CIPD urges UK to make Ethnicity Pay Gap Reporting mandatory

Just 13 FTSE firms currently disclose their ethnicity pay gaps, according to CIPD’s latest research. So the professional body is urging the UK government to make Ethnicity Pay Gap Reporting mandatory to boost equality, ahead of next week’s parliamentary debate on the topic.

Despite many organisations publicly condemning racism and discrimination in our societies and workplaces after last year’s Black Lives Matter protests, few actually voluntarily report their ethnicity pay gaps. In fact, just 13 FTSE 100 companies did so in their most recent annual report, despite the increasing expectation from the public, investors and other stakeholders, according to CIPD’s latest research. Of those, 10 organisations published for the first time, which “suggests that greater public scrutiny of race inequalities prompted these employers to act”. 

ASSESSING INEQUALITY

With so few voluntary disclosures to date, and slow legislative progress since the Government launched its first consultation three years ago, the CIPD is calling for ethnicity pay reporting, including the requirement to publish a clear narrative and action plan, to become mandatory for all large employers from April 2023.  

“Ethnicity pay reporting is an important lever for businesses and their stakeholders to assess if and where inequality based on ethnicity exists in their workforce,” stated CIPD CEO Peter Cheese.  “That’s why we believe it is so important that businesses both capture and learn from this data. While it’s positive to see some organisations voluntarily report their ethnicity pay, it’s clear that progress is slow and reporting is very inconsistent. Some companies just report their data; while others report a commitment without sharing the data behind it.”

KICKSTARTING REAL CHANGE

“We know that gender pay gap reporting has driven greater transparency and accelerated progress, and we believe the same is needed for ethnicity pay reporting,” added Cheese. “Mandatory reporting of data, and the associated narrative that shows understanding of the data and the actions being taken to improve, for both ethnicity and gender pay, will help create fairer workplaces and societies and kickstart real change.” 

The professional body suggests that organisations use the same snapshot dates that are currently in place for gender pay gap reporting. That means data would be collected in March/April 2023 and would need to be reported within one year. In order to bring greater insight and consistency to people reporting, the CIPD is also calling on the Government to require organisations to provide a narrative; including action plans, alongside the data for gender pay gap reporting. “Numbers without a narrative are less likely to drive real change; and too many organisations are not providing this important additional commentary,” noted the CIPD.  

INCLUSION & FAIRNESS FOCUS

A strong commitment to inclusion and fairness at work “is not only good for business and their ability to attract and retain the diversity of talent, experience, and skills they need to thrive, but also for our economies and societies”, pointed out Baroness Ruby McGregor-Smith, author of the 2017 McGregor-Smith review on race in the workplace. “Every person, regardless of their ethnicity or background should be able to fulfill their potential at work. It must be a collective goal that our organisations reflect the communities we live in; and mandatory ethnicity pay data gives businesses, investors, and regulators the tools they need to see the current reality and where changes need to happen. It’s only once we see organisations publicly start to report the diversity of their workforce that we will see real change start to happen.”

Dianne Greyson, Director of Equilibrium Mediation Consulting, who founded #EthnicityPayGap Campaign is advising companies “not to wait for the results of next week’s Government debate to do the right thing”. Greyson launched the #EthnicityPayGap campaign three years ago to push the government to take action on mandatory pay gap reporting. Additionally, she launched Ethnicity Pay Gap Day this year (on 8th January 2021) to promote a call to action, as reported. “For change to happen, we must all play a part,” pointed out Greyson. She urges individuals and businesses to “join the campaign and make the Ethnicity Pay Gap a thing of the past”.

NEW GUIDANCE & RECOMMENDATIONS

To help employers and HR professionals navigate ethnicity pay reporting, from data collection through to analysis and reporting the results, the CIPD has published a new ethnicity pay reporting guide to support employers on their ethnicity pay reporting journey from data collection to publishing a narrative and creating an action plan. In the absence of legislation, the CIPD recommends that employers should publish annual ethnicity reports based on three key components:

1. A uniform set of eight commonly defined statistics to profile pay by ethnicity. The first six are in line with six data points organisations already collect for gender pay gap reporting: median ethnicity pay gap; mean ethnicity pay gap; median bonus gap; mean bonus gap; bonus proportions and quartile pay bands. The guide also recommends two additional data points focused on encouraging the full representation of ethnic minority staff in the workforce:

• The proportion of their total UK workforce from ethnic minorities, ideally presenting this in the context of external demographic data.
• The proportion of employees who have disclosed their ethnicity, as low ethnicity disclosure rates have been a challenge for many employers but can also indicate concern amongst a workforce of disclosing information and how that will be used.

2. A supporting narrative to explain the nature and causation of any pay differentials and gaps by ethnic group evident in their stats. 

3. An action plan of initiatives defined to reduce and remove any such gaps over time. 

Click here to access the full guide. If you’re struggling with where to start, you can also check out the practical guidance from The Clear Company’s Jenny Hinde. 

Earlier this year, the UK’s largest trade body TUC, CBI and EHRC also issued a joint call to the UK government to introduce mandatory ethnicity pay gap reporting. Click here to read more.