Ethnicity pay gap reporting can be a valuable tool, but it is not appropriate for every employer, the government has warned.
In the long-awaited government response to the ethnicity pay gap reporting consultation, published this week after the consultation concluded in 2019, the Department for Business and Trade reiterated that it would not be legislating to make ethnicity pay gap reporting mandatory, as it “may not always be the most appropriate mechanism for every type of employer”.
In 2022 it confirmed it would not be going ahead with a statutory ethnicity pay gap reporting regime. It has since faced numerous calls to resurrect the plans and has published official guidance for employers that want to voluntarily publish their data.
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The report said the government has continued to meet with businesses and representative organisations to understand the barriers to reporting.
It ran a voluntary methodology testing exercise between June and August 2019, using payroll data from a broad range of businesses, to better understand the challenges.
“This work has highlighted the genuine difficulties in designing a methodology that produces accurate figures that allows for interpretation and action from employers, employees and the wider public,” the report said.
Issues included the practicalities of collecting ethnicity data such as low response rates, the fact that data is not binary, and numbers being skewed by particularly large or small pay values because of low numbers within certain ethnic groups.
The report said the government wanted to conduct more work to understand disparities in employment outcomes and pay based on ethnicity.
It said: “Introducing an effective pay reporting system is one way to achieve that because it helps employers build an evidence base for relative pay across ethnic groups and identify unexplained gaps. But, employers need flexibility to do this well.
“We do not believe that now is the right time to take forward a mandatory approach to ethnicity pay reporting. It is clear that a single reporting model may not work for all employers and that ‘a one-size fits all’ approach to action-planning will not be appropriate in all circumstances.”
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The consultation found that nearly all employers agreed that a standardised approach to classifications of ethnicity should be used to ensure data is consistent, meaningful and comparable across organisations and over time.
There was a strong sentiment that the government should ensure employee data-sharing remains voluntary, but positively encouraged through clear communications by business leaders and government.
