Businesses may be required to report ethnicity pay gaps, says prime minister

Mandatory reporting will allow workers to progress 'regardless of their background', as CIPD welcomed potential legislation

Employers could be required to report their race pay gap statistics under new plans revealed by Theresa May to increase ethnic minority representation at work. 

Announcing the launch of a consultation on whether mandatory reporting will help address disparities between the pay and career prospects of black, Asian and minority ethnic (BAME) workers and their white colleagues, the prime minister said: "Every employee deserves the opportunity to progress and fulfil their potential in their chosen field, regardless of which background they are from, but too often ethnic minority employees feel they're hitting a brick wall when it comes to career progression."

The consultation, which runs until January, will allow organisations to share views on what information should be published while avoiding “undue burdens on businesses”. 

Peter Cheese, chief executive of the CIPD, said he fully supported ethnicity pay gap reporting and the “need for meaningful action” that will drive change. 

"The CIPD has consistently highlighted the need for organisations to be more transparent about how they report on the diversity of their workforce and how they reward, manage and develop their people as a catalyst for creating more diverse and inclusive workplaces,” he said.

"It is crucial that the insights and views of employers are fully taken into account during the consultation, for any new law in this area to truly create more inclusive workplaces. There are many challenges and complexities to consider when collecting, analysing and reporting data on ethnicity, so there will be a need to provide in-depth information, advice and guidance for employers.”

Maria Miller MP, chair of the women and equalities committee, said it was “encouraging” to see the government is "taking race inequality seriously”. 

“By requiring employers to take responsibility for the diversity of their workforces, the government can ensure that people from ethnic minorities are not left behind in their careers,” Miller said. 

The move to report on ethnicity pay follows the decision by the government to require firms with more than 250 employees to reveal their gender pay gaps – though race pay is a far more complex area given the greater intersections between ethnicities, and the fact businesses are not currently required to collect information on their employees’ ethnic backgrounds.

Nikita Sonecha, employment solicitor at SA Law, said basing ethnicity pay reporting on the gender pay regime was a “good start, but not a quick fix to the situation”. 

“Such a proposal is not intended to ‘name and shame’ companies where there is a race or ethnicity diversity gap, but enable them to see if there are any such issues  and if so, whether these can be resolved,” Sonecha said. 

She anticipated race discrimination claims “will increase exponentially” as it would be “easier for individuals to bring such claims and such data may be key to backing up their claims”.

The prime minister is also due to unveil a Race at Work Charter aimed at increasing recruitment and career progression among BAME employees. The charter, designed with Business in the Community, has been signed by the CIPD, accountancy giant KPMG and public sector bodies including NHS England the Civil Service. 

May’s announcement follows the launch of a review by the Department for Business, Energy and Industrial Strategy (BEIS) earlier this year, which will scrutinise how employers have tackled barriers to BAME employee progression at work, one year after the 2017 McGregor-Smith Review into race in the workplace.

That report found the UK economy could potentially benefit from a £24bn annual economic boost if BAME employees were given the same opportunities as their white counterparts. 

And in the fifth episode of People Management’s That HR Podcast, Suzanne Semedo, the Ministry of Justice’s (MoJ) diversity and inclusion lead, said this research had made the business case for ethnicity pay gap reporting much clearer. 

"Where I’ve seen organisations be more progressive is where they are absorbing that business case and linking it to their ability to reach their future customers – the whole globalisation argument,” Semedo said. 

She added there was now an opportunity to make discussions around ethnicity in the workplace much more nuanced and strengths-based. 

However, an Equality and Human Rights Commission (EHRC) report found most employers would face barriers in collecting data to calculate their ethnicity pay gap should it become a legal requirement. 

More than half (51 per cent) of employers felt they faced barriers when it came to collecting ethnicity data, and a third (32 per cent) said collecting ethnicity data was “too intrusive”. A quarter (27 per cent) of businesses thought “employees did not want to share the information”.