Only a tiny fraction of UK businesses have carried out any analysis of their ethnicity pay gap (EPG), new research has suggested, with legal concerns around data collection one of the main issues holding them back.
The new Taking the Right Approach report from consultancy PwC found 95 per cent of businesses had not yet analysed their gap, with 40 per cent of that group citing concerns around legal restrictions and GDPR compliance.
Three quarters (75 per cent) of the 80 companies surveyed said they did not presently have sufficient data to analyse their EPG.
Under GDPR, ethnicity is classified as ‘special category’ data which means it could pose a more significant risk to an employee’s fundamental rights and freedoms by putting them at risk of unlawful discrimination.
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It is widely anticipated that mandatory ethnicity pay gap reporting will be introduced relatively soon. The government closed a consultation on the specifics of a reporting in January 2019, following the introduction of gender pay reporting in 2018. Prime minister Theresa May gave her backing to EPG reporting when the consultation was launched in October 2018.
Ethnicity is generally viewed as an even more significant factor in determining pay than gender, though it is also more complex to calculate and information on race is not routinely collected by many businesses.
According to the Resolution Foundation, the pay gap is highest for black male graduates, who earn an estimated 17 per cent less on average than their white counterparts, while black female graduates face a pay penalty of 9 per cent. Pakistani and Bangladeshi men earn on average £4 less per hour than their white male counterparts.
Overall, the foundation estimated black, Asian and minority ethnic (BAME) employees were losing out on £3.2bn a year compared to white colleagues doing the same work.
In the report, PwC warned organisations against waiting for legislation to take action on the issue, stating: “There is a significant data collection exercise to be done. Organisations should be aware that this will be a more complex task than gender pay gap reporting, with significant legal, HR systems and GDPR implications.
“Tackling this challenge head-on is a key first step in ensuring organisations don’t fall behind in preparing to address this important issue.”
Mary Agbesanwa, co-chair of the multicultural business network at PwC, said there was no value in putting off EPG reporting.
“For employees, such reporting requires appropriate messaging and authentic engagement,” she said. “The longer you leave it, the more complicated and costly it will become and the more corners you may end up cutting. Starting now with the necessary planning and honest communication will earn employee trust and confidence and could reduce the risk of regulatory or legal implications.”
Nandini Das, change consultant at PwC, added: “The complexity of this issue is far from limited to the data collection exercise. There is a lot of hesitation around language and cultural differences and the approach organisations take needs to balance the need for data and reporting with engagement, communication and building trust.”
Responding to the report, REC stakeholder engagement manager Ornella Nsio said diversity and inclusion were not just moral but commercial necessities.
“Pay transparency is a vital first step," she said. "Recruitment professionals can play a powerful role in supporting businesses in their quest for more diverse teams. By getting the fundamentals of recruitment right, with committed leadership at the top, real strides can be made in tackling disparities in ethnicity pay.”