Why ethnicity pay gap reporting has to be introduced

By Ben Wilmott, Head of Public Policy, CIPD

Greater transparency over workforce diversity can help drive change.

Recent events have again demonstrated that racial injustice and inequality remains a fact of life for far too many people and continues to scar and undermine our society. 

The killing of George Floyd has triggered a deep emotional response not just in the US but across the world, resulting in numerous Black Lives Matter protests because it shows starkly that too little has changed.  Evidence from a recent Public Health England report on the impact of Covid-19 on different ethnic groups in the UK is also damning. 

It finds that people from an ethnic minority background are likely to be at increased risk of infection because they are more likely to live in urban areas, in overcrowded households, in deprived areas and have jobs that expose them to higher risk. However, to date there has been no Government guidance around how better to protect ethnic minority groups and others that are at greater risk of infection and death but not currently in the ‘vulnerable’ or ‘extremely vulnerable categories’. 

Other recent data from the 2017 Race Disparity Audit found that in the UK people from an ethnic minority were more likely to live in poverty, be unemployed and have lower access to good quality housing than white British people. The audit also showed that black men are more than three times likely to be arrested than white men, while black and Asian offenders receive longer custodial sentences than their white counterparts.  

Of course, the reasons underpinning these engrained inequalities are numerous and complex and require a range of changes to public policy on education, housing and immigration, and to our policing and criminal justice system 

It also requires employment policy changes to ensure that businesses are playing their role in preventing discrimination and bias and ensuring equal access to jobs and progression regardless of people’s ethnicity. 

One of the policy levers that could really catalyse behaviour change in organisations is the introduction of ethnicity pay gap reporting regulation. The introduction of the Gender Pay Gap Reporting Regulations in 2017 has ensured that the issue of gender equality is taken much more seriously at a senior management level in organisations across the UK and they are increasingly being held to account on this.  

Progress to reduce the gender pay gap will of course be slow, but requiring companies to measure this and report on their actions pushes employers to play their role in improving gender equality.  

Of course tackling gender pay inequality cannot be directly compared with ethnicity as it is affected by different factors and ethnicity is more complex, but ethnicity pay gap reporting has the potential to help drive change in the same way over time.  

This is why CIPD called for the introduction of ethnicity pay gap reporting in our Manifesto for Work before the last election , having engaged in the initial government consultation on this issue during autumn/winter 2018/19. 

We held six roundtables with CIPD members across the UK to explore in-depth the challenges and opportunities of introducing ethnicity pay gap reporting and inform the design of the regulations.  

Consequently, we were disappointed when there was no mention of it in the Queen’s Speech in December 2019. But we remain optimistic the Government will move forward with plans to legislate in this area and we are calling on them to do so now 

Of course, ethnicity pay reporting is complex and will require the provision of significant support and guidance for employers and the regulations may require a significant lead time particularly as the economy recovers from Covid-19 and our formal exit from the EU on 1 January 2021.  

However a statement from Government that it will be taking action in this area and introducing legislation requiring larger firms to report annually on their ethnicity pay gap for example from, for example April 2022, would immediately ensure more employers start to pay more attention to the vital issue of racial equality and scrutinising their culture and people management practices. 

In the meantime, the Government should establish an ethnicity pay gap reporting portal so employers with 250 or more staff can start to voluntarily report their pay gap data. 

CIPD will be publishing research on ethnicity pay gap reporting to inform thinking on how the regulations should be designed and to highlight the support that employers will require when reporting their data and creating action plans. 

More broadly, CIPD believes there should be greater transparency on a wider range of workforce measures including on other areas of workforce diversity, investment in skills and employee health and wellbeing. This data combined with information on business performance can provide greater insight on why investment in people requires higher priority in organisations and is critical to long-term value creation for all stakeholders and not just short-term gains for shareholders. 

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