Unlike gender pay gap reporting, there is currently no legal requirement for businesses to publish an ethnicity pay gap report. After a consultation on mandating ethnicity pay gap reporting almost three years ago, what progress has been made and what steps are next?

Current reporting

Employers in the private sector with 250 or more employees must publish a gender pay gap report each year (with equivalent duties in the public sector). However, at the moment there is no mandatory requirement to publish information on ethnicity pay data, although some organisations choose to do so voluntarily.

In the last few years, the number of businesses calculating ethnicity pay gap has grown significantly and a study carried out in September 2020 showed that of just over 100 respondents:

  • 67% of those surveyed now collect ethnicity data on their employees, up from 53% in 2018;
  • 23% now calculate their ethnicity pay gap, compared to 5% in 2018; and
  • 40% of those who calculated their ethnicity pay gap have already published those details voluntarily.

Calls to the government

The Commission on Race and Ethnic Disparities published a report in March 2021 which advised that ethnicity pay gap reporting should continue to be voluntary. One of the reasons given was because the current system used to report gender pay gap information was not appropriate for reporting on ethnicity. Changing a system designed for a binary characteristic would lead, according to the Commission, to 'significant statistical and data issues' when applied to ethnicity which has multiple categories.

In contrast, in June 2021 the Trades Union Congress, the Confederation of British Industry and the Equality and Human Rights Commission called on the government to introduce mandatory ethnic pay gap reporting.

Government consultation

The government ran a consultation on ethnicity pay gap reporting from October 2018 to January 2019 which received over 300 responses (read more in our earlier blog). No response has been published yet.

House of Commons debate

On 20 September 2021 a debate was held in the House of Commons on a recent petition which reached over 130,000 signatures to introduce mandatory ethnicity pay gap reporting. During this debate a number of key challenges for mandatory ethnic pay gap reporting were raised, including:

  • Statistical challenge - the Royal Statistical Society argued for a minimum sample size per category of at least 100 to draw a valid conclusion. This is difficult to fulfil in small companies who may not have 100 employees.
  • Anonymity - whatever reporting system is introduced should not allow the identification of individuals of a particular ethnicity to a particular pay band. For example, if an employer has just five ethnic minority employees, public reporting of the ethnic-majority versus ethnic-minority pay gap for this employer could inadvertently reveal the personal pay levels of those five ethnic-minority employees.
  • Data collection - a report in August 2020 found that 35% of organisations did not collect any ethnicity data, with half identifying legal and GDPR requirements as barriers.
  • Uneven geographical distribution of ethnic groups across the UK complicates the issue further. In Wales, for example, only 0.7% of the working-age population is black, which makes producing reliable and actionable statistics difficult. There are further concerns that 437 of 650 constituencies in the UK are over 90% white, so employers in these areas would not be able to record a valid sample.

House of Lords debate

On 25 October 2021 the House of Lords had a short debate on ethnicity pay gap reporting. The discussion highlighted:

  • The benefits of gender pay gap reporting, given that the gender pay gap has narrowed from 17.4% in 2019 to 15.5% in 2020;
  • The fact that ethnicity pay reporting is more complex than gender pay, so some experimentation will be needed in the future;
  • While ethnicity pay reporting may provide an imperfect picture, it is still a much needed one that organisations can learn from to improve their employment practices; and
  • A key part of building a better economy is ensuring businesses and other organisations reflect the nation's diversity, from factory floor to boardroom.

What next?

The government is to announce a way forward in due course. If ethnic pay gap reporting is made mandatory it will involve new legislation or amendments to the Equality Act 2010. We will update this blog as matters progress.

If you would like to discuss anything raised in this blog, please contact a member of our Employment and Immigration team, or your usual Brodies contact.