The UK government has confirmed that it will not introduce legislation requiring the mandatory reporting of ethnicity pay gaps.

The government recently published a response to the report by the Commission on Racial and Ethnic Disparities entitled Inclusive Britain, which sets out measures to reduce the effects of bias in the UK whilst recognising that discrimination stemming from ethnic diversity is nuanced and has to be countered with key interventions in particular sectors.  

The government considers there to be significant obstacles to a mandatory ethnicity pay gap reporting mechanism, including not wanting to legislate and impose additional burdens on employers as they recover from the pandemic. For that reason, the government will continue to support employers with voluntary reporting, which remains encouraged, and has provided some new requirements and guidance.  

New requirement for a diagnosis and action plan  

One significant new measure for employers who choose to publish ethnicity pay gap data is the requirement to publish a diagnosis and action plan. Although there is no specific guidance yet on what this should look like, the Department for Business, Energy and Industrial Strategy (BEIS) has committed to publishing guidance for employers on voluntary ethnicity pay reporting in summer 2022. The government says this guidance will help to ensure that there is consistency amongst employers who do report voluntarily and will give employers the tools to understand and tackle pay gaps within their organisations. It will also aim to help employers build trust with employees.

Broader categories - not just BAME

The report also marks a clear distinction between gender pay gap reporting and ethnicity pay gap reporting, emphasising that while gender pay gap reporting has two distinct categories (male and female), ethnicity data is not binary.  Instead, employers are encouraged (where appropriate) to embark on a deeper analysis, which doesn’t focus only on BAME or non-BAME, but goes even further and addresses specific ethnic groups rather than broader categories when publishing their data. The report emphasises that different ethnic groups that share the same race can have very different outcomes.

Final thoughts

As a matter of best practice, employers who do currently publish their ethnicity pay gap data are encouraged to continue to do so. Similarly, those who are yet to publish such data are equally encouraged, as it provides greater transparency for potential candidates as well as demonstrates an employer’s commitment to equality and diversity. Ultimately, ethnicity pay gap reporting will help ensure employers have workplaces where everyone is treated fairly and can succeed.

Given the additional burden now imposed on employers to prepare a corresponding diagnosis and action plan and with little guidance yet available on what this should look like until summer 2022, employers should be careful when carrying out voluntary ethnicity pay gap reporting prior to the publication of the guidance. This will help to ensure that employers are able to report in line with new requirements. Employers may also wish to undertake a more in-depth look at the ethnicity pay risks in their organisation by undertaking an equal pay audit, based on ethnicity (rather than just gender) and to ensure that a detailed legal analysis is carried out of the data to identify any problem areas.

As highlighted in the report by the Commission on Racial and Ethnic Disparities, to ensure employers are promoting fairness and inclusivity in the workplace they may wish to not only focus on reporting ethnicity pay gap data, but also go further and analyse other factors where possible. These could include disability and sexual orientation as well as the overlap between ethnicity and socio-economic disadvantage in order to identity and address areas where disparities exist, dependent on the data available to the organisation.

If you would like to discuss ethnicity pay gap reporting, please contact your usual member of our team or Kathryn Dooks.