Tom Heys: Why employers need to think about ethnicity and gender pay gaps

Tom HeysGender pay gap reporting has successfully increased focus on one aspect of diversity, with high levels of compliance. Although reporting will not be mandatory, the imminent arrival of government guidance on ethnicity pay gap reporting means that more employers will be taking a greater focus on ethnic diversity.

But more complex issues remain unaddressed by looking at gender and ethnicity separately. Individuals from different ethnicities face different challenges, with important differences between men and women in each ethnicity category.

Official statistics from the Office for National Statistics’ October 2020 report Ethnicity pay gaps: 2019 prove this. For example, average white Irish women earn 23% more than white British men. Indian men average 20% more than white men, but Indian women 10% less than white men. Arab women on average earn more than Arab men, but both less than white men.

People cannot be defined solely by their gender or ethnicity. The challenges and problems that different people face in the labour market are complex and, for effective progress on diversity, different strategies will be needed for different groups.

An employer looking to identify intersectional issues in its workplace can face some practical challenges. To do any form of pay gap analysis, a large enough dataset, or group of employees, is needed for the results to be statistically useful. Too small a group and any gaps can be sensitive to any changes in the underlying dataset making any results unstable and uninformative.

There may also be geographical considerations, since, unlike gender diversity, ethnic diversity is not equally spread across the country. Only the largest employers are likely to be able to segment their workforce to be able to reliably calculate accurate gaps combining both gender and ethnicity.

There are options though for smaller employers looking to investigate their intersectional issues. For example, a Swiss-style mechanism to calculate the adjusted pay gap could reveal the interaction between specific ethnicities and genders. Employers may also take a more qualitative approach by listening to their experiences, or conducting anonymised surveys.

Taking this sort of approach may be the next step for those seeking to thoroughly and robustly address workplace diversity.

Tom Heys is a legal analyst at law firm Lewis Silkin