Getting ready for ethnicity pay reporting

Proposed legislation to require employers to reveal their ethnicity pay gap exposes some of the key flaws with the gender pay gap reporting exercise, as Samantha Mangwana reports

Distilling the gender pay gap into a single number may be meaningless where it doesn’t identify any unlawful equal pay issue, but instead can be skewed by entirely lawful pay practices. 

The loophole that allowed businesses to avoid reporting on the pay gap between partners, for example, was criticised for masking the worst examples in professional services practices, along with abuses where staff were dismissed in advance or classed as self-employed. And of course, the ultimate hollow truth for those who were unlawfully paid is that gender pay gap reporting (GPGR) provided no remedy at all.

Even so, given that a consultation has now been launched on ethnicity pay gap reporting – highlighting how much employees from ethnic minorities are paid compared with white/British counterparts – there may be an opportunity to address those weaknesses, and build on the gender pay gap reporting’s successes, which surprised many with their impact. 

Far from being a damp squib, the gender pay gap became a topic of national interest and debate. Yes, staff did learn of their pay gap figures and started to consider whether pay decisions had been lawfully made and query them. So did the board directors for whom they worked, with demands for scrutiny and improvement. 

The GPGR did not lead to widespread non-compliance, but instead to the implementation of new practices. Even a small degree of change is significant here, when half a century of equal pay law has done little to alter the stubborn gender pay gap.

In comparison to the ‘glass ceiling’ blocking female leadership at work, many black and ethnic minority workers experience ‘sticky floors’, preventing them from progressing in the first place. Images abound to illustrate these issues, with all-white leadership teams referred to as ‘snowy mountains’.

Whatever your analogy of choice, the ethnicity pay gap will need to be approached with care, because ethnicity comes in many varieties, and the impact will not be as straightforward to assess as comparing men and women. Different challenges will impact nationals of different countries and different races, but also first- and second-generation immigrants, and those from different socio-economic groupings. 

Importantly, it may still be necessary to consider gender alongside nationality, colour and race – since there are likely to be differences in the male/female experience. A particular difficulty posed for employers is that there is no obligation on an individual to disclose their ethnicity at work, and before now there has not been any requirement to investigate this.

Tips for companies

The first step that businesses should be taking now is starting to collect that data, by issuing questionnaires and asking staff to self-identify their ethnicity, leaving open the option of ‘prefer not to say’. 

Reviewing internal policies and procedures, communicating clearly and appropriately with staff members and dealing with grievances appropriately, are all sensible next steps. This may include upholding the grievance and awarding back pay. If the cost helps stave off potential litigation in a climate where staff are now more likely to query their pay, it may ultimately represent a cost saving, as well as saving management time.

Crucially, now is also the opportunity to deal in advance with any known problems and rectify pay disparities before the pay reporting requirements kick in. Why pay the pain of poor PR if you can sort it out with a pay rise ahead of time?

Samantha Mangwana is a partner at CM Murray