The role of diversity policies in the competition for labour

Friday 21 April 2023

Lucy Gordon
Walker Morris, Leeds

Shabana Muneer
Walker Morris, Leeds

The UK is currently experiencing a significant skills shortage in terms of a lack of homegrown labour available and willing to work in highly skilled sectors such as healthcare, IT and construction, as well as for lower-skilled roles. There were an estimated 1.2 million unfilled vacancies in the UK in February 2023,[1] at a time when unemployment is very low by historical standards.

This scenario is replicated across many Western economies including Canada, Germany, the Netherlands, Spain and the US. All of these economies, in addition to the UK, are increasingly turning to migrant labour to fill these skills gaps. In the UK, of 268,000 work visas issued in 2022 (almost twice as many as in 2019), by far the highest proportion were issued to Indian nationals (almost 60,000), closely followed by Nigerian and Zimbabwean nationals.[2] Sixty-two per cent of visas issued were for long-term sponsored work and the majority of these were issued under the skilled worker (health and care) category (76,938).

The competition for talent: Nations versus corporations?

There is clearly a developing competition for this international talent but the extent to which this is a competition between nations or between corporations will be interesting to see. The decision of the Western Australian government to visit Ireland and the UK in February 2023, with the specific aim of recruiting workers in the construction and healthcare sectors to fill up to 31,000 Australian vacancies, could be the tip of the iceberg in the global war on talent. The Australian offering is heavily centred on competitive pay and having an attractive work-life balance. But without Australia's stunning beaches and warm weather, what can other countries and employers do to attract and retain both national and international workers?

The economies that are likely to grow the fastest will almost inevitably be those that are the most welcoming to immigration and that adopt policies to appeal to the required international talent. Political tensions in a number of Western European countries mean that immigration policies, or at least the rhetoric surrounding them, have become more restrictive in recent years as opposed to welcoming. In the UK, the official government stance is that investment should be made into tackling inactivity in the resident labour force rather than relying on migrant labour. However, in the face of acute shortages in certain sectors resulting in intense lobbying, immigration policy has in practice become more lenient in recent years for the likes of workers in health and social care.  There are now proposals to extend this leniency further, with the construction sector reported to be the next in line to benefit from more relaxed work visa requirements.

In order to counter the difficulties of acquiring work visas, what is being done to make these countries an attractive place to work?

The UK’s approach

The UK and Europe are typically more generous than some other nations when it comes to holiday entitlement and family-friendly rights. These benefits, together with developed healthcare and education systems and a general high quality of life, are undoubtedly beneficial to migrant workers and their families, but what else is being done to make the UK attractive? The UK has been taking steps to improve employee rights even further in some areas to enhance work-life balance and family-friendly entitlements. For example, changes are in motion to increase protection from redundancy for pregnant employees and for a defined period after the taking of family-related leave. The UK is also looking to introduce paid neo-natal leave and unpaid carers' leave, following on from the introduction of parental bereavement leave in 2020, but these are slow to progress to become law.

What can employers do?

The burden is therefore likely to fall heavily on employers to offer enticing packages and benefits to staff to encourage them to apply and remain with the business. The first issue for many candidates in the UK is obviously pay, but increasingly applicants – including those from abroad – are putting more emphasis on workplace culture and benefits packages. The pandemic has focused attention on work-life balance and office culture is seen as vitally important to warrant long commutes.

Equality and diversity policies

Equality and diversity policies will play a key part in this. Once workers have been attracted, it is of course crucial to get the benefit of the investment and ensure that they remain with the business. Employers will therefore have to pay greater attention to fostering inclusive workplace cultures and ensuring that equality and diversity policies are effective. In the UK, Employment Tribunal statistics show that approximately 25 per cent of successful claims by employees were for discrimination in 2021/2022, with the highest award being granted in respect of race discrimination for £228,000. Diversity and inclusion therefore need to be high on the agenda and embedded in workplace culture as opposed to being a box ticking exercise. Businesses that do this well adopt approaches such as blind application reviews and use contextualised recruitment software to focus on skills over educational background.

Pay wars aside, we are seeing a strong trend in the UK towards diversity policies that promote health and wellbeing and respect for colleagues from all backgrounds. These take many forms but key areas for employers at present include family-related leave, mental health and the menopause. We are seeing a huge increase in popularity for gender-neutral new parent policies, offering mothers, fathers and partners the opportunity to take paid time away from work with a new family. Businesses are competing to offer the most generous terms available, with some offering up to one year's full pay, or in much rarer cases, even unlimited time off in the first two years of the child's life.

In the tech sector in particular, there is increased activity in launching ‘unlimited’ personal leave and extremely generous healthcare packages including private medical and dental care. The concept of unlimited leave inevitably has its own management challenges, but provided policies are well-drafted and take into account potential ‘problem’ areas, they are proving very popular and attractive to candidates.

Mental health is a key focus and one that has not been completely resolved since the pandemic. Many employees in the UK experienced significant burnout and loneliness from working in isolation at home for so long. The majority of workers (four in five) say that they want to work flexibly, including home working, so the UK government is currently consulting on requesting flexible working becoming a day one right. Sophisticated employers already offer this balance and those that are not accommodating are seeing employees vote with their feet by moving to competitors.

The UK government has declined to make legislative changes to improve protections for menopausal employees and here the burden falls very heavily on employers to have inclusive workplace cultures and to educate staff about the realities of the menopause.

Global mobility

For businesses that already operate internationally, there will be an increased importance of global mobility and international remote working policies. Here it is vital that employers appreciate the nuanced details of the laws applicable to the jurisdictions in which their employees are residing and working, but the ability for businesses to open up to a world of candidates means they would be foolish to disregard the potential. In the UK we are seeing a significant increase in interest for sponsor licences which are required to recruit overseas candidates into UK roles, or send colleagues from overseas group companies on short- or long-term assignment to the UK, as well as for employer of record/professional employer organisations, which can come with their own challenges for employers, but the desire is clearly there to attract the best talent – wherever in the world it may be.

How can we help?

There is undoubtedly a renewed focus in the UK among many businesses who are opening their eyes to the potential for worldwide recruitment, particularly in the healthcare and tech sectors. Whether or not this is supported by the government in terms of making the UK more welcoming to migrant workers, prudent employers will do all they can to make their workplaces more attractive to international applicants, whether this is by enhancing the employee experience or by becoming more flexible as to employee location. Employers can learn from the experiences of employees in other jurisdictions and take on board ideas for innovative new policies and benefits. We as lawyers can share our experiences and the trends we are seeing, and our expert knowledge of the markets and jurisdictions in which we operate, as well as assist with the facilitation of international workforce movement.