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.

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Background to class pay gap reporting

There have been various moves over recent years by the 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 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 are starting to take their owns steps to measure and analyse their class pay gaps in the workplace.

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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 for class pay gap reporting

“Class”, or socio-economic status, is notoriously difficult to define. What does working class mean? What does middle class mean? Where do you draw the distinction? Consider the table below:

Scenario	Parental occupation during secondary school	Parental qualification	Type of school attended during secondary school
1	Routine occupation	No qualifications	State
2	Routine occupation	No qualifications	Private (via full scholarship)
3	Routine occupation	No qualifications	Private (no scholarship)
4	Routine occupation	Masters / PhD	State
5	Routine occupation	Masters / PhD	Private (via full scholarship)
6	Routine occupation	Masters / PhD	Private (no scholarship)
7	Company director	No qualifications	State
8	Company director	No qualifications	Private (via full scholarship)
9	Company director	No qualifications	Private (no scholarship)
10	Company director	Masters / PhD	State
11	Company director	Masters / PhD	Private (via full scholarship)
12	Company director	Masters / PhD	Private (no scholarship)

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 distinction is hard to determine and can be different for different people. “Class” is highly subjective.

The main identifiers of socio-economic background

In order to try to remove 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. Parental occupation is split into nine categories, then consolidated into three broader groups: working class, intermediate, professional.

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).

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The role of 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.

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).

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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.

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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. With this information, an employer can deploy more targeted diversity initiatives to tackle the issue. For example, employers could widen candidate pools by reaching out to underrepresented schools or universities.

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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 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 untouched talent pools.

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If you have any specific questions you would like advice on, then please contact: Abi.Frederick@lewissilkin.com or koichiro.nakada@lewissilkin.com of Lewis Silkin LLP.