KNOWLEDGE

Is now the time to introduce mandatory ethnicity pay gap reporting?

Morton Fraser_Innes Clark
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Innes Clark
Partner
PUBLISHED:
06 July 2020
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Is now the time to introduce mandatory ethnicity pay gap reporting?  No - it should have happened a long time ago!

A petition signed by over 125,000 means that mandatory ethnicity pay gap reporting must be considered for debate in Parliament.

Not many of us have experienced the frustration of knowing with 100 per cent certainty that we are being treated unfairly in a fundamentally important area of our lives.  Pay inequality is one such area.  That frustration can only be magnified when the cause of the unfairness - discrimination - often has a hand in preventing progression into roles that could influence a positive change in this area.  The pay gap is, after all, not a measure of whether people are being paid equally for equal work, but rather a sign post for whether certain groups are not progressing up the career ladder and, consequentially, pay scales. 

Whether mandatory gender pay gap reporting has had an impact on gender pay inequality is still very much up for discussion.  Between the first and second year of reporting the gap closed by 0.1%.  This year gender pay gap reporting was suspended to allow employers to concentrate on managing their businesses through the current pandemic.  As a consequence, only 50% of those who would usually be required to report did so and the gap increased by 0.9%.  But the point is that the gender pay gap is very much on the radar, it is a discussion that is happening.  The gap may not be about to disappear but if nothing else there is a starting point, a measure from which things can (and must) improve.

Not so for mandatory ethnicity pay gap reporting. 

Acknowledging that ethnicity pay inequality exists is by no means new. In 2016 a draft Ethnicity Pay Gap Bill was introduced as a private members bill into the House of Lords, but did not get any further than a first reading.  It called for regulations requiring employers with 250 or more employees to report on remuneration for employees from different ethnic groups.  In 2017 Race in the Workplace - The McGregor-Smith Review was published calling for companies with more than 50 employees to publish a breakdown of their workforce by race and pay band.  It also found that the UK economy could benefit from a £24bn per year boost if BAME people had the same work opportunities as their white counterparts in the workplace.  The Government response was to encourage all employers to take on board the compelling case made for action and accept the recommendations made in the review.  

It is, of course, open to employers to voluntarily examine pay disparity in the workplace.  But it seems without the stick of legislation few took on the recommendations in the Review.  In 2018 research conducted by Business in the Community looked at the performance of UK employers one year on from the Review - Race at Work 2018: The Scorecard Report - and found that only 11 percent of UK employers were actively capturing ethnicity pay data.  The report contained further calls to action for business, seeking to remove barriers to ethnic minorities entering the workplace and achieving their potential at work. 

The Conservative party had in fact pledged to introduce mandatory ethnicity pay gap reporting in advance of the General Election in June 2017.  A consultation was launched on 11 October 2018 looking for views on what ethnicity pay gap information should be reported by employers to allow for meaningful action, who should be expected to report and what the next steps should be.  The consultation closed on 11 January 2019.  But as yet, no further action.

Evidence of both the pay gap and employers inability to analyse it persisted.  A study carried out by PwC - Taking the right approach to ethnicity pay gap reporting - and published in March 2019 found that three quarters of organisations lack the data required to analyse their ethnicity pay gap.  A few months later the Office for National Statistics published the first official ethnicity pay gap statistics highlighting significant gaps between different ethnic groups.  The highest earners were from the Chinese ethnic group, earning, on average, 30.9% more than white British employees, while at the other end of the scale the Bangladeshi ethnic group earned on average 20.2% less than white British employees.

In March 2020 Race Inequality in the Workforce was published.  This survey of 7,700 young workers in England carried out by the Carnegie Trust, University College London Centre for Longitudinal Studies and Operation Black Vote found that BAME workers were 47% more likely to have a zero hours contract than white workers.  As well as calling for "good work" to be equally available to BAME workers, it also called on the Government to address the ethnicity pay gap.   March 2020 was also when the current petition calling for the introduction of mandatory pay gap reporting was started.  It subsequently reached the 100,000 signatures required for it to be considered for debate in Parliament, however a date is yet to be set. 

The tragic death of George Floyd has led to many large companies within the UK and around the world making announcements of their intention to address racism in their organisations in solidarity with the Black Lives Matter movement.  At the time of publication of the Race Inequality in the Workforce survey earlier this year Baroness McGregor-Smith noted "It is time for action rather than words", echoing what she said in her Review in 2017 - "The time for talking is over.  Now is the time to act". 

Now is not the time to act.  Some years ago was the time to act.  But perhaps now we have some momentum and we must now see some action in this very important area. 

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