Top tips on preparing for potential new pay gap reporting regulations


Need to know:

  • Employers should review the personal data they currently store, to identify whether it will facilitate pay gap reporting.
  • To improve disclosure rates, communications campaigns can help explain to staff what the organisation will be doing with the information and why.
  • Completing a voluntary pay gap report on areas such as ethnicity or sexual orientation can create a useful foundation, ahead of any formal reporting requirements that might be introduced in the future.

In Measuring and reporting on ethnicity and disability pay gaps, published in August 2018, The Equality and Human Rights Commission (EHRC) recommended that the government legislate for mandatory reporting on the recruitment, retention and progression of disabled and ethnic minority employees at organisations with 250 or more staff.

In October 2018, the Department for Business, Energy and Industrial Strategy (BEIS) and the Race Disparity Unit responded by launching a consultation on the implementation of ethnicity pay gap reporting, to mirror the statutory gender pay reporting obligations introduced in April 2017.

Employers and industry experts alike predict that ethnicity pay gap reporting will come into force from April 2020. Organisations would do well, then, to begin preparing in advance, both to stand ahead of their competition in a world increasingly focused on corporate social responsibility, and to avoid being caught out when changes are brought in.

Quality data

First, employers need to review what information they store on employees, particularly as personal details, such as ethnicity and sexual orientation, are not mandatory disclosures when staff join an organisation.

Details regarding protected characteristics can be more complex because reporting categories are broad. For example, the Office for National Statistics (ONS), in its Ethnicity pay gaps in Great Britain: 2018 report, published in July 2019, used up to 10 different ethnic categories.

Ruth Thomas, senior consultant at Curo Compensation, says: “Quite often, part of the problem is that ethnic categories are baked in to HR systems, so if using different systems for different populations, [there may be] different categorisation systems going on. That has to be the starting point; looking at what data [employers] have on ethnicity.”

Getting a head start on the number-crunching prior to the implementation of any formal regulations is wise, in order to mitigate potential unexpected issues, adds Thomas. “[Employers do not] want to be doing this last minute before the deadline and then finding some complete shocker,” she explains. “The more [they] can do early on to be able to put in place, or talk about how [they] have put in place, actions to start to try and tackle these issues, the better.”

To track year-on-year trends, employers also need to ensure their data is as consistent as possible.

Encouraging communications

If employers do not currently store enough data pertaining to protected characteristics among their employee population, then a communications campaign to encourage staff to voluntarily disclose their details can help to produce a more representative and meaningful pay gap report.

Sharron Pamplin, partner for HR at professional services firm Deloitte, which reported its ethnicity pay gap voluntarily in February 2019, says: “Our biggest [lesson] was about making sure [to] collect data in [such] a way that people feel very comfortable with why [we are] collecting it. It’s about explaining.”

With this in mind, Deloitte has refreshed its new starter welcome pack to explain the collection of ethnicity data. The firm has also conducted a communications campaign targeted at existing staff who had not disclosed their personal information, using videos and senior partner sponsorship to further explain how the data will be used.

“It sets the context and the importance for us about being an inclusive organisation,” Pamplin explains. “That context is something we thought was really important.”

This communications focus has paid dividends: in February 2019, Deloitte’s ethnicity disclosure rate was 73% and in July 2019, it had risen to 85%.

Voluntary disclosure

According to the UK reward management survey, spring 2019, published by Paydata in July, 58% of employers are either looking at, or are planning to examine, their ethnicity pay gap figures. More than two-fifths (44%) are exploring pay gaps regarding disabled employees and 42% are studying discrepancies related to age.

Tim Kellett, director at Paydata, says: “[This] shows that [organisations are] ahead of the curve. Starting on the journey and trying to start to rectify any problems is better than not doing anything at all.”

Thomas adds: “I would run the numbers in advance of having to do this from a statutory perspective. [Employers have then] got a base line to start thinking about how big [the] issue is.”

Employers that choose to voluntarily disclose additional statistics typically use the same metrics and calculations as those required within the gender pay gap reporting regulations. However, ethnicity pay gap reports may need to publish a disclosure rate as an extra statistics, says Thomas. The results from the government’s consultation have yet to confirm whether a disclosure threshold for reporting will also be introduced.

Pamplin says: “Having voluntarily disclosed [at Deloitte], it’s given us good experience to be able to identify both the complexities, but also the opportunities that we’ve got and how we need to address things.

“Being an early adopter has really helped us to increase our transparency. It enables [us] to identify areas that, as an organisation, [we] need to focus on.”