The Government has rejected the idea of making ethnicity pay gap reporting compulsory in its response to a consultation on the issue.
Ethnicity Pay Gap Reporting
As we highlighted in a previous article, the Government launched a consultation on the issue of ethnicity pay gap reporting back on the 11th October 2018. That consultation closed for submissions of the 11th January 2019. The consultation had been launched in response to the report, Race in the Workplace (The McGregor-Smith Review), back in 2017 which called for mandatory ethnicity pay gap reporting to be implemented.
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.” The CRE 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 compulsory ethnicity pay gap reporting, the Sewell 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 report added: "The main statistical problem that arises with ethnicity pay reporting is the unreliability of sample sizes. If an employer with 250 employees 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...[Moreover,] 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."
In its response to the Sewell report on the 17th March 2022, the Government rejected mandatory ethnicity pay gap reporting.
The Government stated in its response that: "We recognise the significant obstacles for employers looking to create ethnicity pay gap mechanisms, including employee confidentiality, that allows meaningful comparisons to be made."
The then Equalities Minister, Kemi Badenoch, added: “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.“
Response To Consultation
The Government finally published its response to the ethnicity pay gap reporting consultation launched back in 2018, on the 13th July 2023. In its response, the Government again rejected the idea of mandatory ethnicity pay gap reporting.
The Government stated in its response that "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. This consultation highlighted genuine difficulties in designing a methodology for ethnicity pay reporting, with mixed views on the best metric to use. It is therefore clear that it is not appropriate for the government to mandate a particular methodology."
Voluntary Ethnicity Pay Gap Reporting
In its response to the Sewell report, the Government stated that where employers do wish to publish their ethnicity pay gap data voluntarily, then those employers should "produce a diagnosis and action plan, setting out the reasons for and steps to address the disparities."
The Government later produced guidance in relation to its voluntary ethnicity pay gap proposals. In that guidance, it stated: "Ethnicity pay reporting is one of the tools employers can use to build transparency and trust among their employees. We want to help those employers who want to report their ethnicity pay data by providing a consistent approach that they can follow, which will allow for meaningful comparisons."
