Quarter of large firms now calculating ethnicity pay gap, research suggests

Survey also finds two in five plan to crunch race pay data within three years as pressure mounts on the government to honour its promise for mandatory reporting

Almost a quarter (23 per cent) of large companies are now calculating their ethnicity pay gap, research released today reveals – a jump from just one in 20 (5 per cent) in 2018 – despite the government so far failing to act on plans to make ethnicity pay gap reporting mandatory.

Two in five (40 per cent) respondents also said they planned to start doing so within the next three years.

The survey, conducted by PwC, polled 100 companies that collectively employ more than one million people, and found that one in 10 (10 per cent) firms were now voluntarily publishing their ethnicity pay gap figures, up from just 3 per cent two years ago, even though they are not legally required to do so.

Additionally, two-thirds (67 per cent) of respondents said they were now collecting and recording data around their workforce’s ethnicity, up from just over half (53 per cent) in 2018. 

According to the research, a lack of data is cited as the main reason for not calculating ethnicity pay gap, and perceived obstacles to obtaining the data included GDPR restrictions and unease over how to ask questions around race and ethnicity.

Seven in 10 (70 per cent) respondents said they were planning new initiatives to encourage more staff to voluntarily share their ethnicity data.

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PwC is one the few companies that publishes its ethnicity pay gap, which currently stands at 35 per cent.

Laura Hinton, its chief people officer and member of the executive board, said: “It’s not been straightforward and the results are often stark reading – but that’s the point. Ultimately, our pay gap is improving year on year but we still have work to do.”

Jason Buwanabala, HR consulting actuary and data scientist at PwC, commented: “In order to address inequalities caused by systemic and structural biases, organisations should be looking across the entire employee experience to ensure fairness in areas such as recruitment, progression and attrition – and data is critical here.”

Responding to the survey findings, Sandra Kerr, race director at Business in the Community, said: “These figures are the clearest case yet for mandatory ethnicity pay gap reporting. This new data shows that only 10 per cent of companies are disclosing their ethnicity pay gap voluntarily, and gender pay gap reporting has shown that government intervention is the only thing that can ever really move the dial.”

The government has committed to making annual ethnicity pay reporting mandatory for companies that employ more than 250 people, mirroring the requirements for gender pay.

But two years after it released a consultation into its plans, further developments have yet to materialise, and more than 130,000 people signed a petition earlier this year calling on the government to make ethnicity pay reporting mandatory.

BITC, the Equality and Human Rights Commission, the TUC and the CIPD are among a large number of organisations backing the demands.

A CIPD spokesperson said forcing firms to report on ethnicity pay will “help shine a light on race inequalities and galvanise employer action to address these”.

They added: “For those organisations that are struggling with issues like a lack of data, encouraging buy-in from the organisation and employees is crucial to meaningful reporting. Building up employee 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.”

Dawn Moore, group people director at construction firm J Murphy & Sons, which intends to start reporting its ethnicity pay gap next year, said: “You have to work from the ground up; work with those employees who have given you the data to get better insight into why your ethnicity pay data might say certain things. Most of the causes I find are cultural, behavioural, etc and they won’t be resolved by relooking at your pay scales or anything like that. They will tend to be resolved by addressing leadership behaviours.”

Data is part of a bigger picture that needs to be looked at, according to Binna Kandola, co-founder and senior partner at Pearn Kandola and author of Racism at Work.

“Reporting itself is not a solution to the problem. However, having greater transparency will make a difference, and even bigger change will occur if people are held accountable for closing the gap. At this moment in time we have very little transparency and no accountability. A recipe for things not changing," he said.

The Department for Business, Energy and Industrial Strategy did not respond to a request for comment.