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Ethnicity Pay Gap Reporting

The Government consults on the Ethnicity Pay Gap

Last month the government published a consultation regarding whether organisations should report on pay gaps between people from different ethnic backgrounds. We consider how the proposal could impact employers if this came into force.

Following the introduction of gender pay gap reporting in April 2017, the government has now published its consultation paper on reporting on ethnicity pay.

The government’s proposal is that reporting obligations would be mandatory when an organisation employs 250 people or more, reflecting the obligations of the gender pay reporting requirements.

Ethnicity Pay Gap Reporting

There are several factors to consider regarding reporting ethnicity pay information. The government will need to seek to establish how companies should report ethnicity pay. A number of options have been proposed:

  • a single pay gap percentage difference between average pay of white employees against all ethnic minority employees;
  • multiple percentage figures for different ethnic minority groups set against white employees;
  • ethnicity pay information by £20,000 band; and
  • ethnicity pay information by quartile.

The government will need to consider the advantages and disadvantages of each potential option when considering the most appropriate method for reporting.

Obtaining the data

Currently there is no legal obligation for employees to disclose which ethnic group they identify with. This would therefore cause difficulty in obtaining useful data, not least because of an individual’s association with an ethnic group being subjective. It’s considered that employers that have previously collected ethnicity data may have done so in a variety of different ways and may not have had full participation from all employees.

These challenges raise questions around the standardisation of obtaining data and the number of ethnic groups to be considered. In order for employers to obtain useful data, the government will need to develop and adopt a standardised list of ethnic groups and this will need to be enforced when mandatory reporting is introduced.

Additional reporting obligations

Gender pay gap reporting is already in force and has been welcomed as a positive step by many. However the inclusion of ethnicity pay reporting should not be considered in isolation.

The consultation paper refers to a number of factors to consider. One of these factors is geographical variations when looking at data for employers with sites in multiple locations, this is because various ethnicities tend to be concentrated in certain locations.

Gender variations should also be considered. For instance, some cultures may have fewer females in work.

Being able to review the ethnicity pay data alongside gender pay data could develop a more accurate image of the pay gap and help to establish an approach to addressing workplace discrimination.

What happens next?

The consultation paper aimed to respond to concerns that had been raised for instance regarding the classification and standardisation of ethnic groups. However there is a long way to go before ethnicity pay reporting could be rolled out. Despite the success of gender pay gap reporting, the complexity involved in collecting ethnicity pay data means that the proposal for mandatory reporting still has a long way to go before it can be implemented.

Contact us today for advice on your current pay and benefits.

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Pay and Benefits

Gender Pay Gap Reporting

Should smaller organisations care about the Gender Pay Gap?