The CIPD has called for ethnicity pay gap reporting to become mandatory for all large employers from April 2023 ahead of a parliamentary debate on the issue next week.
The HR body points out that just 13 FTSE 100 companies currently report their ethnicity pay gap on a voluntary basis, despite an increased expectation that employers demonstrate their anti-racist commitments after last year’s Black Lives Matter protests.
It accuses the government of making “slow legislative progress” on ethnicity pay gap reporting, which was the focus of a government consultation in early 2019 but is yet to be enshrined in law.
The key proposals in the consultation included a requirement for companies with more than 250 employees to report ethnicity pay gap figures annually, mirroring gender pay gap reporting where possible.
The requirement would encourage employers to provide additional context to the figures by providing a narrative or action plan setting out the steps they are taking to address any disparities.
In June, the TUC, CBI and Equality and Human Rights Commission wrote to the government, urging it to set out a clear timeframe for introducing ethnicity pay gap reporting, and the legislation has been backed by the Commission on Race and Ethnic Disparities.
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The CIPD has called on the government to mandate a narrative as part of the legislation and for employers to include action plans in their reports, and has today launched a guide to support organisations to produce them.
Peter Cheese, chief executive of the CIPD, said ethnicity pay gap reporting could be an “important lever” for businesses to identify race inequality in the workforce.
“That’s why we believe it is so important that businesses both capture and learn from this data. While it’s positive to see some organisations voluntarily report their ethnicity pay, it’s clear that progress is slow and reporting is very inconsistent,” he said.
“Some companies just report their data while others report a commitment without sharing the data behind it. We know that gender pay gap reporting has driven greater transparency and accelerated progress, and we believe the same is needed for ethnicity pay reporting.
“Mandatory reporting of data, and the associated narrative that shows understanding of the data and the actions being taken to improve, for both ethnicity and gender pay, will help create fairer workplaces and societies and kickstart real change.”
The CIPD recommends that ethnicity pay gap reports include three key components:
- A uniform set of eight commonly defined statistics; the first six aligned with gender pay gap reporting (median ethnicity pay gap; mean ethnicity pay gap; median bonus gap; mean bonus gap; bonus proportions and quartile pay bands). The other two would consider the proportion of the organisation’s workforce from ethnic minorities in the context of demographic data, and the proportion who chose to disclose their ethnicity (as disclosure rates can be low).
- A supporting narrative to explain the nature and causes of any pay differentials
- An action plan of initiatives designed to address these gaps over time.
Baroness Ruby McGregor-Smith, who put together the 2017 McGregor-Smith review on race in the workplace added: “A strong commitment to inclusion and fairness at work is not only good for business and their ability to attract and retain the diversity of talent, experience, and skills they need to thrive, but also for our economies and societies.
“Every person, regardless of their ethnicity or background should be able to fulfill their potential at work. It must be a collective goal that our organisations reflect the communities we live in and mandatory ethnicity pay data gives businesses, investors, and regulators the tools they need to see the current reality and where changes need to happen.
“It’s only once we see organisations publicly start to report the diversity of their workforce that we will see real change start to happen.”
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