Last week the Government launched a consultation on the possible introduction of pay gap reporting based on ethnicity (the Consultation). A Government-backed review into the barriers faced by people from ethnic minorities in the workplace had recommended ethnic pay gap reporting last year. The Government expected employers to lead on taking ethnic pay gap reporting forward voluntarily. This was, at best, naïve given the previous encouragement for voluntary reporting on the gender pay gap (the ‘Think, act, report’ initiative) had such a poor response. A year later, the Government has realised that only limited progress had been made on the recommendations made in the review. So now we have the Consultation.
The Consultation asserts that we have already seen the “power of transparency” in gender pay gap reporting. Personally, that feels like a premature statement. The first results on the gender pay gap were only published in April this year so it is far too soon to draw any conclusions about whether it has made a difference. Particularly when there are no penalties for having a gender pay gap, or positive obligation to do anything about it. It will take several years to analyse whether gender pay gap reporting has actually made a difference.
The Consultation poses a range of questions. Some of the questions in the Consultation are genuinely things which employers would want to influence. But others lead me to feel that the Government has made a commitment that it is now trying to square the circle on. So employers are asked to set out what the main benefits of reporting their ethnicity pay information would be – but if the Government’s position is that it is time to move to mandatory ethnic pay monitoring then what will this question actually achieve? Employers are also asked to outline the steps that should be taken to preserve confidentiality – a kind of ‘we’re going to do this which is going to create this problem for you, please tell us how it should be fixed’.
The questions which employers will want to engage with in the Consultation are about the sorts of information that ought to be gathered. So should there just be a comparison between white vs ethnic minority employees, or should the exercise be more nuanced by looking at different groups of ethnic minority employees? The Government does not want to over-burden employers but the simplistic white vs ethnic minority ratio could create a false sense of security since it will mask the differentiation between different ethnic groups. Labour Force Survey data indicates that some ethnic groups actually outperform white employees on hourly pay, which will skew the results. But how granular does the breakdown of ethnic groups have to be in order to get useful information? And how do you get the data in the first place about what ethnic group employees self-identify with?
The Consultation also asks whether employers should be required to publish an action plan if they identify disparities through their data. This would take ethnic pay gap reporting a step further than gender pay gap reporting. The absence of an obligation to address an identified pay gap is one of the criticisms of the gender pay gap regime in terms of its ability to actually drive change rather than just monitor it. If a positive obligation is introduced for the ethnicity pay gap then it is likely to be introduced for the gender pay gap too.
The Consultation gives a clear steer that ethnic pay reporting will be introduced. After a Race Disparity Audit by the Government last year found that Asian, black and other ethnic groups were disproportionately likely to be on low incomes, being seen to do something to address this was always likely. But it involves a much more complicated field of data than for the gender pay gap and the balance between useful data and over-burdening employers will be a difficult one for the Government to find.
The consultation closes on 11 January for anyone interested in responding.