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29 Jan 2021
by Ruth Thomas

Ethnicity Pay Gap Reporting: what should employers be doing now?

We are rapidly approaching the UK Gender Pay Gap (GPG) reporting deadline for the 20/21 period. Many employers are anticipating whether the Government Equalities Office, along with the Equality and Human Rights Commission, will suspend reporting again (due to the ongoing coronavirus crisis), and also if mandatory Ethnicity Pay Gap Reporting will finally be introduced.

 

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Legislative progress

Back in January 2019, the UK government closed its consultation on Ethnicity Pay Gap Reporting and no action has been taken since. The global events that caused the resurgence of focus on the Black Lives Matter (BLM) movement led a number of parties to urge the government to reconsider introducing mandatory reporting. In June 2020, the Prime Minister responded by confirming that the Commission on Race and Ethnic Disparities would reconsider current legislation.

Further to this, a private members bill was submitted on 20 October 2020 to the House of Commons by Labour MP Stella Creasy. If it does become law, the Equal Pay Information and Claims Bill 2020 (also known as the EPIC Bill) will make it mandatory for companies with at least 100 employees to report on both their gender and ethnicity pay gaps. The next stage for the EPIC Bill is a second reading and will require support from the government to make it into pay equity law.

At this stage it may be prudent to assume that, with other current competing priorities, the government may not take action until the next scheduled full review of the GPG regulations in 2022. Practically this means employers may not be required to report until April 2023.

Despite the lack of legislative progress an increasing number of employers are taking positive action. There has been a groundswell of opinion that we should not be waiting for Ethnicity Pay Gap Reporting to become mandatory, but rather committing to find ways to improve equality across our organisations, so every person can fulfill their potential at work. In fact, in response to the BLM protests many employers made corporate pledges to do this.  

What can employers do?

The starting point is collecting Ethnicity Data. Only by analysing employee data can we move beyond anecdotal evidence and subjectivity to truly measure inequality in the workplace. From there, we can start to understand where disadvantage and barriers occur in order to take corrective action.  

A survey from PwC last year involving 80 UK employers, indicated that 75% of them didn’t record ethnicity data. Those that did record it experienced low numbers of employees willing to disclose their status. To tackle this, many organisations have launched declaration or internal communication campaigns that aim to build trust and start the conversation more openly about race in order for employees to feel comfortable disclosing their status.

PwC recommends employers should aim for 80%+ disclosure, although you can still gain critical insights with less (they suggest 60% as a minimum). The other key question is what methodology to use for collecting data (the Binary BAME approach vs individual ethnicity categories). Best practice indicates capturing data by individual ethnicity categories is necessary to capture the different employee experiences of each ethnic group.

We have also seen an increasing number of leading employers report their Ethnicity Pay Gaps at the same time as reporting their GPG for 20/21 period. PwC estimates the percentage of businesses calculating their Ethnicity Pay Gap data has risen by 18% since 2018. Undoubtedly this number will increase. 

More generally, opening up conversations on race across organisations and giving all employees a safe, comfortable space and voice to share thoughts and ideas is paramount. Many choose to do this through staff networks, encouraging discussions on different experiences to provide insight into unseen barriers and devise practical and creative solutions. It’s all about fostering an inclusive culture where a diverse range of people are fully and happily able to be themselves.

The ultimate aim of analysing ethnicity pay gaps should be to make employers reflect on why discrepancies in pay exist within their organisation and prompt them to raise awareness and understanding of these issues. Only then can we consider solutions. But with diversity, equity and inclusion metrics becoming part of broader environmental, social and governance concerns, and companies seeking to redefine their purpose to generate a positive impact on society, taking action now is fast becoming a business priority.  

The author is Ruth Thomas, co-founder and industry principal at Curo.