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UK opens consultation on ethnicity pay gap reporting

UK employers could be required to publish data on their pay gaps for workers from different ethnic backgrounds, the government has announced.12 Oct 2018

It has opened a consultation seeking views from employers about the best approach to ethnicity pay reporting, noting that few businesses currently publish this information voluntarily. Its consultation, which closes on 11 January 2019, asks what employers should publish in order to allow for "decisive action" on workplace diversity, without placing undue burdens on businesses.

The consultation was announced by prime minister Theresa May on the first anniversary of the government's Race Disparity Audit, which sought to establish how people of different ethnic backgrounds are treated across society. This exercise found significant disparities in the pay and progression of employees from black and minority ethnic (BAME) backgrounds when compared to their white colleagues.

Baroness McGregor-Smith recommended that businesses with more than 50 employees should be required to publish ethnic pay data in her government-commissioned independent review into race in the workplace, published in February 2017. However, only 11% of employers surveyed by business body Business in the Community (BITC) for a 'progress report' on the McGregor-Smith review are currently collecting this sort of data.

According to the McGregor-Smith review, tackling ethnicity-related barriers to workplace participation and progression could boost the UK economy by £24 billion annually, or 1.3% of GDP. The government has, however, stressed in its new consultation that tackling inequality of opportunity in the workplace is not just about the economy, but about social justice.

"This consultation is further evidence of the government's commitment to drive a market-led improvement in diversity in the workplace through its transparency agenda," said diversity and inclusion expert Susannah Donaldson of Pinsent Masons, the law firm behind Out-Law.com. "The recent requirement for companies with more than 250 employees to report their gender pay gap demonstrates that the government stands ready to legislate for mandatory reporting in this area if change is not forthcoming."

"However, measuring the ethnicity pay gap is more complex than measuring the gender pay gap, as there are multiple ethnic groups with different gaps, and many people with mixed ethnicity. Very few employers are currently collecting data on their ethnicity gaps and even fewer have reported this data publicly on a voluntary basis," she said.

The idea behind the new consultation is to develop "a consistent methodological approach" to pay data reporting "which drives meaningful action while remaining proportionate and without adding undue burdens on businesses", according to the government. Although a small number of employers have already chosen to publish this sort of information voluntarily, their differing approaches "limit comparability" while "mak[ing] it more difficult for employers and employees to understand what the data is showing and what action should be taken as a result".

The consultation proposes a number of different approaches to reporting: a single pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees; or more granular figures which compare the average hourly earnings of different ethnic groups. It also raises the possibility of reporting ethnicity pay information by pay band or quartile, similar to the requirements already in place for gender pay gap reporting.

The government is also seeking views on what contextual factors, such as geographical, gender or age variations, should form part of the information that is reported. Another focus of the consultation is whether businesses should be required to publish narrative information or action plans to address any disparities identified by their data, or whether this should remain voluntary, as is the case for gender pay gap reporting.

Alongside the consultation, the government also announced a new 'Race at Work Charter', developed in conjunction with BITC. Businesses that adopt the charter commit themselves to various principles and actions designed to encourage recruitment and progression of ethnic minority employees. Public sector employees including the NHS, armed forces, schools and police have also committed to publishing plans to increase the proportion of senior staff from ethnic minority backgrounds.