Ethnicity Pay Reporting: Government response to the consultation

In 2018, the UK Government consulted on a mandatory approach to ethnicity pay reporting, which sought views on the benefits of gathering, monitoring and publishing ethnicity data; what ethnicity pay information should be reported; ethnicity data and classifications; data handling, amongst other key areas. The consultation process ended in January 2019.

The Government’s response to the consultation

The Government provided its response to the consultation in July 2023, where it was noted that the key issues were:

• Collecting data on ethnicity/burden on business – particularly where the General Data Protection Regulation (GDPR) requirements had acted as a barrier to collecting the data.
• Reporting on a binary basis – if combining all individuals from an ethnic minority background into a single group for reporting purposes, this presents a risk of masking the significant variations in the labour market outcomes between groups.
• Skewed results – employers highlighted that reporting at a more granular level risked results being skewed by particularly large or small pay values because of low numbers within certain ethnic groups.

The consultation also highlighted genuine difficulties in designing a methodology for ethnicity pay reporting, with mixed views on the best metric to use. As a result, the Government considered that it could not mandate one particular methodology for all employers to use.

What guidance had been issued to address ethnicity pay reporting?

The Government issued guidance to assist employers with reporting on ethnicity pay on a voluntary basis. The guidance includes the following aspects:

• Collecting ethnicity pay data for employees
• How to consider data issues such as confidentiality, aggregating ethnic groups and the location of employees
• The recommended calculations and step by step instructions on how to do them
• Reporting the findings
• Further analysis that may be needed to understand the underlying causes of any disparities
• The importance of taking an evidence-based approach towards actions

The key aspect has been to ensure that employers approach balancing reliability and confidentiality when reporting ethnicity pay and carefully scrutinising and exploring the underlying causes for any pay disparities.

What can employers do to address any ethnicity pay reporting disparities?

The Government’s response provides employers with the option to report on ethnicity pay within its workforce on a voluntary basis. Following the consultation, there was no general consensus as to an action plan on considerations to take when reporting on ethnicity pay however it was felt by some that a similar methodology to reporting on the gender pay gap could be adopted.

In the absence of the legislation in this area, employers may be encouraged to review its ethnicity pay gap and could take the following steps:

• Providing a range of ethnic groups, rather than grouping ethnic groups to ensure to reduce risk of unreliable results.
• Understanding and adopting a uniform approach to categorising employees.
• Undertaking further investigations in respect of where the disparities may lie, i.e. job role, locations, full-time or part-time, pay bands, and length of service.
• If there are any disparities in ethnicity pay, developing an action plan to address such disparities.

If you require further advice on this topic, please do not hesitate to contact our employment lawyers.