On 11 October 2018, the UK Government launched a consultation on mandatory ethnicity pay reporting. This was via the Department for Business, Energy and Industrial Strategy (BEIS).
Background to the Consultation
The UK Government says that it is committed to ensuring that all people are able to fulfil their potential without inequality and regardless of ethnicity. Therefore, tackling the inequality of opportunity and making this transparent led to the creation of the Race Disparity Audit and Ethnicity Facts and Figures Website in October 2017. This Website gathers data collected by the UK Government in one place and shows the different experiences of people from different ethnic backgrounds in things like education, housing and health amongst other areas.
A vast amount of data shows that, in general, the employment rate for people from ethnic minorities is improving. Although, people from ethnic minorities often have less potential for career advancement and earn less. With a diverse population, there is no reason for this and the workforce, pay and benefits should reflect this. In the Government’s own words, their ambition is that a concerted effort is needed by them and employers ‘to overcome structural, procedural and attitudinal barriers within society and individual organisations’.
The simple objective of the consultation, therefore, is to improve transparency of ethnicity pay in the workplace by requiring the mandatory publication of such information. This is along similar lines to improving transparency of gender inequalities by requiring the publication of gender pay gap information.
The mandatory publication of data will help the Government and employers understand any pay diversity amongst ethnic groups at organisations. In turn, this will allow them both to take action to overcome any barriers that may be present.
The Consultation applies to Great Britain only, as will reporting if and when it comes to employers. Employment and equality legislation is devolved to Northern Ireland.
So, like gender pay gap reporting in the private and voluntary sectors, we have the potential for future ethnicity pay reporting Northern Ireland to be different.
Ethnicity Pay Reporting
This is contained in Chapters 2, 3 and 4 which are well worth a read as they form the basis for the questions that are asked. I detail these below.
The Chapters talk about how a few employers have voluntarily chosen to publish ethnicity pay data but have used different methodologies. This makes comparison of published data impossible, therefore, the purpose of mandatory ethnicity pay reporting is to come up with a consistent approach that will lead to meaningful figures and action.
Importantly, any new reporting is intended to be ‘proportionate and without adding undue burdens on business’. So, interestingly, the first question is:
What are the main benefits for employers in reporting their ethnicity pay information?
What Pay and Contextual information?
The Consultation suggests three ways that ethnicity pay information could be reported:
- One pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees
- Several pay gap figures comparing average hourly earnings of different groups of ethnic minority employees as a percentage of white employees
- Ethnicity pay information by pay band or quartile, showing the proportion of employees from different ethnic groups by £20,000 pay bands or by pay quartiles
Or, is there another way? The Consultation says that it is mindful of the current gender pay gap reporting requirements and wonders if it would be helpful to mirror these in some way.
The second question, together with a request for reasons is:
What type of ethnicity pay information should be reported that would not place undue burdens on business but allow for meaningful action to be taken?
In addition to pay information, the Consultation suggests that a number of other pieces of information could be reported to put the pay data into context. It suggests items such as the age of the employee, their location and gender.
The third question asks:
What supporting or contextual data (if any) should be disclosed to help ensure ethnicity reporting provides a true and fair picture?
Narratives and Action Plans
As the intention of ethnicity pay reporting is to drive meaningful action (from employers and / or Government), the Consultation suggests that mandatory narratives should accompany reporting. This would be a variance from gender pay gap reporting where supporting narratives are voluntary.
The fourth questions asks:
Should an employer that identifies disparities in their ethnicity pay in their workforce be required to publish an action plan for addressing these disparities?
Chapter 3 addresses the important task of looking at the challenges employers will face in collecting, analysing and reporting ethnicity pay information. The fifth question asks:
Do you currently collect data on ethnicity at your workplace? If yes, do you use standard ethnicity classifications for reporting? If so, which ones?
Of course, ethnicity reporting can only be accurate or meaningful if individuals classify their ethnicity in the first place, e.g. collecting the information as part of the starter process. The sixth and seventh questions concern this self-reporting of ethnicity information by individuals to employers and ask:
What do you think are the most effective approaches for employers to improve employee self-reporting or declaration rates?
How should self-reporting or non-disclosure rates be reflected in the information reported by employers?
The Consultation then goes on to talk about using standard classifications of ethnicity, recognising that only a standardised approach will lead to meaningful reporting and interrogation. The eighth question asks:
For a consistent approach to ethnicity pay reporting across companies, should a standardised approach to classifications of ethnicity be used? What would be the costs to your organisation?
The Consultation recognises that the collection of racial or ethnic origin data is ‘personal data’ and highlights that handling and anonymity is protected by various pieces of legislation – the General Data Protection Regulation, the Data Protection Act 2018, the Human Rights Act 1998 and the Freedom of Information Act 2000. The ninth question asks:
Please outline steps that should be taken to preserve confidentiality of individuals
Chapter 4 reinforces that mandatory ethnicity pay reporting is the UK Government’s intention. This would require primary legislation for the private and voluntary sectors but only secondary legislation for the public sector. The Chapter goes on to talk about the size of employer that would be required to report and the support that the UK Government would have to make available. Questions ten and eleven ask:
What size of employer (or employee threshold) should be within scope for mandatory ethnicity pay reporting?
What support measures do you think would be useful for employers?
The Questions – Summary
- What are the main benefits for employers in reporting their ethnicity pay information?
- What type of ethnicity pay information should be reported that would not place undue burdens on business but allow for meaningful action to be taken?
- What supporting or contextual data (if any) should be disclosed to help ensure ethnicity reporting provides a true and fair picture?
- Should an employer that identifies disparities in their ethnicity pay in their workforce be required to publish an action plan for addressing these disparities?
- Do you currently collect data on ethnicity at your workplace? If yes, do you use standard ethnicity classifications for reporting? If so, which ones?
- What do you think are the most effective approaches for employers to improve employee self-reporting or declaration rates?
- How should self-reporting or non-disclosure rates be reflected in the information reported by employers?
- For a consistent approach to ethnicity pay reporting across companies, should a standardised approach to classifications of ethnicity be used? What would be the costs to your organisation?
- Please outline steps that should be taken to preserve confidentiality of individuals
- What size of employer (or employee threshold) should be within scope for mandatory ethnicity pay reporting?
- What support measures do you think would be useful for employers?
Call to Action
Employers have until 11 January 2019 to respond. Whilst the intention is admirable and necessary, ethnicity pay reporting seems to pose significant and sensitive administration burdens on employers. Therefore, it is important that their voices are heard.
How to Respond
There are various ways for employers to respond:
Via the BEIS Website at: https://beisgovuk.citizenspace.com/lm/ethnicity-pay-reporting
Ethnicity Pay reporting team
Department for Business, Energy & Industrial Strategy,
Spur 1, 1st Floor,
1 Victoria Street,
London, SW1H OET
When responding, please state whether you are responding as an individual or representing the views of an organisation