Following the UK government's commitment in March 2022, on 17 April this year it published its guidance on ethnicity pay gap reporting. Unlike gender pay gap reporting, ethnicity pay reporting is voluntary. Many elements of the government’s guidance align with gender pay gap reporting guidance, particularly the calculations. The guidance acknowledges that ethnicity pay reporting is more complex than gender pay reporting.
The guidance contains a number of helpful recommendations, such as collecting ethnicity data by asking employees to report their own ethnicity. There should always be a way to opt-out of responding. Calculations should be made about the proportion of employees who did not disclose their ethnicity, as this is a measure of engagement levels. Employers should also use detailed ethnicity classifications wherever possible. A list of categories in England and Wales has been provided.
The guidance recommends how to choose which ethnic groups to include in the calculations, including minimum category sizes. This is to ensure employee confidentiality and statistical robustness. To maintain confidentiality, in some cases employers may only be able to report pay gaps between two groups, otherwise known as binary reporting. The government strongly discourages this in isolation, as it will disguise detail which is necessary to understand pay gaps.
It will be interesting to see how many employers choose to report voluntarily, given the complexities involved. Mandatory reporting of the gender pay gap has been in place for six years, but there is little indication that it has been an effective tool for creating change.
The study, Almost half of UK companies reported an increase in their gender pay gap in 2021/22, published on 27 June 2022 by PricewaterhouseCooper (PWC), found that while the average gender pay gap is slowly narrowing, the gap will not disappear until 2151 at the current rate of progress.
Calls have been made for obligations to go further than data reporting. The Fawcett Society suggests that all employers should be required to submit a mandatory action plan on the improvements it will make to gender equality. Some have commented that enforcement of gender pay gap reporting is weak, which further impacts the effectiveness of pay reporting.
It is clear that simply reporting pay gaps will not be sufficient. To make meaningful changes, employers need to scrutinise the data and determine required steps. Employers should also consult and engage with their workforce, and review and amend their action plan regularly.
Susannah Bottriell is a solicitor at Fieldfisher
