Ethnicity pay gap reporting: Government’s debate response will frustrate employers

This article highlights some of the key parts of the debate that was triggered by the petition and discusses what this means for employers. Has anything been revealed about whether ethnicity pay gap reporting will become mandatory?

Ethnicity pay gap reporting: background

The government ran a consultation on ethnicity pay gap reporting in October 2018. It closed in January 2019 and no response has ever been published. The government’s Commission for Racial and Ethnic Disparities recommended against mandatory ethnicity pay gap reporting, but in favour of the government producing guidance to support those employers that did want to voluntarily report.

Last week, the CIPD called for ethnicity pay gap reporting to be mandatory. It also published its own guidance on ethnicity pay gap reporting. And earlier in June this year, a joint statement by the TUC, CBI and EHRC called for mandatory ethnicity pay gap reporting.

Many employers want to calculate and report their pay gaps. But the gender pay gap reporting regime cannot simply be copied for ethnicity pay reporting. There are real problems that need to be addressed, particularly due to incomplete datasets. Unless the government produces guidance to ensure all employers are calculating according to the same set of rules, voluntary reporting will never be taken up en masse. As the Guardian reported last week, just 13 out of 100 FTSE employers have reported their ethnicity pay gap, and the CIPD has said that progress is too slow and inconsistent.

The ethnicity pay gap reporting debate

The debate was poorly attended with just a handful of MPs present. Those that did attend spoke in support of ethnicity pay gap reporting. Many highlighted the potential problems with reporting, such as small group sizes, incomplete data and differences between ethnicities. But, the speakers said that those problems should not get in the way of mandatory reporting.

The relative success of gender pay gap reporting was raised by a number of MPs from all sides of the aisle: Conservatives, Labour, SNP and Lib Dem. Gender pay gap reporting has helped prompt employers to think more carefully about the opportunities and barriers for women in their workplace, with changes being made as a result. Caroline Nokes (Conservative MP for Romsey and Southampton North) said that gender pay gap reporting has “shone a light” on gender issues.

The annual nature of gender pay gap reporting means that employers must keep addressing their minds to gender issues each year. Abena Oppong-Asare (Labour MP for Erith and Thamesmead) said that she wants mandatory ethnicity pay gap reporting because she wants to see employers adopt a similar systematic attitude towards dealing with ethnic disparities.

The government’s position on ethnicity pay gap reporting

Many had hoped that the government might finally reveal its policy on ethnicity pay gap reporting as a result of this debate. However, those hopes were dashed.

Speaking on behalf of the government, Paul Scully MP, the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy, said:

“The government are now considering in detail what we have learned from the consultation on ethnicity and pay, our further work and the commission’s report. We are assessing the next steps for future government policy, and we will set out a response in due course.”

There was no indication as to what the position might be, nor when we could expect to hear from the government with a decision. The government has had the consultation responses since January 2019 and been aware of the Commission’s recommendation since March 2021. It has not clearly come out either for or against a mandatory regime, or even for employer guidance on voluntary reporting to ensure all employers are following the same methodology. No reason has been given for the delay. This will continue to frustrate employers and was called “disappointing” by Kirsten Oswald, SNP MP for East Renfrewshire.

What employers should be doing about ethnicity pay gap reporting

Despite the government’s delays, calls for ethnicity pay gap reporting are increasing. Even if mandatory reporting is not introduced in the near future, employers may well want to assess their own figures and consider reporting on a voluntary basis. Our recent survey of in-house employment lawyers revealed that more than a third (38%) have started to calculate their ethnicity pay gap.

Employers should carry out a dry run ethnicity pay gap analysis. Although any guidance or legislation on the methodology might change the calculation at some point, a dry run will at least give a baseline indicator of ethnic disparity within the organisation and allow employers to understand the scope of any problem.

When doing a dry run, employers should first focus on improving the quality of ethnicity data that they collect. Even if a relatively high proportion of employees have provided ethnicity data, anything less than close to 100% completion rates can still leave considerable uncertainty in the results.

Find out more about our ethnicity pay gap reporting solution.