Comment: Tackling ethnic pay gap could bring £24bn boost

'As with gender pay gap monitoring, the time has come to tackle the ethnicity pay gap,' RBS chief executive Ross McEwan said recently, adding that greater diversity within businesses boosts shareholder value. This pledge to put race-wage disparity under the spotlight comes as the government announced that UK employers could be required to publish data on their pay gaps for workers from different ethnic backgrounds.

It is recommended that businesses with more than 50 employees be required to publish ethnic pay data, says Donaldson. Picture: Peter Devlin

A consultation has been launched to gather views from employers about the best approach to ethnicity pay reporting, noting that few businesses currently publish this information voluntarily. The consultation will ask what employers should publish in order to allow for “decisive action” on workplace diversity, without placing undue burdens on businesses.

Prime Minister Theresa May announced the consultation on the first anniversary of the government’s Race Disparity Audit, which sought to establish how people of different ethnic backgrounds are treated across society. This exercise found significant disparities in the pay and progression of employees from black and minority ethnic (BAME) backgrounds when compared to their white colleagues.

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In her government-commissioned independent review “Race in the Workplace”, which made the business and moral cases for developing BAME talent in the workplace, Baroness McGregor-Smith recommended that businesses with more than 50 employees be required to publish ethnic pay data. However, only 11 per cent of employers surveyed by business body Business in the Community (BITC) are currently collecting this sort of data.

According to McGregor-Smith, tackling ethnicity-related barriers to workplace participation and progression could boost the UK economy by £24 billion annually, or 1.3 per cent of GDP. The government has, however, stressed in its new consultation that tackling inequality of opportunity in the workplace is not just about the economy, but about social justice.

However, measuring the ethnicity pay gap is more complex than measuring the gender pay gap, as there are multiple ethnic groups with different gaps, and many people with mixed ethnicity.

According to the government, the new consultation will seek to develop a consistent methodological approach to pay data reporting “which drives meaningful action while remaining proportionate and without adding undue burdens on businesses”. The consultation proposes a number of different approaches to reporting: a single pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees; or more granular figures which compare the average hourly earnings of different ethnic groups. It also raises the possibility of reporting ethnicity pay information by pay band or quartile, similar to the requirements already in place for gender pay gap reporting.

Contextual factors, such as geographical, gender or age variations, could also form part of the information that is reported, as could narrative information or action plans to address any disparities identified by their data.

Alongside the consultation, the government announced a new “Race at Work Charter”, developed in conjunction with BITC. Businesses that adopt the charter commit themselves to various principles and actions designed to encourage recruitment and progression of ethnic minority employees. Public sector employees, including the NHS, armed forces, schools and police, have also committed to publishing plans to increase the proportion of senior staff from ethnic minority backgrounds.

Baroness McGregor-Smith, who headlined her 2017 report “The time for talking is over. Now is the time to act”, must take some comfort at these developments in addressing the ethnicity pay gap in UK society.

- Susannah Donaldson, employment law expert at Pinsent Masons