MPs have called on the government to make ethnicity pay gap reporting mandatory for larger firms, as experts urge employers to start collecting data now.
In a parliamentary debate yesterday (20 September), the government was told that unless ethnicity pay gap reporting was made mandatory for larger organisations, businesses would struggle to make the progress needed to close the pay gap.
Caroline Nokes, Labour MP and chair of the Women and Equalities Committee, said businesses were “crying out” for ethnicity pay gap reporting. “They want it to happen, but on a mandatory basis,” she said.
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Steven Bonnar, Scottish National Party MP, added that mandatory ethnicity pay reporting, modelled on the current gender pay disclosure requirements, “would be one of the most transformative steps a company could take to address racial inequality at work and overcome practical difficulties in the workplace.”
But he criticised the government for the delay in introducing the requirements, stating that “no further developments have materialised” despite there having been an independent report commissioned by the government; a follow-up report from the government; and a government consultation on the issue over the last five years.
“Why, then, has it taken so painfully long for this government to respond to a report that was commissioned in 2018, more than two years after they released their consultations on the plans?” Bonnar asked.
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The debate was triggered by a petition for the introduction of mandatory pay gap reporting, which was launched in the wake of the Black Lives Matter protests last year, which received more than 130,000 signatures.
Responding to MPs' concerns, Paul Scully, Conservative MP and under-secretary for the Department for Business, Energy and Industrial Strategy (BEIS) said the government was “committed to taking action on ethnicity pay reporting”.
“But we want to ensure we are doing the right things to genuinely help move things forward,” Scully said, adding that simply establishing a standard ethnicity pay reporting framework would be more challenging than was the case even for gender pay gap reporting.
In the run-up to yesterday’s debate, business groups have been publicly backing the introduction of ethnicity pay reporting.
Last week, the CIPD called for ethnicity pay reporting to be made mandatory by 2023, and published a framework for businesses that wanted to start collecting and publishing their data now.
Similarly, a policy briefing from the Chartered Management Institute recently reported that four in five (80 per cent) managers agreed that large organisations should be required to report their organisation's ethnicity pay gap.
Sandra Kerr CBE, race director at Business in the Community, told People Management she was glad yesterday’s debate had happened and said ethnicity pay gap reporting “must be made mandatory, and it needs to happen now”.
The debate was a step in the right direction, but “only a step, when we need a jump,” Kerr added, explaining that while the 2017 McGregor-Smith review on race in the workplace laid the groundwork for legislation on mandatory ethnicity pay gap reporting, “organisations have waited for the government to act on this issue for years”.
Efe Ekhaese, consultant at Russell Reynolds Associates, agreed that mandatory ethnicity pay gap reporting was “essential”, adding that pay was one of the most urgent issues to address when facing ethnic disparities in the workplace.
He urged employers to start disclosing data before they are forced to by legislation. “While having the legal requirement would be a great next step, we should not wait until that happens before we feel compelled to act,” he said, adding: “What gets measured gets done.”
Kerr suggested companies start collecting data using the census categories to prepare for reporting their ethnicity pay gap data. If they are unhappy with what they find, they can include an action plan to improve the position, she said.
“It is the companies that voluntarily report their ethnicity pay gap data now, that will be remembered as pioneers in the move toward an equal workplace,” she added.
Binna Kandola, senior partner at Pearn Kandola, warned that failing to make ethnicity pay reporting mandatory could “send a message that issues to do with race and ethnicity are less of a priority than those to do with gender”.
But, he said, if firms combined their ethnicity pay data with gender pay data, businesses could arrive at a more sensitive understanding about what was happening in organisations. This would not only make their commitment to inclusion and diversity clear, but would have a beneficial effect on the staff and prospective applicants.
Read the CIPD's guide to ethnicity pay reporting for UK employers on the CIPD's website.