Mind the ethnicity pay gap in equality law - Susannah Donaldson

Employers should focus on collating and analysing their ethnicity data and open conversations about race more generally across their organisation to build trust and understanding, ahead of the likely introduction of new reporting requirements.

The gender pay gap for full time employees has seen a rise from 10.6 to 11.9 per cent in the last year.

A report by the Women and Equalities Committee of MPs has recommended the introduction of mandatory ethnicity pay gap reporting by April 2023 for all organisations that currently report their Gender Pay Gap (GPG). It said the ethnicity pay gap reporting laws “should include the requirement for employers to publish a supporting narrative and action plan” alongside the raw data.

While thousands of UK employers are obliged to annually report their GPG, there is no legal duty on them to report in relation to ethnicity pay, though many employers voluntarily do so. According to the report, in 2021, 19 per cent of employers in the UK reported on ethnicity pay, up from 11 per cent in 2018, and many businesses go further and report on other diversity pay gaps such as disability, sexual orientation and class.

The Minister for Small Business, Consumers and Labour Markets, Paul Scully, has highlighted the “wide range of technical and data challenges that ethnicity pay reporting brings”. Scully referenced issues around statistical robustness, preserving anonymity, data protection, the burden on business and reporting ethnicity gaps using a White/non-White binary figure for a characteristic with multiple categories, according to the Committee.

The Committee said that it recognises the complexities involved in capturing and reporting ethnicity pay gap data, but said “solutions are available as long as employers are willing, and the purpose of the exercise is clear”.

In the absence of legislation, a number of employers have published their ethnicity pay gaps voluntarily using the same pay data and a similar methodology as that which applies to GPG reporting, demonstrating that the hurdles which the government has identified are not insurmountable.

Witnesses told the Committee that employers could use the same pay statistics and definitions of workers, pay, and reporting dates as currently used for gender. There is also a belief that businesses that currently report for gender should also report ethnicity pay gaps on the basis that they are well resourced to calculate and report ethnicity data, and their number is manageable for policing non-compliance.

Employers are urged to ask their employees to share information using the 18 ethnicity categories listed in the Census. The thinking is that this will make people more comfortable in disclosing their ethnicity rather than forcing them to choose between the binary options of ‘White’ or ‘BAME’.

The uneven spread of ethnic minority employees in organisations across the UK, and the impact this might have on meaningful reporting where the sample sizes vary, is also addressed in the report.

It is possible that the government may not take action until the next full review of the GPG regulations, anticipated later this year. In practical terms, this means employers may not be required to report until April 2023. In the meantime, employers should be focussing their efforts on collating and analysing their ethnicity data and in building trust and understanding about race and ethnicity more generally.

Susannah Donaldson, Legal Director and specialist in equality law and pay transparency at Pinsent Masons