Employers lack data needed to analyse ethnicity pay gap

Ninety-five per cent of employers have not analysed their ethnicity pay gap, with many lacking the data that will enable them to do so.

A survey of 80 organisations by PwC found that concerns around the legality of collecting ethnicity data, poor response rates from employees and ensuring employee anonymity were among the most common barriers to publishing ethnicity pay data.

Although not a legal requirement, the government and campaigners such as INvolve have encouraged employers to voluntarily disclose pay data based on ethnicity, as they do with gender pay data.

The survey found three-quarters of organisations lack the data needed to analyse their ethnicity pay gap, while 40% had not collected data because of concerns around GDPR and other legal restrictions.

PwC’s report, Taking the right approach to ethnicity pay gap reporting, warns that a significant data collection exercise is needed to enable firms to analyse their ethnicity pay gap, but this also requires understanding of GDPR and other regulations.

Prateek Kumar, senior manager, HR technology, at PwC, said complexity in data collection arises from generating trust from employees, not the process of gathering the data itself.

“Specifically, you will need to ensure they trust the data they provide is confidential and cannot be accessed by their direct teams and managers. Getting this access hierarchy right and communicating it effectively is critical,” he said.

Employers are also worried about how HR systems and processes would be affected by the data collection exercise, as well as how they could communicate the business need for the data to their staff.

Organisations that had attempted to collect data on ethnicity report low survey response rates from staff. Although employers cannot require staff to disclose this information, PwC suggests that organisations should encourage them to do so by providing telling them how and why data is being collected and what it will be used for.

Employers could face claims of both direct and indirect discrimination if pay disparities are identified, so they should develop an action plan to address any imbalances, it proposes.

Katy Bennett, diversity and inclusion consulting director at PwC, said: “No organisation or workforce should tolerate a lack of diversity. Understanding and addressing this issue is important culturally and ethically. But it is also critical to success. Diverse workforces, with diversity of experiences, insights and perspectives make better decisions and deliver better results.”

The report recommends that organisations that wish to voluntarily report their data should:

  • define an approach to ethnicity pay gap reporting that incorporates the value of getting it right, sets  milestones, engages all relevant stakeholders and considers how to implement change based on the findings;
  • plan for data collection by understanding legal and GDPR restrictions, assessing the effectiveness and functionality of HR systems, identifying the method of data collection and communicating the process to staff;
  • define how they will calculate pay gaps if the government’s reporting criteria are not yet agreed. A consultation on whether reporting should be made mandatory ran until January;
  • implement an action plan to reduce pay gaps and consider how data collection will be refined in future; and
  • communicate and engage with staff and external parties and define when the data will be released.
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