The Government welcomes for the Women and Equalities Committee report on ethnicity pay gap reporting which was published on 2 February 2022. We are grateful to the Committee and those who attended the oral evidence session on 12 January 2022.
The Committee’s report recommended that:-
(a) data protection to reassure employers how they can legally capture, retain and report ethnicity pay gap data;
(b) methods for capturing, analysing and reporting ethnicity pay data; and
(c) the body responsible for enforcement and what powers that body will have.
The Commission’s March 2021 independent report1 concluded that “ethnicity pay gaps should continue to be reported on a voluntary basis and that the government should provide guidance to employers who choose to do so”.
The Commission was clear that pay gap reporting as it is currently devised for gender cannot be applied to ethnicity. There are significant statistical and data issues that would arise as a result of substituting a binary protected characteristic (male or female) with a characteristic that has multiple categories.
The Commission further said that voluntary reporting should be accompanied by the publication of a diagnosis and action. These should set out the reasons why any disparities exist and what will be done to address them.
Since the Committee published its report, the Government has responded to the Commission on Race and Ethnic Disparities recommendations. “Inclusive Britain” was published on 17 March.2 Alongside 74 other actions to ensure that everyone – no matter their background, gender, sexuality, creed or colour – has the opportunity to go as far in life as their ambition will take them, “Inclusive Britain” sets out how the Government plans to address ethnicity pay reporting.
The Government has accepted the Commission on Race and Ethnic Disparities’ recommendation that ethnicity pay gaps should continue to be reported on a voluntary basis.
As the Government noted when accepting that recommendation, ethnicity pay gap reporting is just one type of tool to assist employers in creating a fairer workplace. It may not be the most appropriate tool for every type of employer seeking to ensure fairness in the workplace. The Government does not want to impose new reporting burdens on businesses and will not be legislating for mandatory reporting.
The Government will therefore support companies and organisations who want to publish data by providing guidance. The guidance will support employers to navigate the challenges associated with reporting as set out in the Commission’s report and subsequently by this Committee.
BEIS has consulted with employers to identify issues and is currently working with experts to develop guidance which will enable employers to identify the causes of pay disparities and take relevant steps to mitigate them.
The guidance will seek to address other challenges identified in reporting. For example, it will help employers to use, where appropriate, specific ethnic groups rather than broader categories when publishing their data. Different ethnic groups that share the same race can have very different outcomes. This means that a meaningful pay gap reporting standard for ethnicity will need to be different to one for gender reporting, which uses just 2 categories.
The guidance will also help employers with reporting across demographically different areas. This will assist those organisations in parts of the country with very small ethnic minority populations who cannot reasonably be expected to produce meaningful pay reporting because the numbers are too low, to give a statistically reliable account of how they are performing.
The guidance will cover data protection issues and methods for capturing, analysing and reporting ethnicity pay data as set out by the Committee in its recommendations.
A key recommendation of the Commission’s report and of the Committee was that employers should produce a diagnosis and action plan, setting out the reasons for and steps to address the disparities. The guidance will support employers to achieve this.
Government committed in “Inclusive Britain” to publish the guidance in Summer 2022.
The Government undertook a consultation on mandatory ethnicity pay reporting which closed on 11 January 2019.3 The consultation received 321 responses. We will publish our analysis of consultation responses in due course.
2 https://www.gov.uk/government/publications/inclusive-britain-action-plan-government-response-to-the- commission-on-race-and-ethnic-disparities/inclusive-britain-government-response-to-the-commission-on- race-and-ethnic-disparities