Masterclass: How to prepare for ethnicity pay reporting

While the government mulls over introducing mandatory race pay reporting, businesses have a chance to get ahead of the curve

The government consultation on ethnicity pay reporting is considering whether it will become mandatory for employers – which means it makes sense to prepare as much as possible.

However, employers that start the process early may face challenges with the availability of demographic data. An important part of meaningful reporting is having accurate information to work with. Many organisations don’t collect data relating to ethnic origin, and those that do can suffer from a low declaration rate. Another challenge is the classification of different ethnic groups: there are several classification systems available and in use, making it difficult to draw comparisons between organisations.  

Encouraging buy-in from the organisation and employees is crucial to meaningful reporting. Communicating the strong benefits of ethnicity pay reporting – such as addressing inequality and developing greater transparency and accountability – and any planned actions to bring about change will help build trust. 

It’s also really important to put a narrative around the figures, while also thinking about what the organisation can do about them. If you are experiencing disparity in terms of ethnicity pay, what are you planning that will make a difference? If you don’t put actions in place, it is unlikely you will bring about change, and it defeats the purpose of reporting in the first place. 

A data audit is needed to establish what information you already have and what more you require. If you find you have low disclosure, you need to look at how to improve declaration rates – focus groups are a good way to discuss and dispel any concerns. It’s also important to understand your labour market and the impact of your current recruitment practices on rates of pay.

Employers should ensure their monitoring systems are robust, and use ethnicity pay reporting as part of a wider strategy to tackle any racial or ethnic disparities within recruitment, progression and retention.

Putting the groundwork in now and engaging with staff about the benefits of disclosure is strongly recommended, but this won’t happen overnight. Building up trust will take time, and it is vital to explain why the information is being collected, how it will be used and who will have access to it. 

Without an official response to the government consultation (including what classification they will be using) it can feel like an uncertain period for employers, but it’s good to be as well informed on this as possible and, most importantly, to be prepared.

Claire McCartney is senior resourcing and inclusion adviser at the CIPD