According to a new report published today, the House of Commons Women and Equalities Committee call on the Government to introduce legislation which would require large companies to publish their ethnicity pay gap data.

Reporting the ethnicity pay gap should be mandatory, and is the first step to addressing pay disparities between employees from different ethnic backgrounds, say a cross-party group of MPs.

While gender pay gap reporting has been mandatory for companies with over 250 employees since 2017, no such condition exists to monitor pay disparity for workers of different ethnicities.

The MPs say there are clear incentives to do so, with the McGregor Smith review estimating that addressing race inequality in the UK labour market could boost the UK economy by £24 billion a year.

As companies who currently report gender pay gap figures are ‘already well resourced’ to do so, the report recommends that the mandate for ethnicity pay gap reporting be in place by April 2023. 

Darren Hockley, Managing Director at DeltaNet International, said:

“It’s great to see the new report from the House of Commons Women and Equalities Committee calling on the government to introduce legislation for ethnicity pay gap data. Since the gender pay gap reporting legislation became mandatory, it has forced organisations to consider their actions and now the same needs to be done to support ethnic minorities.

“This call for action is a step in the right direction to improving racial equality in the workplace. It will give organisations the push they need to review their pay structures and question themselves if they are doing enough to address the pay gap.

 “Organisations must understand the benefits of diversity and inclusion, and this means everyone, regardless of ethnicity, are getting paid their worth. For organisations to retain their best talent and ensure their business continues to prosper, business leaders must address all pay gap issues, including gender and ethnicity. Business leaders ought to undertake unconscious bias and diversity and inclusion training to ensure everyone within their business are not under-represented and paid below their worth.”

Ethnicity and gender pay gaps priority for firms but many still struggle to level the playing-field

27th Jan 2022: For many UK employers pay gap reporting remains a key priority but little progress has been made on reducing gender and ethnicity pay gaps.

According to Mercer’s new UK Gender and Ethnicity Pay Gap trends report, three-quarters (75%) of respondents disagreed with the government’s decision to suspend gender pay gap reporting in 2020.

Although almost three quarters (74%) of respondents reported their numbers to show a continued commitment for inclusion despite the suspension, there has been minimal progress made in closing the gap.

Half (49%) of survey respondents claim they had seen little or no progress year-on-year and just 1% were able to significantly reduce their pay gap by more than 10%. A clear indication of how businesses continue to struggle in closing pay gaps – a trend which is expected to continue.

The report reveals that fewer than one in three (30%) employers reduced its gender pay gap by 2% between 2019 and 2020. Alarmingly, nearly one in five employers (18%) reported an increase in pay gap from 2019 to 2020. Recently reported government figures on the UK gender pay gap numbers suggest a median gap of 10.4% for 2020, compared to 9.7% from 2019. A similar theme to Mercer’s 2021 Gender and Ethnicity Pay Gap Trends survey.

Michelle Sequeira, Diversity, Equity and Inclusion Consulting Leader, Mercer UK said:

“Our research reveals employers are struggling to narrow their pay gaps. Key drivers of pay gaps range from issues with attracting and retaining women to failing to eliminate the barriers to career progression that prevent female and diverse employees from entering more senior roles. There are employers who have also shown a willingness to change and they are encouraged to conduct deeper analysis to get to the root of the problem and put action plans in place.”

Following many unfortunate events globally surrounding race employers are now looking beyond gender. Nearly two-thirds (65%) supported legislation enabling ethnicity pay gaps to be reported on and addressed and almost half (45%) of respondents claimed they felt under pressure to conduct ethnicity pay gap analysis. Even though ethnicity pay gap reporting is not yet a legal requirement in the UK, three out of four employers (74%) have collected data or are planning to do so in future. More than half (57%) are conducting dry-run analysis to calculate ethnicity pay gaps, and  one-third (31%) have published or are planning to publish their pay gaps. Highlighting the mounting pressure from internal stakeholders, employees and unions to see changes within organisations and wider society.

Ms Sequeira concluded: “To truly make a difference, employers must look beyond their pay gaps. In addition to examining ethnicity pay gaps, our report encourages employers to widen the pools from which they recruit and take steps to reduce unconscious bias in processes. Most important of all is creating a genuinely inclusive workforce that allows people to be themselves and thrive both in and outside of work. It is ineffective to offer working parents career development opportunities and salaries if they are expected to extend their working days in ways that negatively impact their family lives. It is futile to hire and train up diverse colleagues if they join a non-inclusive culture or are repeatedly overlooked for promotion. Understanding your current state and engaging and upskilling senior leaders is so key to help them realise where they are going wrong.”