Mandatory reporting of ethnicity pay gap could be ‘counterproductive’ if not done right

There is a ‘significant risk’ that the reporting ethnicity pay levels could be ‘counterproductive’ unless key differences between it and gender pay are recognised, said the Institute for Employment Studies (IES) in its response to the UK Government’s consultation on ethnicity pay reporting. Although the IES supports the government’s proposals to introduce mandatory reporting of ethnicity pay gap information, it suggests that cultural and practical barriers to collecting and reporting ethnicity data are greater than for gender pay. More time and greater government support are therefore needed to prepare for these changes. The consultation response voices specific concerns that measures to increase the recruitment of under-represented groups, for example through apprenticeships or paid internships, could serve to widen pay gaps initially. This could inadvertently discourage employers from taking positive action to improve their ethnic diversity. Reporting arrangements therefore need to also take account of changes in the levels of employment participation for different ethnic minority groups, as well as their pay.

IES argues that information submitted by employers should be benchmarked against local demographics so that assessments can be made of how representative employers are of the communities in which they are based. Participation rates need to go hand in hand with pay reporting.

Drawing on research conducted on behalf of the Equality and Human Rights Commission (EHRC), the IES consultation response suggests that greater transparency at national and employer level is associated with lower pay gaps. Transparency alone does not close these gaps, but plays a key role in driving wider actions that can do so.

Duncan Brown, IES head of HR consultancy, said: ‘There are significant potential benefits for the UK economy, society, employers and employees from the introduction of mandatory ethnicity employment and pay gap information.

‘The success of gender pay reporting is promising, though it is important that the government recognises the particular challenges of reporting on ethnicity pay, namely cultural barriers and the practicalities of data collection.

“Whereas most employers already held data on gender when the reporting requirement was introduced, this is not the case with ethnicity. Employers will need, and should be afforded, more time and support to meet this requirement. We suggest a phased implementation, similar to that which supported the successful implementation of pensions’ auto enrolment.’