Ethnicity pay gap reporting will not be mandatory

The government says it will ‘help’ organisations with ethnicity pay gap reporting but stops short of making it mandatory. It will also discourage the use of ‘unhelpful’ terms such as BAME, and will pursue policies to improve inclusion at work, according to its response to last year’s Sewell report.

A year ago the Commission on Race and Ethnic Disparities, chaired by Dr Tony Sewell, controversially found UK organisations were not institutionally racist and that diversity had increased in key professions such as law and medicine.

However, the government’s newly published response, called Inclusive Britain, contains measures to reduce the effects of bias in the UK while recognising that discrimination stemming from ethnic diversity is nuanced and had to be countered with key interventions in particular sectors.

One prominent employment lawyer has said that today’s report’s proposals on ethnicity pay gap reporting may actually discourage firms from seeking to improve their records in this area.

The report recognised “the significant obstacles for employers looking to create ethnicity pay gap mechanisms, including employee confidentiality, that allows meaningful comparisons to be made”. There was no mention of legislation to make ethnic pay gap reporting compulsory but it stated organisations that chose to publish ethnicity pay figures would be required to publish a diagnosis and action plan.

It said: “Ethnicity pay gap reporting is just one type of tool to assist employers in creating a fairer workplace. It may not be the most appropriate tool for every type of employer seeking to ensure fairness in the workplace. We also want to avoid imposing new reporting burdens on businesses as they recover from the pandemic and so we will not be legislating for mandatory reporting at this stage, rather we will support employers with voluntary reporting.”

There was also a commitment to “work with experts to produce guidance which will enable employers to identify the causes of pay disparities and take relevant steps to mitigate them”.

Employers would be encouraged to use “specific ethnic groups rather than broader categories when publishing their data,” the report stated.

The Department of Business, Energy and Industrial Strategy is set to publish guidance to employers on voluntary ethnicity pay gap reporting in summer 2022. This, said the authors, would give employers the tools to understand and tackle pay gaps within their organisations and build trust with employees.

For David Lorimer, director of law firm Fieldfisher, news that the government would publish guidance for firms who voluntarily reported the ethnicity pay gap “could be seen as contentious because they aren’t legislating it but they are putting emphasis on it. One could go as far to say it’s not really a committed strategy and could make things harder for employers as it is optional whether you do it or not, but if you are going to do it you need to have an action plan.”

NHS England was singled out as facing particular difficulties with ethnicity pay gap reporting. To this end a strategic review – in the form of an Ethnicity Pay Gap research project – of the causes of disparate pay across NHS England would spell out fresh measures to address disparities.

Fairness in the workplace was another theme of the report, which stated that resources would be developed to examine “what works to advance fairness in the workplace”.

By spring 2023 an Equality Hub would be created to tackle unfairness and bias at work. It will create an Inclusion at Work Panel, made up of a panel of academics and practitioners in business. This would go beyond just race and ethnicity to identify actions to promote fairness for all in the workplace.

The transparency and use of artificial intelligence was also identified as an issue that needed addressing in the cause of fairness, with the report promising guidance to clarify how to apply the Equality Act to algorithmic decision-making. This would require transparency for public sector bodies when such technology was applied to decision-making concerning individuals.

A white paper will set out a national position on governing and regulating AI this year, said the report, including measures on how to address racial bias in algorithmic decision-making.

Ministers said they agreed that the acronym BAME had become “increasingly irrelevant and even counterproductive to ethnic minority progress”. It obscured important disparities between different ethnic groups, and instances where some groups are actually doing better than average, they said.

The use of the acronym led to the conflation of race with ethnicity. “Poor reporting”, it said, muddled the “complex reality that even ethnic groups who share the same race have different outcomes and face different challenges”. For example, said the study, black African pupils who outnumbered black Caribbean pupils by more than 220,000 “are less likely to be excluded from school than white British pupils”.

The report acknowledged that fresh initiatives were needed to improve diversity in the judiciary and the police force while new guidance on Civil Service diversity and inclusion would offer “clear advice on impartiality in language and practice”.

More analysis of the structural issues that immigrants faced in the UK was needed, said Inclusive Britain. “It is important to look beyond race to other causes of disadvantage, such as migration status, even when considering issues of race and ethnicity. Migration patterns have shaped the present ethnic and racial disparities by influencing how different groups have integrated into communities,”

Lorimer, at Fieldfisher, said employers would be particularly interested in new laws governing algorithmic decision-making. “That will be interesting to employers who use these tools in their recruitment, promotion, termination and other processes. For instance it has been shown that candidate screening tools can perpetrate bias or result in biased decisions,” he said.

Lorimer said the fairness in the workplace agenda remained somewhat vague: “This will focus on best practice and is laudable but it’s not yet clear what the panel will do and what timeline they are working to, so employers in the meantime will need to continue to move forward with their own identified priorities and inclusiveness programmes.”

However, he said new guidance later this year on positive action would be helpful to employers “because they can often find it hard to determine which of the steps are lawful and which become actionable discrimination under the Equality Act”.

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