A lot of employee data is collected simply because some legislation mandates its disclosure to the market, for example: gender pay gap regulations; annual financial reporting obligations; and listing rules requiring UK listed companies to set out whether they have met board diversity targets in their annual reports.

However, data collection isn’t just about legal compliance. Employers need to think about employee data as an asset from an external and internal perspective. When data is thought about in this way, as a valuable asset, it is easier to understand why voluntary employment data collection is increasing.

Employee data that is consumable by the market has value – perform well against your competitors and investors will be attracted to you. Benchmarking employment data is done with increasing ease through voluntary initiatives, such as the Workforce Disclosure Initiative, and the growth of ESG rating agencies means investors can increasingly easy draw comparisons.

Helen Corden is a Partner and employment law specialist at Pinsent Masons

For this reason, some employers go further than mandatory disclosure to the market and voluntarily disclose significant employment data in increasingly common ESG reports. These reports may include data on a range of topics including diversity and inclusion, wellbeing, and training.

Data collection is increasingly wise to substantiate public statements made around progressive employment practices. It is predicted by some that avoiding accusations of “social washing” will join “greenwashing” as a risk area to be managed and regulated - there could be a significant reputational fall-out for businesses that make misleading statements.

Employee data also gives insight into efficiencies - for example, whether recruitment costs, training costs and turnover is too high, and whether current shift patterns or team configurations are optimising productivity.

If an employer wants to implement an AI application with an HR function, the employer needs to be able to feed accurate, unbiased data into the AI’s operating system. This may include for example, impact measurement –whether initiatives, such as D&I, wellbeing, and training strategies, are having an impact, and whether benefits and resources are being fully utilised.

In risk assessments, data might help employers predict who is likely to leave the business, raise red flag indicators of misconduct, or help identify training gaps, and in a crisis situation such as the Covid-19 pandemic, data on vaccination status was relevant to some employers’ risk.

Impact measurement and risk assessment are particularly relevant to ESG strategies as these feed into a sustainable business strategy. The Financial Reporting Council plans to develop guidance and best practice on how ESG data is communicated to the market, and there are also a number of initiatives that give best practice advice around employee data collection.

Having employee data as evidence to back-up internal decision-making is also, simply, good governance for senior management but employers need to remember that good data collection is not a fishing expedition and there should be a strategic reason for any additional collection exercise.

Helen Corden is a Partner and employment law specialist at Pinsent Masons

Employers need to think about staff data as a valuable asset - Helen Corden