Mandatory ethnicity pay gap reporting should be introduced by April 2023 because organisations are now ready for the government to force businesses to act, MPs have claimed.
The House of Commons women and equalities committee said it recognised that capturing and reporting ethnicity pay gap data is a more complex exercise than for gender, but noted that solutions were available “as long as employers are willing and the purpose of the exercise is clear”.
Last September, business minister Paul Scully said that collecting and reporting ethnicity pay data is “far from straightforward”, as there are concerns around anonymity, data collection, statistical robustness, and the fact that ethnicity is not “binary”.
Ethnicity pay gap reporting is widely considered to be more challenging because of the smaller sample size of ethnic minority groups, as opposed to the rough 50:50 gender split of the workforce.
However, the women and equalities committee has said bringing forward legislation that will force organisations with 250 or more employees to publish their ethnicity pay gaps is possible, as long as the government provides clear guidance around data protection; methods for capturing, analysing and reporting data; and the enforcement action employers could see if they fail to comply.
Committee chair Caroline Nokes said: “The government’s failure to move forwards on ethnicity pay gap reporting is perplexing. We already have the systems and structures in place to start reporting on the ethnicity pay gap, as well as a clear impetus – tackling inequality benefits not only marginalised groups, but the whole economy.
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“The government has no excuse. All that is lacking, it seems, is the will and attention of the current administration.
Referring to the publication of last week’s ‘levelling up’ plan, Nokes said the government “proves itself to be blind to the importance of levelling up within our communities and address long-standing disparities along the lines of protected characteristics”.
“By taking this small step, the government would demonstrate its commitment to working with business to reduce inequality,” she added.
In a report published today, the committee says ethnicity pay gap reporting “is not about producing a league table or punishing organisations who, due to geographic location, may not have access to the same talent pool”. Rather, it is “an indicator for employers to identify, understand and address trends in ethnic disparities across their own workforce”.
The MPs had written to Scully in November 2021 asking for an update on the government’s proposals for ethnicity pay gap reporting. Scully said it was still considering the best approach and would report on next steps “in due course”.
The government’s failure to move forwards on ethnicity pay gap reporting is perplexing. We already have the systems and structures in place to start reporting on the ethnicity pay gap, as well as a clear impetus.” – Caroline Nokes, women and equalities committee chair
An evidence session last month that involved employer groups, diversity advocates and trade unions heard that progress on the issue had been too slow.
Some organisations have voluntarily published their ethnicity pay data – with the proportion of employers publishing their ethnicity pay gaps having increased from 11% in 2018 to 19% in 2021, according to the report – but Wilf Sullivan, race equality officer at the TUC argued that these employers were being “undercut”, as there are costs associated with collecting and reporting on pay gap data.
Matthew Percival, people and skills director at the CBI, said the value of ethnicity pay gap reporting lies in the narrative and action plans that accompany the data. Charles Cotton, senior performance and reward adviser at the CIPD, suggested this would demonstrate to employees, customers, and investors that a company is serious about tackling inequality.
Asked about their views on the data collection challenges, several witnesses told the committee that employers should collect data using the 18 ethnicity categories listed in the census, rather than giving staff only the binary options of “White or BAME” to choose from.
Percival recommended that employers should only report the binary headline figure and use the disaggregated data for granular analysis as part of their supplementary narrative.
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The witnesses also told MPs that the government should not have suspended enforcement of the gender pay gap reporting requirement during the Covid-19 pandemic. Business in the Community’s race director Sandra Kerr claimed 50% of employers chose not to report and still delayed reporting by the postponed date, even though they had the data, while Sullivan said the suspension had sent the wrong message to employers.
