According to the Office for National Statistics, there are wide variations in gross earnings between ethnic groups in the UK labour market. Ethnicity pay gap reporting remains voluntary in the UK, unlike gender pay gap reporting which has been mandatory for larger employers since 2017. Despite this, some employers are voluntarily choosing to report on their ethnicity pay data and the government has published its first guidance suggesting a consistent approach to measuring ethnicity pay differences. The aim is to drive greater fairness in the workplace and reduce pay disparity between ethnicities. The guidance covers a number of areas including the collecting of the data, how to make the calculations, analyse the results and develop an action plan to address any disparities.
One of the main challenges with ethnicity pay gap reporting is the poor quality of data many employers hold about ethnicity. Incomplete data can lead to misleading results, as can taking a binary “white v. non-white” approach. Different ethnicities can face different challenges. For those reasons, when collecting the data, the government suggests that detailed ethnicity classifications are used wherever possible (such as breaking down “white”, into English, Welsh, Scottish, Northern Irish or British, Irish, Roma, Irish Traveller and any other white background). When assessing the data, the guidance recommends looking at the percentage of employees in different ethnic groups, as well as the percentage of employees who did not disclose their ethnicity (answering “prefer not to say” or providing no answer when asked).
In terms of the actual calculations, the government recommends looking at a number of different aspects of pay including mean (average) and median ethnicity pay gap. This mirrors the gender pay gap reporting calculations with the aim of reducing the complexity of collecting and applying this information. The guidance includes useful methodologies for these calculations. If an employer opts to calculate their ethnicity pay figures, the government recommends looking at ethnicity representation at each pay band in an organisation and across the organisation as a whole, as well as the differences in average pay between ethnic groups and the levels of engagement with ethnicity questions.
Data on employees’ ethnicity is considered special category personal data under the General Data Protection Rules (GDPR). Employers must advise employees how their ethnicity data will be used, how the data will be kept safe and how it will be anonymised to ensure no specific individuals can be identified if an analysis derived from the data is published. The Information Commissioner’s Office gives further guidance on how to collect and secure this data to comply with the law.
Taking steps to identify and narrow the ethnicity pay gap can assist in improving diversity and inclusivity in the workplace, and generally in allowing for a fairer workplace with respect to pay. While voluntary, there may be a positive impact on an employer’s brand if they are seen to be genuinely considering their ethnicity pay situation and taking steps to narrow any gap identified. The new guidance provides useful practical steps to assist employers with that process.