurisdictions, collecting diversity data (whether or not lawful) may be unusual and the culture may be such that there is general reluctance to share personal data, with consequent effect on the ease of implementation. Collecting specific types of diversity data also needs to be considered alongside general reluctance. Certain disabilities continue to be stigmatized in some regions, impacting the willingness of employees to disclose such information. Further, in those jurisdictions that continue to criminalize certain sexual orientations or gender identities, it may be inappropriate and even unlawful to ask for details of those characteristics, even on a voluntary basis. Tailoring the type of diversity data by jurisdiction may improve response rates but, conversely, inhibits multi-national organizations from adopting a consistent global approach to the collection and analysis of diversity data in all of the jurisdictions in which it operates.

Where the chosen strategy includes a component of supplier diversity, careful consideration should be given to any target-driven approach, including where data evidence is demanded. In particular, to ensure that the strategy can achieve an appropriate balance between the diversity aspiration and operational viability and that the organization is not procuring any breach of legal requirements through the demand for and receipt of data.

Where the collection of ethnicity data across jurisdictions forms part of the strategy, it should be noted that there is no globally-consistent categorization norm. Often due to the population make-up, social and political attitudes and different government agency categorizations, classifications can vary significantly between jurisdictions. Collecting such data is further complicated by the subjective and multifaceted nature of ethnicity. As such, for the collection of such data, tailoring the global approach at the local level and building in safeguards around data comparisons, will be essential.

Finally, the collecting and use of data will inevitably mean that evidence is created of those areas where an organization’s diversity and inclusion practices may be open to challenge. With workers more willing than ever to voice concerns about systems that exacerbate inequality, the strategy should take into account that the existence of such data may encourage or support potential action, including discrimination litigation and reputational damage. Risk mitigation should therefore be incorporated into any data collection strategy, including a clearly-defined communication strategy.

Global diversity data gathering and use –summary and key strategic considerations checklist

With employment laws, data privacy laws, cultural considerations, local demographic differences and local labor relations influences all at play, designing and meaningfully advancing a diversity data approach can be a conundrum for global employers. Like any change management program, effective planning, local engagement and a readiness to be creative and flex where appropriate, without overstepping any legal constraints or undermining core standards, will all be key.

  • What is the organization’s global diversity and inclusion strategy? This strategy should be broad enough to guide the development of local diversity and inclusion principles, irrespective of differences in local laws, demographics, or customs.
  • What is the specific diversity and inclusion aim that is sought to be achieved globally, locally or by location?
  • Is the collection and use of diversity data necessary to achieve that aim?
  • If so, what are the local legal limitations/requirements for the collection and processing of diversity data? Are there different legislative constraints depending on the type of data collected and whether collected at the recruitment or ongoing employment stage?
  • Are there any applicable lawful bases, such as a legal requirement or public interest reason, that would enable the diversity data processing without having to deal with the risks arising out of consent?
  • What measures are available for the collection of anonymized data and how may the quality of such data differ from un-anonymized data collection in helping the organization achieve its specific diversity and inclusion aim?
  • What is the local cultural landscape regarding different kinds of diversity, including the local diversity profile, and the collection and use of diversity data? What would be the most effective global and local communication strategies to take account of the different landscapes?
  • What organizational/labor relations challenges exist regarding the company’s aim?
  • Where supplier diversity is used as a component of a diversity management strategy, is the disclosure of data a necessary part of that strategy? If so, what is the legal risk profile around such requirement? If targets are used, does that strategy achieve an appropriate balance with operational viability?

 


 

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