Ethnicity pay gap reporting

Counting British pounds - finace Print publication


Walker Morris risk series stampMandatory pay gap reporting on grounds of ethnicity (similar to gender pay gap reporting) could be on the horizon.

In line with a manifesto commitment, the Government has published a consultation paper on introducing mandatory pay gap reporting on ethnicity grounds. The consultation comes on the heels of the Government’s Race Disparity Audit which highlighted significant racial inequalities in access to good quality employment, housing and education in the UK.

The consultation also follows a number of formally commissioned reviews all of which have highlighted disparities in pay and status between ethnic minority individuals and their white British counterparts. These include the Parker Review which highlighted a dearth of ethnic minorities in UK boardrooms, the McGregor-Smith review which emphasised structural workplace biases and an Equality and Human Rights Commission report in 2017 which referred to a notable ethnicity pay gap in the UK.

Which employers would be in scope?

The consultation indicates that employers with fewer than 250 employees would not be required to report (as is currently the case with gender pay gap reporting). However, the Government has asked for views on this. The McGregor-Smith review (referred to above) concluded that employers with 50 or more employees should be in scope although the Government has indicated in the consultation document that this would impose too great a burden on smaller businesses.

What ethnicity categories would be used?

The consultation seeks views on whether broad categories (e.g. White, Asian, Black African etc) should be used or the 18 ethnicity categories currently used by the Office for National Statistics. The downside of using broad categories is that the data may lack meaning but, on the other hand, using the 18 ONS categories could result in it being possible to identify an individual employee’s salary. Another question that has been raised is whether it should be the employer or the employee who decides which category an employee is in.  If it is the employer then, there would inevitably be scope for error or misunderstanding.

What happens next?

The consultation runs until 11 January 2019. It is thought that any new legislation would be introduced later in 2019 (with an additional year to allow employers to prepare for it).  The Government’s Brexit workload may mean that this is something of an ambitious timescale. We will report on any further developments.

If you would like any advice on this article, please contact David Smedley or Andrew Rayment.