Ethnicity pay gap reporting - how will the market respond?

On 11 October 2018, the Government published a series of papers and statements on supporting ethnic minorities in the workplace. Central to this was the launch of a consultation on ethnicity pay reporting, which explored a number of potential approaches to require organisations to publish their ethnicity pay gap (similar to existing gender pay gap regulation).

We know from our experience as both an employer and an advisor how important the collection and analysis of data is to building effective diversity and inclusion strategies. But many organisations are facing challenges with how to prepare for these latest potential reporting requirements. We spoke to a number of businesses to gain insight into both their experiences and concerns relating to ethnicity pay reporting. We also asked our clients to complete an anonymous survey to collect views on the Government’s consultation and diversity data. We have identified a number of key themes:

  • Transparency should be welcomed: Encouragingly, many of the organisations that we have spoken to recognise the value of ethnicity pay gap reporting in shining a brighter light on the subject of ethnic diversity in the workforce; opening up the conversation on race; and encouraging organisations to improve their action plans and initiatives to improve ethnicity inclusion
  • The challenge of data collection: Although many organisations saw the value of some sort of reporting on ethnicity, very few have themselves calculated or published their ethnicity pay gap. The key reason for this seems to be the challenge of data collection. Understanding the legal and data protection issues around ethnicity data is an issue for many, while a lack of systems and tools to collect this data is a challenge, particularly for smaller firms. As a result, 40% of the companies we surveyed said they do not currently have the data to calculate their ethnicity pay gap. Of those who did, many struggled to get high response rates in an area where information can only be requested on a voluntary basis
  • Need for simplicity: Given these challenges, the overwhelming message from our survey was that any reporting should be as simple as possible, and supported by clear guidance, with many expressing a desire for overlap with the approach of gender pay gap reporting where practical
  • Desire to take action: Ultimately, the goal of ethnicity pay gap reporting is not the reporting itself, but to encourage greater employer action and accountability on the ethnic diversity of their workforce. In this context, it is positive to see that organisations are already beginning to think through these actions. Nearly 50% stated they were supporting ethnic diversity in the workplace by reviewing recruitment processes. Others also stated they were setting a clear strategy on the action they are taking to address ethnic diversity.

While the Consultation is still at the early stages, it shows that ethnicity in the workplace is firmly on the Government’s agenda - so organisations need to start preparing now for possible future requirements. The short term challenges of collecting and analysing diversity data beyond gender are considerable, meaning it's essential for firms to start planning now so they can move their focus to driving real improvement in this important area.

At PwC we have voluntarily chosen to publish our BAME pay gap for the past two years, recognising transparency and accountability in this area as an important step in ensuring the workplace is diverse, inclusive and fair.

Over the next months, we will be sharing further insights and solutions for organisations to help them prepare for this new potential reporting requirement.

Katy Bennett

Katy Bennett | FS Diversity & Inclusion Consulting Leader
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Shalah Akhtar

Shalah Akhtar | Tax Manager
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