Ethnicity pay gap reporting: new legislation looks unlikely after report by Commission on Race and Ethnic Disparities

The report describes ethnicity pay gap reporting as a “potentially useful tool” but one that needs to be approached with care.

What did the report say?

The report by the Commission on Race and Ethnic Disparities highlighted the same set of problems with ethnicity pay gap reporting that we have identified before (here and here).

The report states, “It is clear that pay gap reporting as it is currently devised for gender cannot be applied to ethnicity. There are significant statistical and data issues that would arise as a result of substituting a binary protected characteristic (male or female) with a characteristic that has multiple categories”.

Many of those statistical and data issues relate to the size of groups used in any gap calculations. The report highlights how parts of the UK are less ethnically diverse than others, and that this may affect any ethnicity pay gap statistics. For example, any employer in the Lake District can expect 98% of its candidate pool to be white due to the demographics of the area. A gap calculated from just six ethnic minority employees is likely to be highly changeable from year to year, so would not be a useful statistic.

The Commission recommends that employers continue to report on a voluntary basis and, where possible, that they report pay gaps across different ethnicities rather than a simple “white vs non white” gap. This is because the Commission also recommends that the government produce guidance to assist those employers who choose to voluntarily calculate and report their pay gaps.

The Commission further recommends that those employers who do choose to publish this information also publish an action plan setting out what they intend to do in order to reduce any identified pay gaps.

The Commission suggests that the government should look at the ethnicity pay gap in the NHS as part of a thorough strategic review, and use the information and insights obtained from this to further inform its approach to legislating on ethnicity pay gap reporting in future.

What will the government do now?

The government has been dragging its heels on ethnicity pay gap reporting for two and a half years. A consultation published in 2018 has still had no response published. The government has clearly been reluctant to legislate on this issue, and can potentially use this new report as a justification for taking no further action.

Legislation aside, many employers are already calculating and reporting their own ethnicity pay gaps (although still far short of the 10,000 or so that report their gender pay gaps).

Thie guidance that the report recommends would be very welcome. Until now, many employers have been simply making their best guess of how to analyse and interpret their data, meaning that ethnicity pay gap figures are not necessarily comparable from one employer to the next. Employers need this guidance on issues such as how to deal with small group sizes, and how to incorporate the data of employees who do not declare their ethnicity.

The government has not yet said whether it agrees with the report’s recommendations on ethnicity pay gap reporting or confirmed whether it will draft guidance. Even if guidance is created, we don’t expect it to be published for many months. Employers will have to wait for clarity on ethnicity pay gap reporting for the time being, but the report does at least confirm that this can be a useful tool for those who currently choose to report voluntarily.

Find out more about our ethnicity pay gap reporting solution.