‘No excuse’ for government not to mandate ethnicity pay gap reporting, say MPs

But experts say firms need to pay attention to what they do with the data after they have reported it

There is “no excuse” for the government not to mandate ethnicity pay gap reporting for businesses, a group of MPs has said.

Yesterday (9 February), the House of Commons Women and Equalities Committee (WEC) published a report calling for the government to introduce a requirement for all large employers to publish the pay disparity for workers of different ethnicities by April 2023.

Caroline Nokes, Conservative MP and chair of the committee, said: "The government's failure to move forwards on ethnicity pay gap reporting is perplexing.

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“The government has no excuse. All that is lacking, it seems, is the will and attention of the current administration.”

The committee’s proposals largely mirror the current rules for gender pay gap reporting, which has been a requirement since 2015 for all firms with 250 or more employees.

The MPs are also calling for the mandate to include a requirement for employers to publish a supporting narrative and action plan alongside their ethnicity pay data – something campaigners have said needs to be added to the current gender pay gap reporting requirements.

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Under the proposal, there would also be guidance for businesses on data protection and methods for capturing, analysing and reporting data, as well as a body responsible for enforcement and what powers that body will have. 

According to the parliamentary report, the number of employers voluntarily publishing their ethnicity pay gaps has increased to 19 per cent in 2021, up from 11 per cent in 2018. It added that ethnically and culturally diverse businesses can be up to a third (36 per cent) more profitability than other firms.

The WEC report is the latest in a long line of publications calling for an ethnicity pay gap reporting mandate to be introduced. It follows a government-commissioned review into the progression of ethnic minority groups in the UK labour market published in 2017 and a consultation launched in 2018 by the Department for Business, Energy and Industrial Strategy (BEIS), both of which recommended a reporting requirement.

Tom Heys, legal analyst at Lewis Silkin, welcomed this latest call for legislation mandating the reporting, adding that employers have been “kept in the dark” about the government’s intentions for three years.

“Many employers want to calculate and report their gaps,” he explained. “But without legislation – or even official guidance – on how to deal with the issues, it can be hard for employers to know how to approach the issue,” he said.

There was also support for the WEC’s call for a supporting narrative to be made part of the ethnicity pay gap reporting process.

Charles Cotton, senior performance and reward adviser at the CIPD, said that reporting is “not enough” to drive change. “[Organisations] need to interrogate the figures in order to understand the causes of racial inequality and come up with the most appropriate solutions,” he explained.

This was a part of the report also welcomed by Sandra Kerr, race equality director at Business in the Community (BITC). “Data isn’t the sole answer to solving the inequalities that have been plaguing the UK’s workforce for far too long,” she said.

Kerr also cautioned that, for organisations, collecting right data would not happen “overnight”. Employers may need to run internal campaigns to encourage employees to disclose their ethnicity while also being transparent and reassuring about how this data will be used and stored. 

“Building trust with employees on how the data will be used will be vital to making reporting ethnicity pay gaps a success,” she said.