Further to our previous article, the Government has now confirmed in its formal response to the Sewell report, that ethnicity pay gap reporting will not be made compulsory.
Ethnicity Pay Gap Reporting
Following the Black Lives Matter protests in the wake of the death of George Floyd, the Commission on Race and Ethnic Disparities (CRE) was commissioned by the Government on the 16th July 2020 to “examine inequality in the UK across the whole population.” It published its report (aka 'the Sewell report') on the 31st March 2021. Whilst the Sewell report did not call for the introduction of mandatory ethnicity pay gap reporting, it did issue guidance for those who wish to volunatrily publish their own ethnicity pay gaps.
In rejecting mandatory ethnicity pay gap reporting, the CRE's report stated: “It is clear that pay gap reporting as it is currently devised for gender cannot be applied to ethnicity. There are significant statistical and data issues that would arise as a result of substituting a binary protected characteristic (male or female) with a characteristic that has multiple categories.”
The CRE also pointed out that: “The main statistical problem that arises with ethnicity pay reporting is the unreliability of sample sizes. If an employer with 250 employees (the threshold suggested in the 2018 BEIS consultation on ethnic pay gap reporting) reports a gender pay gap, on average they will be comparing 125 men with 125 women. If they report an ethnicity pay gap as well, on average they will be comparing 225 White employees with 25 ethnic minority employees. Any findings from such a comparison will be unreliable and make it impossible to look at the workforce stratified by the 18 ONS ethnicity classifications.“
Moreover, the CRE contended that: “If an employer is in an area with a low ethnic minority population there may not be a diverse local candidate pool for firms to employ from. The 2011 Census data shows that of the 650 constituencies in the UK, 437 are over 90% White, so many employers around the country simply do not have enough ethnic minorities for the recording sample to be valid.“
The Government's Response
In its response to the Sewell report, entitled 'Inclusive Britain', the Government confirmed that it would not be making ethnicity pay gap reporting compulsory. The response states: "We recognise the significant obstacles for employers looking to create ethnicity pay gap mechanisms, including employee confidentiality, that allows meaningful comparisons to be made."
Nevertheless, where employers do wish to publish their ethnicity pay gap data voluntarily, the Government confirmed that those employers would be required to "produce a diagnosis and action plan, setting out the reasons for and steps to address the disparities."
Guidance will be published later this year for those employers who wish to voluntarily report their ethnicity pay gap data, and the Government undertook to "work with experts to produce guidance which will enable employers to identify the causes of pay disparities and take relevant steps to mitigate them."
Other measures that will be implemented include:-
- By 2023, an "Inclusion at Work Panel" will be created to address bias and unfairness at work
- Guidance will be provided in a white paper to "address potential racial bias in algorithmic decision-making" to ensure that such decision making complies with the Equality Act 2010
Reaction
Commenting upon the decision not to make ethnicity pay gap reporting mandatory, the equalities minister, Kemi Badenoch, stated: "The causes behind racial disparities are complex and often misunderstood. Our new strategy is about action, not rhetoric, and will help create a country where a person’s race, social or ethnic background is no barrier to achieving their ambitions."
Nevertheless, Labour’s shadow equalities minister, Taiwo Owatemi, argued that the Government had "completely failed to identify or tackle the root causes of racial disparities. It obviously cannot be relied upon to address these disparities, and yet the government has unquestioningly accepted....[the CRE's] findings....It’s disgraceful that we’ve had to wait almost a year for the government’s response"
