Sinead Cuthill and Emma Vennesson: Ethnicity pay gap reporting in the UK

Sinead Cuthill and Emma Vennesson: Ethnicity pay gap reporting in the UKIn its Inclusive Britain policy paper, published on 17 March 2022, the government stated that it would not be mandating ethnicity pay gap reporting. One of the reasons for this is that it wanted to “avoid imposing new reporting burdens on businesses as they recover from the pandemic.”

The government’s position has been criticised as “nonsensical” by Caroline Nokes MP, chair of the Women and Equalities Committee, who urged the government to mandate ethnicity pay gap reporting. Nokes’ view is that the government’s approach “makes clear that what is lacking in this administration is not resource or know-how, but will or care to foster a fairer and more equal society.”

The Women and Equalities Committee’s report stressed that mandating ethnicity pay gap reporting was “not about…punishing organisations who, due to geographic location, may not have access to the same talent pool” but about having a tool to “understand and address trends in ethnic disparities across their own workforce.”

The government emphasised in the Inclusive Britain paper that ethnicity pay gap reporting is just one type of tool to assist employers in creating a fairer workplace. Other tools proposed by the government include the launch of an Inclusion Confident scheme in autumn 2023, the aim of which is to provide a framework for improving race equality and progression in the workplace, with employers able to sign up to it voluntarily.

The Women and Equalities Committee acknowledged that capturing and reporting the ethnicity pay gap is a more complex exercise than for gender, which in addition to time and resources taken up by Brexit and the Covid-19 (Coronavirus) pandemic in recent years, might explain the government’s current position on ethnicity pay gap reporting.

The biggest challenge appears to be statistical. It was reported in the House of Commons by Paul Scully MP that there are “difficulties in designing a methodology that provides accurate figures and…allows for interpretation and meaningful action from employers, employees and the wider public.”

In its Inclusive Britain paper, the government highlighted that reporting on broader categories of ethnic groups could create challenges, as “different ethnic groups that share the same race could have very different outcomes.”

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Despite the government’s current decision, developments in this area will likely continue. The current trend towards greater transparency for businesses means that employers should keep ethnicity pay gap reporting on their agenda and keep an eye out for the government’s guidance due to be published this summer.

Emma Vennesson is a counsel and Sinead Cuthill is a trainee at Faegre Drinker Biddle and Reath