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05 May 2021
Ethnicity pay gap reporting should be voluntary, according to the Commission on Race and Ethnic Disparities' new report.
The report describes ethnicity pay gap reporting as a "potentially useful tool" but one that must be approached with care.
The Commission on Race and Ethnic Disparities' report highlights the same set of problems with ethnicity pay gap reporting that have been identified by legal practitioners (for further details please see "Ethnicity pay reporting: why it's not that simple").(1)
The report states that:
[i]t 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.
Many of those statistical and data issues relate to the size of groups used in any gap calculations. The report highlights how parts of the United Kingdom are less ethnically diverse than others and that this may affect any ethnicity pay gap statistics. For example, employers in the Lake District can expect 98% of their candidate pool to be white due to the area's demographics. A gap calculated from just six ethnic minority employees is likely to be highly changeable from year to year, so would not be a useful statistic.
The commission recommends that employers continue to report on a voluntary basis and, where possible, that they report pay gaps across different ethnicities rather than a simple 'white versus non-white' gap. This is because the commission also recommends that the government produce guidance to assist employers which choose to voluntarily calculate and report their pay gaps.
The commission further recommends that employers which choose to publish this information also publish an action plan setting out what they intend to do in order to reduce any identified pay gaps.
The commission suggests that the government should look at the ethnicity pay gap in the National Health Service as part of a thorough strategic review and use the information and insights obtained from this to further inform its approach to legislating on ethnicity pay gap reporting in future.
The government has been dragging its heels with regard to ethnicity pay gap reporting for two and a half years. A consultation published in 2018 has still had no response published. The government has clearly been reluctant to legislate on this issue and can potentially use this new report as a justification for taking no further action.
Legislation aside, many employers are already calculating and reporting their own ethnicity pay gaps (although still far short of the approximately 10,000 that report their gender pay gaps).
The guidance that the report recommends would be very welcome. Until now, many employers have simply been making their best guess as to how to analyse and interpret their data, meaning that ethnicity pay gap figures are not necessarily comparable from one employer to the next. Employers need this guidance on issues such as how to deal with small group sizes and how to incorporate the data of employees who do not declare their ethnicity.
The government has not yet stated whether it agrees with the report's recommendations on ethnicity pay gap reporting or confirmed whether it will draft guidance. Even if guidance is created, it will likely not be published for many months. Employers will have to wait for clarity on ethnicity pay gap reporting for the time being, but the report does at least confirm that this can be a useful tool for those which currently choose to report voluntarily.
For further information on this topic please contact Tom Heys at Lewis Silkin by telephone (+44 20 7074 8000) or email (firstname.lastname@example.org). The Lewis Silkin website can be accessed at www.lewissilkin.com.
(1) For further information please see "Ethnicity pay reporting – will the government now act?".
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