The CIPD today called for larger employers to be legally required to produce an ethnicity pay gap report by 2023. Its chief executive Peter Cheese outlines why organisations should prepare for reporting now if they want to drive change on race inequality.
It’s been three years since the government launched its first consultation into ethnicity pay reporting, but disappointingly, despite much discussion, we are yet to see any real legislative progress in that time.
Despite many businesses publicly condemning racism and discrimination in society and in the workplace during the Black Lives Matter protests last year, recent analysis from the CIPD found just 13 FTSE 100 companies currently report their ethnicity pay data.
This is contrary to the increasing expectation from the public, investors and other stakeholders to do so.
Next week’s parliamentary debate on the need to introduce mandatory ethnicity pay reporting will hopefully result in some movement; specifically, the CIPD would like to see mandatory reporting for all large employers by April 2023.
Pressing issue
However, the clock is ticking and business leaders should not wait for ethnicity pay reporting to become a legal requirement before they start tracking and publishing their data.
While ethnicity pay reporting is not yet a legal requirement, as a forward-thinking employer, it is a moral one, and can provide businesses with key insights into their workforce practices.
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The slow uptake in ethnicity pay reporting could, in part, be down to a complete lack of guidance from the government on how organisations should calculate and share ethnicity pay gap data.
Many employers do not know where to start and we recognise that it is a big challenge.
Support for employers
This is why the CIPD has launched its new ethnicity pay reporting guide to help before there is a legislative process in place.
The guide supports employers to take action by recommending what data they should gather and how, as well as providing a narrative and a long-term action plan.
Although there are more complexities to ethnicity pay reporting, our guide recommends collecting the same six data points organisations already collect for gender pay gap reporting, but with two additional data points focused on encouraging the full representation of ethnic minority staff in the workforce.
Understanding the steps to take is vital, as ethnicity pay reporting is an important lever for both businesses and their stakeholders to assess if and where inequality based on ethnicity exists in their workforce.
It is crucial that businesses both capture and learn from this data, and expectations are high that organisations will become more transparent and open about where there are gaps and their plans to address them.
Desire versus reality
One of the primary rationales is that no one should be disadvantaged by their ethnic origin in the workplace. This is hard to argue against, yet we know from the Equality and Human Rights Commission’s ‘Is Britain Fairer?’ report that it is not the reality.
Inequality is rife in Britain and there are substantial differences in pay gaps across different ethnic groups. White British employees earned a median hourly rate of £11.67, compared to £9.93 for Pakistani workers and £9.24 for Bangladeshi workers.
While there will undeniably be a range of social, economic and employment factors which influence this, responsible employers simply cannot separate themselves from it and wait for societal changes. They need to do their part to create change, and ethnicity pay reporting is a good place to start.
We know that reporting of this kind is effective as we have seen progress since the introduction of gender pay reporting. Businesses should use pay reporting as a tool to drive transparency and accelerate progress.
No one would want to work for an organisation that paid people differently based on the colour of their skin, any more than they would for one that paid men and women differently because of their gender.
No one would want to work for an organisation that paid people differently based on the colour of their skin, any more than they would for one that paid men and women differently because of their gender.
Mandatory reporting of data, the associated narrative that shows understanding of the data and the actions being taken to improve, for both ethnicity and gender pay, will help create fairer workplaces and societies and kickstart real change.
Data disparities
Encouragingly, we know that 77% of employers believe ensuring workforce diversity is a priority.
There is an understanding among businesses that action is needed. However, only 36% collect and analyse data to identify differences in pay and progression for employees from different ethnic groups, so now it is important for business leaders to feel compelled to drive the change.
Everyone should have access to good work which compensates them fairly and no progress will be made if we do not commit to being transparent.
However good the intentions, diversity initiatives to date have fallen short, and businesses can no longer afford to be behind the curve.
We need to get comfortable with being uncomfortable, particularly when it comes to having difficult conversations around language and terminology, and drawing long-term plans for social inclusion and racial equality that go beyond symbolic gestures.
It must be a collective goal for organisations to reflect the communities we live in, and mandatory ethnicity pay data gives businesses, investors, and regulators the tools they need to see the current reality and where changes need to happen.
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Responsible businesses should be a positive force, benefitting both their employees and wider society. I believe that committing to ethnicity pay reporting is a key part of this.
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