Ethnicity Pay Gap Reporting

The Government have released guidance on 17 April 2023 called Ethnicity Pay Reporting: guidance for employers. This guidance is intended to help employers voluntarily report and to provide a consistent approach to measuring pay differences between ethnic groups.

• The Guidance was published in response to the Commission on Race and Ethnic Diversities’ Report Inclusive Britain published in March 2022.
• In Inclusive Britain the Government said that ‘We recognise the significant obstacles for employers looking to create ethnicity pay gap mechanisms, including employee confidentiality, that allows meaningful comparisons to be made. So we will work with experts to produce guidance which will enable employers to identify the causes of pay disparities and take relevant steps to mitigate them.

Why do we need guidance?

According to the Living Wage Foundation’s latest report ‘London Low Pay Landscape’: ‘Almost a third (29.7 per cent) of Pakistani/Bangladeshi workers in London earn less than the Living Wage, while the same is true for around a quarter (23.1 per cent) of Black workers. White workers, on the other hand, face a much lower risk of being low paid (10.4 per cent), as do Indian workers (13.4 per cent).

It is believed that one of the best ways to tackle the issue of ethnic pay disparity is to first have accurate information regarding this pay gap. To do this, the earnest is on employers to voluntarily collate and report on this information.

What does the guidance say?

• This publication provides guidance on:
• collecting employees’ ethnicity data in a reliable and consistent manner;
• considering issues including comparison pools, confidentiality, and location of employees;
• gathering the required payroll data for ethnicity pay calculations;
• making ethnicity pay calculations including consideration of working hours, bonus schemes, time off and relevant periods;
• analysing and understanding the results of these calculations;
• reporting these findings;
• developing an action plan to address any identified disparities.

The guidance includes helpful tips such as using the census wording when asking employees about their ethnicity to maintain consistency, and using only ethnic groups of large numbers to maintain confidentiality.

Do employers need to report ethnicity pay gaps?

Reporting pay gaps between ethnic groups is not a legal requirement for employers, however many employers already choose to include this information in their gender pay gap report in the interest of transparency. Reporting on the ethnic pay gap helps employers to develop a reputation as a fair and progressive employer, who acts to address workplace inequalities. As the national focus is more and more concentrated on equality and inclusion, this is key for employers to attract and retain talent, and create a more inclusive and supportive workplace culture. The Government guidance provides concise advice for employers for best practice to help ensure that reporting is consistent and reliable.

In their Inclusive Britain paper, the government confirmed that it did not intend to make ethnicity pay gap reporting compulsory at this time, due largely to the complexity of reporting on ethnicities which may include a large number of ethnic groups, and data concerns where individuals may be identifiable due to their inclusion in an ethnic group.

If you would like more information, or assistance with implementing this guidance in your workplace, our team would be happy to help.