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Ethnicity pay gap reporting 

MPs will be debating today (20 Sept) whether the UK should make ethnicity pay gap reporting mandatory.

Ann Franke100x100Ann Francke, Chief Executive of the Chartered Management Institute, said:

“While there has been some progress on the ethnicity pay gap in recent years, companies across the UK are still not as representative as they should be. In particular, there continues to be a woeful lack of women of colour in positions of management and leadership. With gender pay gap reporting being compulsory for larger organisations, there simply isn’t a good enough excuse for not making ethnicity pay gap reporting a requirement too. At the CMI we’ve developed a practical blueprint for how this can be done, including providing clear and detailed guidance applicable for every business.

 “As we emerge from the pandemic, leaders have a once-in-a-generation opportunity to build back more inclusively. And the evidence is clear - businesses that are truly inclusive and representative are more productive organisations. The Government should look to introduce mandatory ethnicity pay reporting in the Employment Bill as a matter of social justice, but also to ensure the UK retains its competitive advantage.”

80% of managers agree that large organisations should be required to report their organisation's ethnicity pay gap.

The Chartered Management Institute (CMI) have developed guidance on how this can be delivered as a reality in the UK.

As well containing key ethnicity pay gap statistics, it also contains practical steps, both for the Government and businesses, such as how to ensure anonymity when gathering data and the importance of a clear narrative.

What is Ethnicity pay reporting? 

  • Ethnicity pay reporting is the process of collecting personal data from employees on their ethnic identity in order to analyse and publish information on average pay in their organisations.
  • The data may be used by the organisation to help identify and understand where it may face specific equity, diversity and inclusion challenges for different ethnic groups. 
  • Organisations need to build trust and communicate effectively with employees in order to gather information on ethnicity comprehensively.
  • Because it is important that published ethnicity pay information does not identify individuals, organisations will use minimum thresholds. For some organisations, where the number of staff
    from diverse ethnic backgrounds is small, this will mean publishing on a ‘binary basis’ - looking at the gap between two combined groups.

What is the ethnicity pay gap?

  • The ethnicity pay gap shows the difference in the average pay between White employees as a group and a combined group of Black, Asian, Mixed and ‘Other’ employees in a workforce.
  • A positive percentage means that the average pay of the White staff is higher than the average pay of the combined group of Black, Asian, Mixed and ‘Other’ staff.
  • Some larger organisations are voluntarily publishing more detailed ethnicity pay reports, for example Lloyds Banking Group break down their data further to shine a light on the situation for their Black employees, Asian employees and ‘minority ethnic’ employees separately.
  • Some, like CMI partner the University of Bristol, have started to include intersectional analysis in their reports - looking at two characteristics combined, for example gender and ethnicity.
  • At this moment in time, ethnicity pay gap reporting is voluntary for organisations, unlike gender pay gap reporting which is compulsory for certain organisations in the UK and elsewhere -including many countries in Europe.
  • Some countries, like the UK, also publish national statistics on the ethnicity pay gap and gaps between specific ethnic groups for comparative purposes. This information is presented on the UK Government’s Ethnicity Facts and Figures website and detailed reports are published by the Office for National Statistics (ONS).
  • As CMI highlighted in Moving the Dial on Race in 2020, the overall pay gap between White and ‘ethnic minority’ groups is at its lowest level (2.3%) since 2012 (5.8%).
  • Whilst this might sound like great progress, there is variation for specific ethnic groups. For example, the largest pay gap (+16%) is between the White British group and the Pakistani group.
  • Whether an employee is born in the UK or not continues to be a key pay gap driver.

Transparency can be a catalyst for action in tackling the ethnicity pay gap 

11th Oct 2018: CBI comment on the Government’s intention to consult on mandatory ethnicity pay reporting.

Matthew Fell, CBI Chief UK Policy Director, said:

“Transparency can be a catalyst for action in tackling the ethnicity pay gap, in the same way that it has been so successful for gender.

“Reporting must be done in a way that is supported by both businesses and employees, to recognise the wide range of ethnic groups and legitimate staff concerns about intrusiveness where sample sizes are small.

“Companies want to work with the Government to achieve their goal of becoming more inclusive employers.”

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