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Ethnicity Pay Gap reporting should be mandatory, signal MPs

Author: ICAEW Insights

Published: 08 Feb 2022

In a new report, the House of Commons Women and Equalities Committee calls on the UK government to introduce legislation that would require large companies to publish their ethnicity pay gap data.

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.

Chair of the Women and Equalities Committee, Rt Hon Caroline Nokes MP, said the government’s failure to move forwards on ethnicity pay gap reporting is “perplexing”.

“We already have the systems and structures in place to start reporting on the ethnicity pay gap, as well as a clear impetus – tackling inequality benefits not only marginalised groups, but the whole economy. The government has no excuse. All that is lacking, it seems, is the will and attention of the current administration,” said Nokes.

There are clear incentives to do so, according to the Committee. Research estimates that addressing race inequality in the UK labour market could boost the UK economy by £24bn 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 put in place by April 2023. 

All Big Four accounting firms have been trailblazers in this topic by publishing – and advising businesses on how to publish – ethnicity pay gap data. Back in 2019, accountancy firms made a push for mandatory ethnicity pay gap reporting among businesses with more than 250 staff. The movement was headed by INvolve, an organisation which champions diversity and inclusion in business. Signatories also included the Bank of England, Bupa, Citi, Creative Equals, ITN, Jomas Associates, Lloyds of London, Reluctantly Brave, Santander, Sodexo, Stella McCartney and WPP.

“Last week, the government made bold promises to ‘level up’ geographically,” said Nokes. “Time and again it proves itself to be blind to the importance of levelling up within our communities and addressing long-standing disparities along the lines of protected characteristics. By taking this small step, the government would demonstrate its commitment to working with business to reduce inequality.”

In evidence taken from business and employment experts, the Committee acknowledges the challenges presented by the mandate – notably, the smaller sample size of ethnic minority groups as opposed to the rough 50:50 gender split of the workforce, which raises issues regarding anonymity in smaller organisations. Addressing concerns regarding the enforcement of publication, the report calls for a clear explanation of how new rules will be enforced, and states that the government must provide employers with data protection guidance. 

The Committee also calls for legislation to require businesses to publish an accompanying statement and action plan, allowing employers to account for pay gaps and outline steps to be taken to address them. 

The Department for Business, Energy and Industrial Strategy had already got the ball rolling back in 2018 when it launched a consultation recognising that it is time to move to ethnicity pay gap reporting. The consultation closed in January 2019 and the government has yet to publish a response.

On 10 January 2022, Paul Scully MP wrote to the Committee, stating that the Government will respond “in due course”. 

Read the Women and Equalities Committee report: Ethnicity pay gap reporting

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