Don’t wait for ethnicity pay legislation to start gathering data, firms urged

Business body warns employers must consider reporting challenges now, such as staff worried about the risk of discrimination

Employers should start gathering ethnicity data and improving pay equality in their organisations now rather than wait for mandatory ethnicity pay gap reporting, business leaders have urged. 

The Confederation of British Industry (CBI) said it expected ethnicity pay gap reporting to become law in the next one to two years, and urged employers to start collecting and voluntarily publishing their data ahead of any legislative change.

A guide published by the membership organisation and law firm Eversheds Sutherland said employers must start persuading employees to voluntarily disclose their ethnicity to enable them to accurately report any pay gaps. 

Employers should consider now if such reporting could expose BAME staff to inequitable treatment, the guide said. Under GDPR, ethnicity is classified as ‘special category’ data which means it could significantly compromise an employee’s fundamental rights and freedoms by putting them at risk of unlawful discrimination.

In 2018, the government published a consultation on introducing ethnicity pay gap reporting, and suggested companies with more than 250 employees could be required to publish this data in a similar way to gender pay gap reporting. Many experts had expected the legislation to be passed this year. But since the general election, it has been unclear whether a bill would be tabled and when this was likely.

Nonetheless, Dr Jill Miller, diversity and inclusion adviser at the CIPD, said HR teams had a key responsibility to use workforce data to identify and take action where people from different backgrounds, identities or circumstances were being left behind. “This data can act as the starting point for planning the necessary action needed to change an organisation’s systems, culture, policies and processes,” she said.

Get more HR and employment law news like this delivered straight to your inbox every day – sign up to People Management’s PM Daily newsletter

“However, we know that gathering data about the ethnic make-up of the workforce, and creating a culture where people feel comfortable talking about race and ethnicity, are significant challenges employers need to overcome first,” Miller said.

Sandra Kerr, race equality director at Business in the Community (BITC), told People Management ethnicity pay gap reporting was an important indicator for businesses of how much work was needed to make their workplaces fair and equitable. 

“Pay gap figures have to be looked at in the context of the action plans and targets [employers] attach to the figures themselves which set out how they intend to address the issue,” Kerr said. “Problems in pay inequality are often linked to bias in recruitment and a need for increased access to opportunities for progression.”

Kerr added businesses would not be able to close their ethnicity pay gaps without “thoughtful, consistent” action plans to tackle the root causes of inequality, and called on the government to hold organisations to account on their pay gaps. 

A report by PwC earlier this year found the majority (95 per cent) of UK businesses had not yet carried out any analysis of their ethnicity pay gap, with two in five (40 per cent) citing concerns around legal restrictions and GDPR compliance when it came to gathering data.

Three-quarters (75 per cent) of the 80 companies surveyed said they did not currently have sufficient data to analyse their ethnicity pay gap.

A separate report by the Equality and Human Rights Commission (EHRC) found over half (51 per cent) of employers faced barriers in collecting ethnicity pay data. A third felt collecting ethnicity data was “too intrusive”, while a quarter (27 per cent) thought “employees did not want to share the information”. 

Matthew Fell, chief UK policy director at the CBI, explained some companies had already begun reporting their ethnicity pay data and understood what “long-term, meaningful action” was needed to tackle inequality in the workplace.

But, many businesses are still lagging behind on preparing for pay reporting, he said. “Firms have to get better at speaking about race at work; developing campaigns to encourage employees to share their ethnicity; and creating strategies to improve BAME representation all the way up to the boardroom,” Fell said. 

“Business can be a real force for good. But to build a fairer society, all businesses need to take action now.”