Ethnicity Pay Reporting

On 11 October 2018, the Government introduced a Race at Work Charter comprising a series of measures to tackle ethnic disparities in the workplace. A number of high-profile employers have already signed up to it. One signatory, Lloyds Banking Group, is the first FTSE 100 Company to set a goal to increase representation of ethnic minorities at senior levels.

Alongside the Race at Work Charter, Business in the Community published the McGregor Smith Report, based on a survey of 24,000 employees. One of the principle findings of the report is that only 11% of employers reported that their organisation collects data on ethnicity pay. In response to this limited voluntary approach, the Government has decided that a mandatory ethnicity pay reporting obligation is necessary to enable employers to identify barriers to workplace progression by ethnic minorities. The Government’s proposals follow the introduction of mandatory gender pay gap reporting in April 2017.

What ethnicity pay information should be reported?

The Government suggests the following alternative approaches:

• One pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees. This provides one headline pay gap figure which may be easier to communicate but may not give a fully representative picture as ethnic groups are rolled into one.
• Several pay gap figures by ethnicity group. This would compare average hourly earnings of different groups of ethnic minority employees as a percentage of white employees (for example, Asian, black, mixed, unknown). However, this approach would not identify variations in pay distributions across different groups.
• By pay-band or quartile. This approach would show the proportion of employees from different ethnic groups by £20,000 pay bands or by pay quartiles. Employers would be able to see where ethnic minorities are concentrated in terms of pay and identify any apparent barrier to progression. However, the Government recognises that breaking down data in this way may cause issues in some cases where data cannot be published to protect anonymity.

Which Employers should report ethnicity pay information?

The Government believes that employers of fewer than 250 employees should not be expected to publish ethnicity pay data.

Next Steps

The consultation closes on 11 January 2019. The Government suggests that a trial or phased approach could be used with “early adopters” to test the process before mandatory reporting is required. Some public sector organisations (such as the Civil Service) already publish ethnicity pay data and have committed to publishing departmental breakdowns once the methodology has been agreed in line with the results of the consultation.

Comments

Lack of clarity around what information should be reported as well as concerns about the use of classifications and levels of data collection and self-reporting within organisations has led to a very low take-up of voluntary ethnicity pay reporting. The Government considers that mandatory ethnicity pay reporting alongside gender pay gap reporting will provide an opportunity to examine the potential overlapping effects of pay differences. For example, employers would be able to consider whether women from an ethnic minority background are likely to experience greater pay differentials to men and women from a white background. The comparison would exclude any effect of a gender pay gap and give a richer picture of how ethnicity influences men and women’s pay differently.

Please contact Audrey Spencer, Associate Solicitor and Head of Employment Law, if you require further information on any of the above by emailing a.spencer@hklaw.uk or calling 01202 725400.