Government says ethnicity pay gap reporting will not be mandatory – what now?

Experts express disappointment over the decision, but encourage businesses to continue in their efforts to reduce wage disparities

Credit: Hyejin kang/iStockphoto, Victor/DigitalVision Vectors/Getty Images

The government has decided not to go ahead with mandatory ethnicity pay gap reporting, prompting criticism from experts.

In its recently published response to the consultation on ethnicity pay reporting, which concluded in January 2019, the Department for Business and Trade acknowledged that ethnicity pay gap reporting can be a “valuable tool” for businesses; however, it may not always be “the most appropriate mechanism for every type of employer”.

The government said it was “determined to take steps to help employers address unjust ethnic disparities in the workplace”, and “introducing an effective pay reporting system is one way to achieve that”, but it was important that employers have the flexibility to do this effectively.

“We do not believe that now is the right time to take forward a mandatory approach to ethnicity pay reporting. It is clear that a single reporting model may not work for all employers and that a ‘one size fits all’ approach to action planning will not be appropriate in all circumstances,” the report said.

Lutfur Ali, senior EDI adviser at the CIPD, warned that the decision indirectly perpetuated “systemic biases”, and inhibited the “necessary steps towards greater equality of outcomes for all ethnic minority people. “We know from mandatory gender pay gap reporting how effective it has been to improve pay disparities between men and women,” he said. 

“This decision not only disregards the insights and recommendations from professional bodies, organisations and experts for greater transparency and accountability in workplace inequalities, but crucially undermines the progress made by employers seeking to deliver wider equality, diversity and inclusion.”

However, Teresa Boughey, chief executive of Jungle HR and founder of Inclusion 247, said the government’s decision “underscores a reluctance to adopt a uniform model for all employers”. 

“The government has recognised that combining all ethnic minority groups together for reporting purposes poses a significant concern,” she said. “It overlooks the rich individual uniqueness and the wide array of backgrounds that comprise ethnic minority communities, which would in turn fail to spotlight specific pay disparities.”

The government had previously reversed a commitment to make ethnicity pay gap reporting mandatory in 2022. It then published guidance in April 2023 for employers that wanted to voluntarily report on their ethnicity pay, following an update to its Inclusive Britain strategy introduced last year.

Sandra Kerr, race director at Business in the Community, said it was “disappointing” that the government had ignored their calls to make ethnicity pay gap reporting mandatory, but its recent publication of voluntary guidance was welcomed. “Even though reporting is not mandatory, organisations can still ensure they are collecting, publishing and acting on their ethnicity pay gap data, and addressing any inequalities and disparities in pay,” said Kerr. 

Tom Heys, legal analyst at Lewis Silkin, said that “if an employer is taking steps to reduce its ethnicity pay gaps, it will be much less likely that any claims will arise”.

While ethnicity pay gap reporting will not generally help to “defend a specific claim of direct or indirect discrimination”, he added, it might be of “some support in an employment tribunal when an employer is faced with a direct discrimination or harassment claim based on the actions of another employee.  

“The reporting itself shows the employer is committed to eliminating discrimination.” 

According to Ali, the CIPD ethnicity pay reporting guide encourages organisations with more than 250 staff to ensure that, as part of their wider equality, diversity and inclusion strategy, ethnicity pay gap reporting is used to tackle workplace inequalities.