Establishing a framework for mandatory ethnicity pay gap reporting is complicated as the data is not binary, can be easily skewed, and there are challenges with anonymity and data collection, a minister has said.
During a debate in response to a petition that called for the governent to bring forth legislation that would require employers to publish their ethnicity pay gap, Paul Scully, the minister for small business, consumers and labour market, admitted there are numerous statistical challenges to introducing the requirement.
“We want to make sure we’re doing the right things to genuinely move things forward,” he said. “The key to that is determining what it makes sense to report on and what use the data can be put to. It’s far from straightforward.”
He said the Department for Business, Enterprise and Industrial Strategy’s (BEIS) consultation into mandatory ethnicity pay gap reporting highlighted issues including:
- Statistical robustness – minimum sample sizes are needed to ensure that the data shows an accurate picture of what pay looks like within an organisation
- Anonymity – any reporting framework will need to ensure that individual’s rates of pay cannot be extrapolated from reports, particularly if they are part of an ethnic group that makes up a small percentage of employees in an organisation
- Data collection barriers – organisations had highlighted practical and legal challenges to collating the data
- The wide range of ethnic groups within the UK – ethnicity is not “binary” and representation of different ethnic groups differs across the UK. Organisations and government needed to be careful not to make sweeping statements about ethnicity, as average pay varies significantly across groups
- The potential for results to be skewed – a reporting exercise within the Civil Service found that 22% of employees did not provide their data, which that the data showed average pay within every ethnic group was higher than average median pay in the Civil Service.
“[We need] a method that allows for meaningful interpretation for businesses,” said Scully. “[The consultation] raised a series of issues. Establishing an ethnicity pay reporting framework is considerably more challenging than was the case for gender pay gap reporting.”
Caroline Nokes, chair of the women and equalities committee, said that black female entrepreneurs had told her that many large organisations wanted to report but were nervous about how to do so. They wanted the ability to benchmark their data against that of other similar organisations, which was not possible under a voluntary framework.
She added that the gender pay gap reporting requirement for larger organisations had gradually “seen the pay gap reduce” and suggested that mandatory ethnicity pay gap reporting could have a similar effect.
Introducing these measures would [hold employers accountable] for closing the gap where there is a disparity” – Steven Bonnar, MP
She said that the forthcoming Employment Bill was an opportunity to bring forth ethnicity pay gap reporting and questioned when the bill would be introduced.
SNP MP Steven Bonnar asked why it had taken the government so long to respond to the ethnicity pay gap reporting consultation that was launched in 2018.
“Currently there is a lack of data available to us to gauge the ethnicity pay gap. Introducing these measures would [hold employers accountable] for closing the gap where there is a disparity,” he said, adding that Black, Asian and ethnic minority workers were significantly more likely to be in lower paid roles than their white counterparts.
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Kirsten Oswald, SNP deputy Westminster leader, said the government’s lack of action on the issue had been disappointing. She said ethnicity had been a major factor in some of the economic effects of the pandemic and unless action is taken now, it “may also be a hidden factor in the distribution of pay and reward during the recovery and beyond”.
She highlighted that the “multi-tier” system of workers’ rights had been used to progress an argument that the labour market is “too complex” for ethnicity pay gap reporting being effective.
“How convenient,” Oswald said. “Of course, if the government had brought forward their persistently delayed Employment Bill then they [could have] swept away some of these anomalies.”
Scully said that BEIS was considering what had been learnt from the consultation and would respond “in due course”.
Commenting on the issues raised in the debate, Chartered Management Institute chief executive Ann Francke said there “isn’t a good enough excuse” or not making ethnicity pay gap reporting mandatory.
The government should look to introduce mandatory ethnicity pay reporting in the Employment Bill as a matter of social justice, but also to ensure the UK retains its competitive advantage” – Ann Francke, Chartered Management Institute
“While there has been some progress on the ethnicity pay gap in recent years, companies across the UK are still not as representative as they should be. In particular, there continues to be a woeful lack of women of colour in positions of management and leadership,” she said.
“As we emerge from the pandemic, leaders have a once-in-a-generation opportunity to build back more inclusively. And the evidence is clear – businesses that are truly inclusive and representative are more productive organisations. The government should look to introduce mandatory ethnicity pay reporting in the Employment Bill as a matter of social justice, but also to ensure the UK retains its competitive advantage.”
CMI research found that 80% of managers agree that large organisations should be required to report on their ethnicity pay gap.
KK Harris, executive coach director at coaching firm Talking Talent said any data that would shed light on the ethnicity pay gap would be welcomed by organisations.
“A pay gap is inequality and that has no place in business today. Reporting of this kind is essential to expose bias and open the crucial dialogue within businesses who can take steps to fill these gaps,” said Harris.
“However, exposing the pay gap alone isn’t enough as it does not guarantee tangible change. Other measures must follow to make sure that wages are immediately matched through the business and there must be conversations had to truly understand the bias at play that made the pay of individuals lower in the first place. Until equality is met for everyone, no measure is enough.”
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Professor Binna Kanola, co-founder of diversity and inclusion training provider Pearn Kandola, said: “The two key pillars for building fairness within an organisation are transparency and accountability. Ethnicity pay gap reporting creates greater transparency, and the information it uncovers will serve as a starting point for taking action where necessary.
“Introducing mandatory ethnic pay gap reporting sends a strong signal to organisations about the importance of diversity and inclusion. What’s more, we could potentially combine the data with that for gender to arrive at a more sensitive understanding about what’s happening within organisations. Once the full scale of its injustice was cast in the cold light of day, pressure would need to be applied to the offending organisations to correct it.”
