As reported in an earlier post, the UK Government introduced mandatory gender pay gap reporting in 2017.
An independent review conducted in 2017, Race in the workplace, made a number of recommendations for removing the barriers to workplace progression faced by ethnic minorities including the introduction of mandatory reporting of ethnicity pay data. At that time the UK Government expressed a preference for a voluntary approach to ethnicity pay reporting.
However, following a later report revealing that very few employers collect ethnicity pay data, the Government has decided that mandatory ethnicity pay reporting is necessary to enable employers to identify barriers to workplace progression by ethnic minorities. In October last year it therefore published its proposals on this for consultation.
Ethnicity pay gap reporting proposals
In the consultation, it is acknowledged that an important first step is to agree the overall approach to ethnicity pay gap reporting, such as how to report the data and how individuals should be categorised. This could impact considerably on the results.
The following alternatives are proposed:
- Reporting one pay gap figure only by comparing the average hourly earnings of ethnic minority employees as a percentage of white employees. However, this approach may not give a fully representative figure as all ethnic minority groups would be reported on together.
- Reporting several pay gap figures according to ethnic group (such as black, Asian, mixed). This would compare average hourly earnings of each ethnic group as a percentage of white employees. However, this would not provide information as to the differences in pay across different ethnic groups.
- Reporting by pay band or quartile. This approach would show the proportion of employees from different ethnic groups according to pay bands or quartiles.
Which employers will need to report?
The consultation also addresses the question of which employers according to size should have to report ethnicity pay data.
The proposal is that only employers of 250 or more employees should have to report. This would mirror the gender pay gap reporting obligations. Figures reported for smaller employers may be less informative because of the limited amount of data.
Challenges of reporting ethnicity pay data
The consultation also acknowledges the difficulties which employers will face in collecting the relevant data:
- There is no legal obligation on employees to disclose which ethnic group they identify with.
- Individuals may not identify with any of the categories of ethnic group proposed.
- Employers may already have their own classifications and a more standardised approach may result in extra costs for these employers if they have to change their systems.
- Employers who collect ethnicity data will need to ensure the anonymity of their employees.
The consultation closed in January this year. No response has yet been published but it has been suggested that the new obligations may be introduced by way of a trial or phased approach before mandatory rules are introduced.