In our previous blog on the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) proposals to boost diversity and inclusion (D&I) in the financial services sector (FCA CP23/20 and PRA CP18/23), we looked at the proposed requirement for firms with 251 or more employees to report on demographic data relating to its employees.

Knowing the make-up of a firm’s people is being seen as a necessary first step before taking steps to increase diversity and drive inclusion. The FCA proposes requiring firms to measure employees’ sense of inclusion through the use of employee surveys. Many large firms already invest significant resources in monitoring staff engagement through the use of annual employee surveys, often supplemented by shorter pulse surveys throughout the year.

The proposals would require firms to survey all employees and collate responses by category of staff: board, senior leadership and all employees.

The FCA has emphasised that the precise wording of its proposed “inclusion questions” must be replicated in the staff survey. As firms will be required to report their results to the FCA on an annual basis, it follows that firms are going to be required to ask these questions every year. This could be particularly disruptive for firms with a global footprint, which already have a global inclusion strategy, with established questions in their global surveys. Those global firms with a UK presence (with 251 or more employees in one legal entity) will need to decide whether to amend their global questions to mirror the regulator’s inclusion questions, or to only ask the FCA-approved questions in the UK. When examined from a global perspective, the approach of the UK regulator extends into areas that are typically not within the jurisdiction of regulators in other parts of the world. Therefore, this requirement is likely to be controversial among global employers.

The six culture and inclusion statements are:

  • I feel safe to speak up if I observe inappropriate behaviour or misconduct.
  • I feel safe to express disagreement with, or challenge, the dominant opinion or decision without fear or negative consequences.
  • I feel as though my contributions are valued and meaningfully considered.
  • I have been subject to treatment (for example, actions or remarks) that have made me feel insulted or badly treated because of my personal characteristics.
  • I feel safe to admit an honest mistake.
  • My manager cultivates an inclusive environment at work.

The final question will shine a spotlight on the role of individual managers in creating a firm’s culture. Employers should consider what training they currently provide to educate managers on this aspect of their role and how proactively they assess the cultural alignment of their leadership population.

There is some concern about the level of survey fatigue that was experienced by some employees during the Covid pandemic, when employers repeatedly sought views of their people as to how they were coping working virtually and then how they felt about the prospect of a return to the office. However, even if the return rate is low, the regulator will gain visibility of that fact and be able to compare the position with other similar sized firms.

At this stage, employers would be advised to review their approach to staff engagement surveys and consider their readiness to adapt to the proposed inclusion of these statements.