Is it time for mandatory ethnicity pay gap reporting?

Fudia Smartt explores whether the government needs to introduce legislation requiring companies to publish their race pay gap data

Since the introduction of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (Gender Pay Gap Regulations), there have been calls for similar regulations to help address the ethnicity pay gap; namely the gap between the average earnings of white British workers and their ethnic minority peers. 

These calls have become louder following a report by the Office of National Statistics (ONS), which was published in July. Some of the report's findings include the following:

  • White workers were paid 3.8 per cent more than all other ethnic groups in 2018;
  • Workers of Pakistani or Bangladeshi origin were paid the lowest median hourly pay of any ethnic group, earning 20.1 per cent less than white British workers;
  • UK-born black African, Caribbean or black British ethnic groups were paid an estimated 7.7 per cent less than their UK-born white British counterparts with the same educational and occupational characteristics.

Chinese employees had the highest median hourly pay of any ethnic group in 2018, followed by Indian and mixed/multiple ethnic groups.

London has the largest pay gap, with ethnic minority groups earning 21.7 per cent less than white employees on average.

The above accords with research published by the Resolution Foundation in December 2018, which found that black, Asian and ethnic minority employees are losing out on £3.2bn in a year in wages, in comparison with their white colleagues with identical characteristics (for example, educational background) for doing the same work. 

Causes of the ethnicity pay gap

In 2017, the Equality and Human Rights Commission undertook research into the causes of ethnicity pay gap. It found that the causes are multifaceted and complex, as well as longstanding. 

Discrimination and bias are likely to be factors, as highlighted by the numerous studies that show that ethnic minority applicants have to submit significantly more job applications than their white counterparts and are more likely to be called to an interview simply by anglicising their names. 

However, it is not the only cause. For example, the ethnicity pay gap is particularly pronounced when looking at those born outside of the UK. Language and cultural barriers, as well as the lack of recognition of qualifications, are often factors credited for this.

The fact that ethnic minorities are more likely to experience educational and social disadvantage is also an issue. However, clearly there is no single answer as evidenced by the fact that Chinese and Indian workers are earning more than the average white British worker. 

Where next?

At present there does seem an appetite to start focusing on the ethnicity pay gap. Employers such as Deloitte and WPP – alongside the Bank of England – have backed a call for employers to voluntarily report their ethnicity pay gaps as a way of tackling the issue. Unions such as TUC and GMB are instead pushing for mandatory ethnicity pay gap reporting legislation to be implemented post-haste.

In my view, as a minimum, mandatory ethnicity pay gap reporting is required. While it is unlawful to discriminate because of race, colour, nationality or ethnic or national origin, it is often difficult to prove such claims due to a lack of evidence. 

There appears to have been an increase of equal pay claims following the introduction of the Gender Pay Gap Regulations because employees now have access to clear evidence of any pay disparity. 

It is hoped that introducing ethnicity pay reporting legislation will have a similar effect. Unfortunately, until employers have to confront the issue of pay gaps – whether on the grounds of gender, race or disability – these issues will continue unabated.

Fudia Smartt is a partner at Spencer West LLP