Government will not introduce mandatory ethnicity pay gap reporting

Experts lament ‘missed opportunity’ as response to Sewell report outlines more than 70 actions to address racial disparities

The UK government will not introduce mandatory ethnicity pay gap reporting, it has confirmed, despite widespread calls for it to do so.

Sharing the update as part of its response to last year’s controversial Sewell report, the government has said it will help organisations undertake reporting, as well as discourage use of “unhelpful” terms such as ‘BAME’.

Published yesterday (17 March), the plan, entitled Inclusive Britain, sets out more than 70 actions that aim to reduce racial disparities across the country.

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Following its publication in 2021, the Sewell report – led by education consultant Tony Sewell – was widely criticised after it concluded that institutional racism was not the cause of additional hurdles faced by ethnic minorities in the UK.

Kemi Badenoch, minister of state for equalities, said the Inclusive Britain plan “delivered a compelling message: as a country we have made huge progress, but we can go further”.

The report’s recommendations targeted other factors behind disparities, including socio-economic background, educational failure, and family breakdown.

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While the action plan does not introduce mandatory ethnicity pay gap reporting, it outlines that the government will publish guidance at a later date that will assist organisations planning to provide voluntary reporting.

However, experts have expressed dismay at the government’s refusal to commit to mandatory ethnicity pay reporting.

David Lorimer, director at Fieldfisher, said: “One could go as far to say it's not really a committed strategy and could make things harder for employers as it is optional whether you do it or not, but if you are going to do it, you need to have an action plan.”

For this reason, he suggested that employers that have voluntarily decided to report on it should be well-advised to interrogate the data they have to carefully and critically examine where any issues lie. 

“For instance, if the pay gap is non-existent at entry level, but significantly skewed at more senior levels, that can help inform the areas of focus. Employers might decide to, for example, invest in mentoring with a particular focus on supporting particularly under-represented groups to progress, or in assessing the progression path to interrogate and root out baked in bias,” he added.

The CIPD has previously called for mandatory reporting, similar to the rules in place for the gender pay gap, to apply to all large employers from April 2023 as well as the need for companies to explain the nature and cause of pay gaps to effectively help tackle the disparities.

Commenting on the government’s decision not to adopt mandatory reporting at this stage, Ben Willmott, head of public policy at the CIPD, said: “The government has missed an opportunity to tackle racial discrimination and inequality in the workplace by failing to introduce mandatory ethnicity pay reporting.

“Unfortunately, we know from previous schemes that a voluntary approach will not help drive the changes that are needed in many organisations.”

Other strategies to tackle bias and ensure fairness in the workplace included as part of the Inclusive Britain plan include new guidance for employers on how to adopt positive discrimination policies in the workplace.

The government’s Equality Hub has also pledged to create an ‘Inclusion at Work Panel’ by spring 2023

In the absence of legislation, the CIPD has said it will work with the government to support the development of official guidance to try and maximise the adoption of voluntary ethnicity pay reporting.

“We will also support the new Inclusion at Work panel and the development and dissemination of evidence-based resources and training for employers to tackle bias and promote fairness at work,” Willmott added.

The action plan also features guidance on the use of artificial intelligence (AI) in selection processes, which clarifies how anti-discrimination law applies to  decision making via algorithms in order to avoid perpetrating bias or taking biased decisions.

Read the CIPD’s guidance for employers on voluntarily reporting ethnicity pay gap data