What You Need to Know About Ethnicity Pay Gap Reporting

In recent years, ethnicity pay gap reporting has gained significant attention as businesses strive to create fairer, more inclusive workplaces. For many companies, the journey toward understanding pay differences between ethnic groups not only strengthens compliance but also enhances employee trust and creates a positive company culture.

What is Ethnicity Pay Gap Reporting?

Ethnicity pay gap reporting involves analysing workforce pay data to identify and address disparities across ethnic groups. By understanding any pay differences, your organisation can take informed steps towards promoting equality.

While the Government’s guidance on ethnicity pay gap reporting draws from gender pay gap analysis practices, there are key differences. Ethnicity pay gap reporting requires handling data from multiple ethnic groups, adding complexity to the calculations and insights.

Currently, there is no statutory requirement to report on the ethnicity pay gap. However, the government introduced guidance for employers in 2023 on how to do it, and many organisations choose to do it as part of their commitment to equality.

According to data from the Office for National Statistics, pay differences vary widely across ethnic groups, with minority groups often earning less than White British employees. These disparities are more pronounced in areas like London and less so in regions like Wales.

Preparing for Future Legislation

Under the new government, ethnicity pay gap reporting will become a statutory requirement for certain employers. Anytime now, the government will introduce a new Equality (Race and Disability) Bill, which if passed will:

• place a legal duty on employers with more than 250 employees to carry out ethnicity (and disability) pay gap reporting
• extend equal pay rights to protect workers who suffer discrimination on the grounds of their race (and disability)
• ensure that outsourcing services cannot be used to avoid paying equal pay
• implement a regulatory and enforcement unit for equal pay with involvement from trade unions

By starting now, your organisation can get ahead of future compliance requirements and demonstrate its commitment to pay equality.

The Benefits of Ethnicity Pay Gap Reporting

1. Creating an Inclusive WorkplaceAn in-depth pay analysis allows companies to identify pay imbalances across different ethnic groups. By spotting and addressing these disparities, organisations can create a workplace that values and supports all employees equally.An inclusive workplace boosts employee morale and can lead to a more collaborative, engaged workforce, benefiting the overall organisational culture.
2. Ensuring Legal Compliance
   Analysing pay data of your workforce also enables the organisation to remain compliant with equality law. Whilst there is currently no legal requirement to carry out ethnicity pay gap reporting, there is one in regards to the prevention of discrimination, in accordance with the Equality Act 2010.This means that it is unlawful to pay an employee less or give them terms and conditions that puts them at a disadvantage because of a protected characteristic. There are nine protected characteristics, one of which is race and includes colour, nationality, ethnic origins and national origins.

   Carrying out an analysis on how pay is awarded and examining existing working practices will help the organisation to identify any practices or policies that inadvertently disadvantages someone from this group (or any other of the protected characteristics under the Equality Act 2010). If so, this is where there may be claims of indirect discrimination.

   Analysing pay will also help the organisation to see if there are any pay differences between employees by looking at how someone is treated compared to someone else who is in a similar situation. Where there are instances of someone being treated differently to another person, and the difference in treatment is connected to their race, then this opens up claims of direct race discrimination.

3. Increasing Transparency and Accountability
   
   Ethnicity pay gap reporting sends a powerful message to employees, stakeholders, and the public about an organisation’s commitment to equality. Publicly sharing these outcomes can boost trust and encourage current and prospective employees to feel confident about the organisation’s dedication to fair pay practices.
4. Improving Employee Engagement
   In today’s socially conscious work environment, employees value employers who actively work to prevent inequality. Demonstrating a commitment through ethnicity pay gap reporting can help all employees, particularly those from underrepresented backgrounds, feel respected and valued.This increased engagement is invaluable, as engaged employees are more productive and less likely to leave, contributing positively to organisational success.

Is a Pay Gap the Same as Unequal Pay?

A common question is whether a pay gap equates to unequal pay. In fact, they are distinct issues:

• Pay Gap: Refers to the difference in median or mean hourly pay between two groups, which may reflect broad societal factors and organisational practices.
• Unequal Pay: Occurs when employees in the same role, under the same conditions, are paid differently solely due to their gender, race, or another protected characteristic.

Getting Started with Ethnicity Pay Gap Reporting

If considering implementing ethnicity pay gap reporting, here are a few first steps to take:

1. Data Collection: Begin by gathering pay data across the organisation, categorised by ethnic group.
2. Analysis: Examine the data for any significant pay disparities.
3. Policy Review: Assess current compensation policies and identify areas for improvement.
4. Set Goals: Based on findings, establish clear, actionable goals to close any gaps identified.

Organisations that take these steps can contribute to a more equal, fair, and transparent workplace. Ethnicity pay gap reporting is not only a compliance measure but a commitment to a values-driven, inclusive organisational culture.

We’re here to help

If we can help your business start preparing for these changes or if you have any questions about the Ethnicity Pay Gap Reporting, please get in contact.