CIPD calls for mandatory ethnicity pay gap reporting by 2023

Transparency will create ‘fairer workplaces and societies’, experts say, as analysis finds just 13 FTSE 100 companies have voluntarily reported

Just 13 of the UK’s top 100 listed companies currently report their ethnicity pay gap, analysis of official figures by the CIPD has found, leading to calls for mandatory ethnicity pay gap reporting to be introduced in the next two years.

The CIPD is also calling on the government to require organisations to provide a supporting narrative to explain the nature and causation of pay gaps, and an action plan of initiatives to reduce and remove any such gaps.

Without these, the organisation states, it is less likely that reporting will drive real change.

Gender pay gap reporting has driven transparency and progress, and the same is needed for ethnicity pay gap reporting, said Peter Cheese, chief executive of the CIPD. 

“Ethnicity pay reporting is an important lever for businesses and their stakeholders to assess if and where inequality based on ethnicity exists in their workforce. That’s why we believe it is so important that businesses both capture and learn from this data.

“Mandatory reporting of data, and the associated narrative that shows understanding of the data and the actions being taken to improve, for both ethnicity and gender pay, will help create fairer workplaces and societies and kickstart real change,” said Cheese.

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The CIPD has published its findings ahead of a parliamentary debate on Monday when MPs will discuss whether to make ethnicity pay gap reporting mandatory.

Earlier this year, the Commission on Race and Ethnic Disparities recommended that reporting should only be done on a voluntary basis.

However the CIPD is calling for mandatory reporting, similar to the rules in place for the gender pay gap, to apply to all large employers from April 2023.

Employers currently collect data on median and mean gender pay gap, median and mean bonus gap, bonus proportions and quartile pay bands. The CIPD recommends that employers also publish these figures for their ethnicity pay gap, as well as the proportion of their total UK workforce from ethnic minorities and the proportion of employees who have disclosed their ethnicity.  

The CIPD has also released guidance to help employers measure and report their ethnicity pay gap in the absence of legislation.

Commenting on the findings, Baroness Ruby McGregor-Smith, author of the 2017 Race in the workplace review, said that a strong commitment to inclusion and fairness at work was “not only good for business and their ability to attract and retain the diversity of talent, experience, and skills they need to thrive, but also for our economies and societies.”

“It must be a collective goal that our organisations reflect the communities we live in and mandatory ethnicity pay data gives businesses, investors, and regulators the tools they need to see the current reality and where changes need to happen,” she said.

“It’s only once we see organisations publicly start to report the diversity of their workforce that we will see real change start to happen.”

Sandra Kerr, race director at Business in the Community, said FTSE 100 companies should be leading the way when it comes to equality in the workplace: “It is telling that just 13 FTSE 100 companies have reported already, and 10 of those are reporting for the first time.

“While many employers believe in the value of ethnicity pay gap reporting, only a small number are actually collecting the data to do so,” she said.

“That needs to change, and if we are ever going to see progress in racial equality at work, that starts with a government mandate to increase transparency by mandatory ethnicity pay gap reporting.”