Reporting Ethnicity Pay Gaps Recommended for UK Employers

Published by SHRM, June 3, 2021

By Leah Shepherd

The U.K.'s Commission on Race?and Ethnic?Disparities?recently recommended that all employers voluntarily report pay gaps among ethnic groups to identify and rectify disparities.

In a report released April 28, the commission declined to make this reporting mandatory. It suggested that employers should separate ethnic groups in their reporting, rather than aggregating groups.

"The chances of mandatory ethnicity pay gap reporting now appear to be diminishing," said Tom Heys, an ethnicity and gender pay gap reporting expert with the law firm Lewis Silkin in London. "The current administration seems to have little appetite for it. It was not featured in [Prime Minister] Boris Johnson's 2019 manifesto, despite being featured in [Former Prime Minister and Member of Parliament] Theresa May's 2017 manifesto."

The report "will have only reduced the chances of any legislation," he added. "The commission recommended that the government produce guidance for those who want to voluntarily report. I expect that the government will do this."

Institutional racism is one of the factors that contributes to pay disparities among ethnic groups. The commission's report stated, "Outright racism still exists in the U.K., whether it surfaces as graffiti on someone's business, violence in the street or prejudice in the labor market. It can cause a unique and indelible pain for the individual affected and has no place in any civilized society. … Ours is nevertheless a relatively open society. The country has come a long way in 50 years."

Katherine Murray, a consultant with Total Reward Group (now Gallagher) in Kent, England, said, "Fundamentally, the report highlighted that issues of racism are very complex, and as HR professionals it is vital that racial equality at work continues to be a core principle reflected in an organization's diversity and inclusion initiatives."

Recommended Reforms

The report outlined four broad goals:

• Build trust between communities and institutions that serve them.
• Promote fairness to improve opportunities and outcomes for individuals and communities.
• Create agency so individuals can take control of decisions that impact their lives.
• Achieve inclusivity so all groups feel a part of U.K. society.

The report specifically recommended that England's National Health Service should examine the causes of the ethnicity pay gap in the health service and outline measures to address it.

Reporting on pay disparities among ethnicities isn't always easy for employers to do.

"There are considerable challenges," Heys noted. "Employers do not tend to have complete ethnicity data on their staff. … [And] the addition of a few more employees to any particular ethnic group can have a considerable effect on the average and so affect the resulting gap. Even with complete data, gaps calculated from only a few individuals could change wildly from year to year."

While the commission suggested separating employees by ethnic group, Heys added, "there is no clear recommendation for what gaps employers should be calculating. A simple 'white vs. nonwhite' gap risks conflating any disparity faced by particular groups. For example, the gap might be big for Black employees, but small or negative for Asian employees. A combined gap would not show this."

Previous analyses might help employers with this task, Heys said.

"Gender pay gap reporting has shown that employers tend to have a much more focused approach to gender diversity in their workplace when they are forced to analyze their gender statistics each year," he explained. "Other mandatory reporting obligations might lead to similar outcomes."

Some Businesses on Board

Some corporations and trade unions have been vocal supporters of mandatory reporting on ethnicity pay gaps.

Business leaders from the organization Business in the Community (BITC) called for the U.K. to implement mandatory reporting on ethnicity pay gaps and set targets to improve representation in the workplace.

Sandra Kerr, race director at BITC, said the commission's report "is baffling, given the fact that companies have been begging the government for a mandatory duty. 2021 demands so much more than this report. Make no mistake: Businesses will keep asking the prime minister to do better."

BITC published an open letter, asking the government to:

• Address structural barriers that limit opportunities for ethnic minority groups.
• Implement mandatory ethnicity pay gap reporting.
• Set targets to improve representation for ethnic minority groups in the workplace.
• Work with businesses to make their recruitment processes more inclusive to underrepresented ethnic minorities.
• Push for businesses to have more diverse leadership boards.

Leaders at large employers, including Accenture UK, Eversheds Sutherland, KPMG, Nationwide, PwC and Santander, signed the letter.

"Smarter organizations are proactively running communications campaigns designed to encourage their employees to share their personal data from time of entry to the organization," Murray observed. "As a result of having enhanced ethnicity information, these organizations are proactively reviewing their recruitment and promotions practices, [checking their] progress against diversity targets and considering development opportunities."

She added, "Voluntary ethnicity pay reporting should be a discussion taking place for every executive team right now, and if we are not doing it in 2021, as an HR director, you should be asking the question, 'Why not?' "

Leah Shepherd is a freelance writer in Columbia, Md.