Sexism and the City probe could be explosive

The equalities commission’s sex discrimination inquiries must be taken seriously by HR

HR practitioners in the financial services sector may well be forgiven for thinking they have enough on their hands at present. Negative publicity, employees complaining about their bonuses – or rather lack of – the Financial Services Authority draft code on remuneration policies, and the Turner report into regulation, not to mention ongoing redundancy programmes, are just some of the matters keeping them busy.

Following confirmation that the Equality and Human Rights Commission (EHRC) is starting its formal inquiry into sex discrimination in the sector in April 2009, the to-do list just got longer.

The inquiry was borne out of the White Paper on the Equality Bill back in July 2008. The paper referred to the pay gap in the financial services sector – which at 41.5% is the largest for any sector – as well as the race gap in the construction sector. There some 2.5% of workers are from ethnic minorities compared with the national average of 8%.

The paper stated that the EHRC would launch a series of inquiries into inequality in both sectors, beginning in 2008. While little more was heard about the sex discrimination inquiry last year, the EHRC has now published draft terms of reference for the inquiry. The final terms will be published soon and relevant senior HR professionals should ensure they understand them.

In its recent paper, Systemic gender bias in the financial sector, the EHRC highlights the current focus on failures in the banking industry and suggests that the difficulties may be due in part to structural and cultural factors in the way that financial institutions are organised and led. It points to an absence of diversity in leadership and inequality in status and rewards. In particular, the EHRC has been influenced by research and casework reports that suggest the culture is generally hostile to women.

So what will the EHRC look at? It has powers (under the Equality Act 2006) to require companies to provide evidence which could include data on the following:

  • Equal pay
  • Bonuses
  • Gender breakdown of staff by grade and job type
  • Grievances and tribunal claims
  • Policies on sexual harassment
  • Policies on equality and diversity.

Given the current financial climate, the EHRC also intends to examine the differential impact of redundancies on women.

We’ll have to wait to see who will be asked to provide evidence as it is not yet clear who will fall within the scope of the EHRC’s inquiry. It would seem likely that any financial institutions that have faced tribunal claims recently will be within its sights. A failure to provide the information requested “without reasonable excuse” is a criminal offence.

In any case, HR should be prepared. Given the likely scope of the inquiry, HR directors should consider what evidence is available internally. Any evidence of pay evaluation systems and pay audits would be useful as they show the organisation has taken pay issues seriously. Equality and diversity policies and evidence of effective training, including attendance records, would also be helpful.

The EHRC intends to report on the outcome of the inquiry at the end of July 2009. It is likely that its findings will include recommendations to the sector as a whole. It does, however, also have powers to instigate formal investigations against any organisation that it feels has breached its equality and diversity obligations. For this reason, HR and employers would do well to take very seriously any request for evidence from the EHRC.

Key points

  • The EHRC’s terms of reference are due to be finalised by the end of March 2009.
  • The inquiry will take place between April and June 2009.
  • The EHRC is looking at equal pay as well as evidence of an alleged culture of sex discrimination and absence of diversity in leadership roles.
  • Failure to respond to a request for evidence without reasonable cause is a criminal offence.
  • The inquiry findings will be published in July 2009.

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