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Closing the ethnicity wealth wage gap: is mandatory pay reporting on the horizon?

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The Black Lives Matter movement, which has been illuminating and thought-provoking, has led to the resurgence of a former parliamentary petition to introduce mandatory ethnicity pay gap reporting – to shine a light on race/ethnicity based inequality in the workplace so that they can be addressed.  The petition has reached over 100,000 signatures again.

The Government responded on 24 June, stating that it had run a consultation from October 2018 to January 2019 on Ethnicity Pay Reporting and they are currently analysing the detailed responses received. The Government added that “building a fairer economy means ensuring the UK’s organisations reflect the nation’s diversity – from factory floor to boardroom. We are committed to working closely with the business community to consider the steps that can be taken to build more inclusive workplaces, including reporting on diversity.”

What does this mean for employers going forwards? Although we do not know what will come out of the consultation, it is clear that in conjunction with the Prime Minister’s recently announced cross-government Commission on Race and Ethnic Disparities, this is an issue which is coming to the fore and very much on the Government’s agenda. It seems inevitable that racial pay gap reporting will become a new requirement in the future, alongside the current obligation of UK employers of over 250 employees to submit gender pay gap data. 

It may be advisable for larger employers in particular to be proactive and start considering the steps needed to make racial pay reporting a reality so they are prepared for the circumstances if/when it does become mandatory. Even smaller employers may wish to do so to reflect their commitment to a diverse and inclusive workforce.  PwC and NatWest are examples of organisations who are already reporting on their ethnicity pay gap voluntarily. In a report published by PwC in March 2019, they highlighted that of 80 organisations they surveyed, 75% lacked the data needed to analyse their ethnicity pay gap. As a result, it seems that as a starting point, organisations should encourage their employees to disclose this information and tackle potential barriers which are preventing them from sharing their information, such as concerns surrounding confidentiality and how the information will be used.

Once relevant data has been collected, organisations will have to consider how the data will be categorised. This will be important in organisations where there are only a small proportion of BAME employees to avoid identifying these individuals. Organisations may wish to consider using the gender pay gap reporting model they may already use and make any relevant adjustments, as applicable.

For many organisations, the initial results may be discouraging. However, although there is a risk of discrimination challenges, starting the review process and assessing the position will allow organisations to put in place measures to address any imbalances at play. Furthermore, by putting remuneration under the microscope, analysis surrounding recruitment, retention and progression will also be subject to detailed assessment.

Whilst there are various challenges for employers to consider, fundamentally, ethnicity pay gap reporting will highlight many of the issues which as a society we know need to be addressed so that change can happen.

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This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.