'Matter of urgency' | Renewed calls for introduction of mandatory ethnicity pay gap reporting

Renewed calls for introduction of mandatory ethnicity pay gap reporting

A business charity has written to the Prime Minister urging him to introduce mandatory ethnicity pay gap reporting.

Business in the Community (BITC), the Prince’s Responsible Business Network, has written to the Prime Minister Rishi Sunak, as well as the Leader of the Opposition, Sir Keir Starmer, calling for the introduction of mandatory ethnicity pay gap reporting for UK employers with over 250 employees.

The letter asks Sunak and Starmer to work together to legislate for mandatory ethnicity pay gap reporting as soon as possible.

BITC, Baroness McGregor-Smith and UK employers have been calling on the Government to introduce mandatory reporting for some time. This new call for mandatory reporting comes as predictions using census data show that by 2051, nearly a third of working-age adults in England and Wales will most likely be from ethnic minority backgrounds.

Using data from the McGregor-Smith Review, BITC has predicted that if this diverse ethnic talent is fully utilised, it could boost the economy by £36 billion by 2051, increasing £12 billion since 2017.

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Currently, there are just over 888,000 employees who are employed by companies that publish their ethnicity pay gap which is less than 3% of the entire UK workforce. [3] BITC research shows that without Government action, it will take until 2075 for companies currently capturing ethnicity data to publish it.

Sandra Kerr CBE, Race Director at Business in the Community, said: “The Government needs to bring forward mandatory ethnicity pay gap reporting as a matter of urgency. Employers back it, evidence shows that reporting works so I’m not sure what Government is waiting for. Legislating for companies to publish this data is only the first step, closing the pay gap is when the real work will begin. By continuing to ignore the inevitable, the Government is just wasting time when we could all be working together to address the problem.”

Baroness McGregor-Smith CBE said: “It has been six years since I published my review into race in UK workplaces and since then, there has been no tangible action taken by the Government to address pay disparities for diverse ethnic groups. It’s clear that mandatory reporting is the only way to address the ethnicity pay gap, it’s too late for voluntary guidance. The Government must make reporting mandatory and work with employers to ensure pay is equal for people from all backgrounds.”

Business leaders think their company has an ethnicity pay gap

According to 2022 research by D&I consultancy and global network INvolve, almost half of UK business leaders believe their company has an ethnicity pay gap.

The research also found that 95% of employees are willing to share their ethnicity with their employer, meaning that the ability to measure and report on the ethnicity pay gap is well within the grasp of employers.

The ease of collecting this data calls into question the Government’s recent refusal to make ethnicity pay gap reporting compulsory, citing ‘significant statistical and data issues.’ In February, the House of Commons Women and Equalities Committee called for legislation to introduce the metric for companies with over 250 employees, as is already the case with gender pay gap reporting. The research presented by the House of Commons Women and Equalities Committee made a strong economic argument for ethnicity pay gap reporting, pointing out that addressing race inequality in the UK labour market could boost the UK economy by £24 billion a year.

"Too difficult"

However, the Government refused, claiming it would be too difficult to gather the necessary data. The Chair of the Women and Equalities Committee, Rt Hon Caroline Nokes MP, responded to this by saying: “The Government's nonsensical response - which claims that gathering the necessary data would be too difficult, and then promptly outlines how this could easily be addressed - is disappointing. It makes clear that what is lacking in this administration is not resource or know-how, but the will or care to foster a fairer and more equal society."

Previous research in 2017 by the Equality & Human Rights Commission painted a complex picture of the ethnicity pay gap in the UK. Although White British groups tended to out-perform all other groups in terms of pay, Indian, Chinese and British-born Black men had similar earnings to White British men. Pakistani and Bangladeshi males experienced the most severe pay gaps, with a substantial minority paid below living wage in the period 2011-2014.

In terms of women’s pay, ethnic minority women outperformed White British women, with only Pakistani and Bangladeshi immigrant women experiencing a disadvantage. However, this research does not take into account the gender pay gap, which further complicates the picture. It’s also important to note that White British people are employed at the highest rate of all these groups, which also contributes to income inequality.

A long way to go

Suki Sandhu OBE, Founder and CEO of INvolve, said their research shows that business leaders know how far there is to go in driving the diversity and inclusion agenda forward: “The existence of the ethnicity pay gap is a fundamental sign that not enough has been done to improve ethnically diverse representation across senior leadership. The first, and critical, step to drive progress and accountability for change is honest, transparent measurement to create clear benchmarks for progress.”

He added: “While there is currently no legal mandate, businesses taking DE&I seriously should be stepping up and reporting their ethnicity pay gaps. It’s incredibly encouraging to see how many employees are willing to share the data needed to report this and suggests an appetite for change and transparency across businesses. We’ve seen progress made on the gender pay gap – it’s now past time to address ethnicity

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