It is well known that employment disputes over issues such as diversity and discrimination already pose significant risk to American employers.
In the US, in 2002 alone, the Equal Employment Opportunity Commission (EEOC) resolved over 95,000 cases and awarded monetary benefits of $310.5bn.
Currently, UK businesses do not operate under the same strict, punitive legislation as in the US, but they may do in the future. It is paramount that companies begin to look more closely at how they manage recruitment.
Paying lip service to equal employment opportunities (EEO) is not enough - companies now need to prove it.
Recent new UK regulations and European Union directives (such as the employment directive and the race directive) are reshaping the legal landscape for employment and recruitment on this side of the Atlantic. Businesses need to start gearing themselves up to track and identify areas of concern within their organisations, so that preventative measures can be implemented.
It falls to boards and senior management to ask whether they are ready to manage risk and demonstrate efforts to adopt EEO within the business.
Companies need to protect themselves against financial penalties, but also against the threat to corporate reputation. As with most things, prevention is better than cure, and there are a number of potential risk areas for UK businesses, which companies need to pinpoint and take steps to avoid the risks.
This is not just a story of additional administrative burden, though.
Avoiding risk in recruitment and ensuring compliance with discrimination legislation should not simply be seen as another strain on resources.
Ultimately it can bring real business benefits and competitive advantage, not to mention the strong moral and ethical principles behind it.
Legislative risks
Naturally, one of the major driving forces for EEO and diversity within employment is legislation, such as the EU anti-discrimination framework directive (2000/78/EC) which prohibits discrimination on the grounds of disability, sexual orientation, age, religion or belief. Businesses should have ensured that all sexual orientation and religious discrimination provisions were implemented by December 2003, while the age discrimination provisions come into full force in December 2006.
These regulations apply throughout employment, from initial recruitment to departure. They include terms and conditions, such as pay, promotion and transfers. In light of these rules, the importance of excellent record keeping at each stage of the process is paramount. Only then can managers implement proper measurement and analysis to ensure that all people have an equal chance of being recruited, trained and promoted within their organisation, regardless of sex, religion, disability or age.
Examples of companies running foul of EEO legislation and paying the price, include Coca-Cola, which compensated its African-American employees with $192.5m in 2002. Oil giant Texaco paid out $176m in 1997, divided between 1,400 current and former employees who claimed that the company had a racist corporate culture and discriminated against minorities. We have not seen this type of large payout in the UK yet, but, as legislation gathers force, companies may begin running the risk of substantial financial penalties.
In terms of accountability, the UK government wants all companies listed on the UK stock market to publish operating and financial reviews (OFRs), which will contain information on operating procedures, such as employment policies and practices. The penalty for knowingly or recklessly approving an inaccurate OFR will be unlimited fines, making the risks of non-compliance a very real financial threat.
Business risks
It is not just legislation, however, that is prompting companies to start analysing employment records and trends, but also growing recognition of the benefits to be gained, which include increased motivation, lower turnover of staff and access to wider labour markets. Employees do not want to work at a company which has a reputation for prejudice, as it is seen as an indication of negative company culture. Those who work for what they perceive to be fair and honest companies are more likely to fulfil their job responsibilities and are less likely to move on to a different company.
Perhaps, given recent trends towards corporate social responsibility (CSR) and 'the ethical corporation', instead of adopting minimum standards, companies should look at making EEO one of the driving factors within their business. Competitiveness is at risk through failure to take advantage of the skills and creativity that a diverse employment base delivers.
In future, UK demographics suggest there will be fewer workers available.
Companies will no longer be able to afford to exclude certain sectors of the workforce, as broadening the staffing reach will increase the chance of finding the best employees.
Corporate reputation risks
Prejudice, in addition to its moral unacceptability, attracts adverse publicity and destroys corporate reputation. A strong diversity strategy helps to defend against this.
The world's number one online recruiter, Monster.com, for example, has developed the Monster Diversity and Equality Job Search, which enables job seekers to look for positions only from companies which value the benefits of a diverse work force and welcome applicants from all backgrounds.
The move towards EEO corresponds with the growing trend for companies to build a strong reputation for corporate responsibility. Not only do companies have to declare that they are equal opportunities employers, but now they have to prove it too, showing what steps have been taken to guard against discrimination.
Technology does the job
When confronted with the job of putting diversity into practice, however, larger UK companies may face a challenging and time-consuming task. It requires the acquisition and management of an enormous amount of detailed information. This has led to a growing demand for IT solutions which can quickly and simply track and present an accurate picture of diversity within a business.
Technology is well suited to the job of diversity tracking, which largely consists of collecting, processing, analysing and reporting on EEO information, taking a vast amount of disparate information from recruitment to retirement, and transforming it into the bigger picture. Companies can then analyse a large number of factors, from the difference between current representation and the availability of prospective employees in the community, to adverse impact on hiring and promotions.
Technology enables companies to drill down to specific areas of concern where there may be evidence of discrimination. In this way, problems can be identified before they become lawsuits and a better reputation for fairness and awareness created. If, for example, a company is concerned that it is not offering opportunities to male workers over 30 years of age, it can compare its current workforce against the workforce it wants to build, and monitor progress towards its goal.
In this way, companies can manage risk, anticipate legal liabilities and establish themselves as employers concerned with equal employment opportunities for all.
LEGISLATION AFFECTING CORPORATE EMPLOYMENT RISK
- The race directive outlaws discrimination on grounds of racial or ethnic origin in the areas of employment, vocational training, goods and services, social protection, education and housing. Changes to the Race Relations Act 1976 came into force on 19 July 2003.
- The Employment Equality (Sexual Orientation) Regulations 2003 came into force on 1 December 2003
- The Employment Equality (Religion or Belief) Regulations 2003 came into force on 2 December 2003
- Amendments to the Disability Discrimination Act 1995 will come into force in October 2004.
- Operating and financial reviews (OFRs) are scheduled to be in UK law by 1 January 2005 (consultation period ended 6 August).
- The Employment Equality (Age) Regulations 2003 will come into force in December 2006.
CHECKLIST FOR ENSURING EQUAL OPPORTUNITY FOR ALL
Record-keeping
- A selection decision process should be determined at the outset.
- Time and care should be taken to review and scrutinise the selection process to ensure that the necessary information is captured to support and explain all employee selection decisions.
- Make sure that records also focus on any testing or selection procedures affecting applicants, such as psychometric tests.
- Good record-keeping should be the responsibility of everyone involved in the selection process, to ensure that complete and accurate notes are maintained.
- Rather than keeping separate EEO tracking systems, companies should extend the capabilities of existing recruitment management systems to ensure the integrity and accuracy of data.
Monitoring and analysis
- Quality monitoring and analysis enable employers to discover and correct any problems in the employment process before they create business problems, corporate reputation issues or financial penalties. For example, businesses can determine if one group in particular is being selected at a disadvantageously different rate from their counterparts.
- Companies can use step analysis to determine the point in the recruitment process at which candidates were rejected, looking in detail at every stage including the original application, education requirements, relevant work experience, first interview, second interview and any health tests.
- It is important to look at movements within the company in terms of promotion and termination, in order to detect any impediments to hiring or advancement. Employers wanting to attract the best-qualified individuals will want to remove obstacles that hinder them from retaining diverse, highly qualified candidates.
Good faith efforts and goals
- Preconceptions of EEO can be damaging, so it is vitally important the employer publicises its EEO goals properly - the aim of EEO is not to give jobs based on sex, race, disability and/or age, but to make sure that people do not gain employment, only because of their sex, race, disability and/or age.
- Employment aims need to be communicated adequately and understood - if this does not happen, the organisation is kept from achieving its goals.
- All appropriate people in the organisation - not just recruiters and line managers - must be made aware of and understand the established employment goals in order to help drive them within the business.
- Larry Cucchi is director of international operations, Peopleclick, Tel: 020 7554 8525, E-mail: Larry.Cucchi@Peopleclick.com
