Class Pay Gap Reporting: A Social Mobility Tool For Employers In The UK? – Employment and HR

Some employers in the UK are seeking to analyse and
tackle social mobility disadvantages in the workforce, but issues
around definitions and data arise.

There’s a growing trend in employment law towards using
transparency as a method of driving change. Whilst mandatory class
pay gap reporting might not be imminent, this article considers the
drivers behind an increasing number of organisations reporting
voluntarily in this area as a measure to address social mobility
disadvantage in the workplace and identifies the legal and
practical issues employers need to consider.

Background to class pay gap reporting

There have been various moves over recent years by the UK
government to address workplace inequality in the form of mandatory
gender pay gap reporting and CEO pay ratio reporting. Calls for
mandatory ethnicity pay gap reporting are increasing, although the
government is still to set out its plans.

In 2019 the Trades Union Congress (TUC) called for mandatory
class pay gap reporting to address 
‘institutional discrimination’. This policy also
featured in the Labour Party’s 2019 general election manifesto.
Although the current government has no plans to legislate to force
companies to report their class pay gaps, this is likely to be an
area of increasing focus in the years to come.

In the meantime, some employers in the UK are starting to take
their owns steps to measure and analyse their class pay gaps in the
workplace. Accountancy giant PwC recently published its ‘class
pay gap’, showing the difference in pay between their average
lower socio-economic background employee and the average
professional or intermediate socio-economic background employee.
Rival firm KPMG has similarly calculated and reported its class pay
gap.

In the wake of the pandemic, employers are increasingly adopting
value-driven employment initiatives and
policies which go beyond strict legislative compliance.
Many organisations explore voluntary pay gap reporting as part of a
wider diversity strategy. Applying some of the lessons of gender
pay gap reporting, these employers are routinely analysing gaps
each year and so forced to continually consider the issues, keeping
social mobility high on the diversity and inclusion agenda.

What is class pay gap reporting?

Class pay gap reporting involves comparing the pay of the
average low socio-economic status person in a workplace to the
average higher socio-economic status person.

Defining socio-economic status

‘Class’, or socio-economic status, is notoriously
difficult to define. What does working class mean? What does middle
class mean? Where are the lines drawn? Consider the table
below:

Most people might agree that the person in scenario 1 is
probably working class, and the person in scenario 12 is probably
not working class. But what about scenarios 2-11? The line is hard
to draw and can be in different places for different people.
‘Class’ is highly subjective.

Main identifiers of socio-economic background

In order to try to cut through some of this uncertainty, the
Social Mobility Commission’s 
toolkit suggests using parental occupation at age 14 as
the main identifier of socio-economic background.

The toolkit says that this question typically gets the highest
response rates, is accessible to people from all nationalities, and
is a strong predictor of outcomes. For these reasons, the Social
Mobility Commission recommend that this social mobility data point
be given the highest priority by employers (with three other key
social mobility data points being highest level of parental
qualification, type of school attended at ages 11-16, and free
school meals eligibility).

Parental occupation is split into nine categories, then
consolidated into three broader groups: working class,
intermediate, professional. Both PwC and KPMG have used these broad
groups to calculate a gap that compares the average working-class
person against the average intermediate and professional class
person.

Data in class pay gap reporting

Any analysis is only as good as the data behind it. Large,
complete datasets will give organisations something useful. Small,
incomplete ones will not.

Both KPMG and PwC are large businesses with thousands of
employees. They also have good response rates for parental
occupation data (70% of KPMG employees have provided it and 80% of
PwC employees).

The primary focus for any employer looking to take a more
data-driven approach to social mobility should be data collection,
with a target of at least a 70% response rate from employees (but
ideally closer to 100% since 
incomplete datasets can cause problems in the
analysis).

Although the Social Mobility Commission recommends prioritising
parental occupation, the other markers (such as type of school
attended, free school meal eligibility and parental qualifications)
should not be ignored.

How to increase social mobility data

Many employers looking at social mobility issues will be
starting from a very low data point. Getting a high response rate
will take time, persistence and ingenuity. But it is work worth
doing as it is a crucially important first step to identifying and
tackling social mobility issues. Without having the social mobility
data about employee, it is impossible to understand what issues
might affect your workforce. Below are a few ideas to improve data
collection.

Communication

Mass emails to the workforce asking employees to ‘please
provide your data’ are generally not an effective way of
getting individuals to provide their social-economic data.
Employees need to understand why an employer needs it and what they
are going to do with it. Making sure it is processed in a
GDPR-compliant way is, of course, critical.

Transparency

All pay gap reporting regimes are measures which increase
transparency, so employers need to be clear about their plans.
Class pay gap reporting should be part of a more comprehensive
strategy to improve social mobility within a workplace. Being clear
about that will help build the trust that is needed for employees
to provide their data.

Social mobility advocates

There need to be advocates for social mobility at all levels of
a business. Using them to motivate engagement can help with data
collection. Employees are more likely to respond to something like
a request to provide their social mobility data if the request is
coming from a peer that they know.

Behavioural economics

Once people start providing their data, using a behavioural
economics inspired ‘nudge’ can be helpful. For example,
telling people ‘X% of people in your team/department have
provided this data so far’, or ‘xxx people have provided
this data in the past week’. Since people often copy the
behaviour of others, informing stragglers that they are in the
minority can help convert them.

Class pay gap reporting and recruitment

Reporting on a class pay gap will only show the difference
between those within a particular workplace. For many from a lower
socio-economic background, the challenge is entering a high-value
workplace to begin with. How can organisations identify what
barriers people might face?

Again, data is vital. Employers need to know the social mobility
characteristics of those who apply for roles and should measure the
class diversity at each stage in the process. There may be areas
that are having more of an impact on particular socio-economic
statuses than others.

For example, applications from first generation graduates might
score less well than those from people whose parents went to
university and who have access to tips on how to progress. In this
case, an employer could review what information is available to
applicants and more clearly spell out what they are looking for in
an application.

Another example might be if data showed the interview process
affected one social mobility group more than another. In this case
an employer could consider giving interviewers guidance and ensure
a more structured interview process.

Regression analysis for class pay gap

Because someone’s socio-economic status or ‘class’
is a product of many different factors, trying to understand the
difference between groups is hard. The Social Mobility
Commission’s work shows that parental occupation can be a
useful measure, but different socio economic ‘markers’ may
have a different impact from one workplace to another.

For those employers who really want to get to the bottom of
class in their workplace, a more sophisticated type of analysis
might be useful. In a regression 
analysis, each factor related to socio-economic status
(parental occupation, parental qualifications, housing tenure,
school attended, free school meals entitlement) can all be analysed
at the same time. This allows an employer to understand the impact
each factor has on pay. It may show that, in their particular
workplace, the type of school attended is a bigger predictor of pay
than another factor such as parental occupation. Armed with this
information, an employer can deploy more targeted diversity
initiatives to tackle the issue. For example, outreach to schools
or universities in 
social mobility cold-spots to widen candidate pools.

Comment on class pay gap reporting

Social mobility disadvantages in work have received increasing
attention in recent years. Removing social mobility barriers is
something politicians want to tackle: the economic benefits could
be 
huge. and it is part of the UK government’s ‘levelling
up’ agenda. There is help available and employers might want to
consider making a submission to the social mobility index for a
critical assessment of what it is doing.

Although not straightforward, class pay gap reporting could play
a valuable role in enabling employers to take regular action to
tackle social mobility disadvantage in their workplace and gain
access to previously untapped talent pools.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.