Mandatory ethnicity pay gap reporting ruled out

Following the introduction of mandatory gender pay gap reporting in 2017, MPs have been campaigning for a similar requirement on employers to publish an ethnicity pay gap report. However, on 17 March 2022, the government confirmed they would not, at this time, bring this in as a compulsory measure.

In its new “Inclusive Britain” policy, the government highlighted the challenges ethnicity pay gap reporting would bring. Specifically, it outlined that different ethnic groups which share the same race can have very different outcomes; as such, specific ethnic groups, rather than broad categories, must be used when compiling and analysing data. Meaningful pay gap reporting on ethnicity will not be able to follow the structure of gender reporting, whereby only 2 categories (male and female) are considered. This complexity makes ethnicity pay gap reporting a more resource-intensive activity for businesses. The government recognised that many employers are trying to recover from the impacts of the Covid pandemic so didn’t want to impose new reporting burdens on them whilst they attempt to do so. It did, however, outline that businesses will be supported to voluntarily report through new guidance set to be published by the Department for Business, Energy and Industrial Strategy (BEIS) in summer 2022.

The guidance will include case studies of companies who are already reporting and will give employers the resources to reduce or remove existing pay gaps. It is expected that the guidance will take into consideration how employers should report across different demographic areas. In some places, there is a small ethnic minority population, so employers won’t be able to produce meaningful pay reporting since the numbers are too low to give a statistically reliable account of how they are performing. As a result, no reasonable comparisons could be made. Employers, after they have been provided with a trustworthy and consistent reporting standard, will be expected to take meaningful action to tackle the causes of unequal pay.

Diversity and inclusion initiatives are imperative to ensure the fair and equal treatment of all staff members and to close the gaps of employees from underrepresented groups. Introducing ethnicity reporting can be a useful way of evaluating the number of underrepresented employees and pro-actively take steps to increase this. However, business should also consider wider approaches to encouraging workplace inclusion. For example, introducing diversity and unconscious bias training for managers and communicating a clear zero-tolerance approach to any form of bullying, discrimination or harassment related to race and ethnicity.

Businesses can also successfully leverage the benefits associated with positive action tools within their recruitment strategies. Examples of positive action include: putting statements in job adverts to encourage applications from under-represented groups, such as "we welcome applicants from all backgrounds and ethnicities”; offering training to help certain groups get opportunities or progress at work; offering mentoring to groups with particular needs; or hosting open days specifically for under-represented groups to encourage them to get into a particular field.

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