Ethnicity pay reporting – the UK Government’s backtrack

Ever since the Gender Pay Gap Reporting Regulations were introduced in 2017 we have been discussing whether the Government would introduce mandatory ethnicity pay reporting as a legal requirement for UK employers. Over the years, there have been several calls to action and lobbies for the Government to do so. But last week, the Government confirmed that “at this stage” it will not be introducing a mandatory requirement for UK employers to report on their ethnicity pay gap – much to the dismay of many industry bodies, regulators and employers. 

Here is a recap of the journey so far on ethnicity pay reporting in the UK: 

• 2017: The McGregor-Smith Review put ethnicity pay gap reporting on the table as mandatory gender pay gap reporting obligations were introduced for large UK employers.
• 2018: The Government launched a consultation on introducing mandatory ethnicity pay gap reporting obligations which closed in January 2019. We are still waiting for the Government’s response. The Government has recently said it is still continuing to assess next steps and will respond in due course.
• 2020: Two Private Members’ Bills proposing legislation were introduced to the House of Commons calling for mandatory ethnicity pay reporting. 
• 2020: The Government set up the Commission on Race and Ethnic Disparities to review inequality across the UK. 
• 2021: The Women and Equalities Committee recommended that proposals for the introduction of a mandatory reporting obligation should be introduced before the end of 2021.
• 2021: The Commission on Race and Ethnic Disparities Review published their report (referred to as the Sewell Report). Whilst the report acknowledged the increasing number of employers who wished to report their pay gaps, it identified a number of hurdles for employers to meet and rejected the idea of introducing a mandatory reporting obligation for UK employers on ethnicity pay. Instead, it recommended that those employers choosing to voluntary report on their ethnicity pay gap should also publish a diagnosis and action plan setting out the reasons for any disparities and outline what will be done to address them. 
• 2021: A petition with over 130,000 signatories calling for mandatory ethnic pay gap reporting was debated in Parliament. 
• 2021: The CBI, TUC and Equalities and Human Rights Commission published a joint letter urging ministers to introduce mandatory disclosure requirements for ethnicity pay.
• 2022: The Women and Equalities Committee published a report calling for the Government to implement mandatory reporting of ethnicity pay by April 2023 and hitting out at the lack of progress or commitment from the Government so far. The Government has promised to respond in due course. 

• 2022: The Government responds to the Sewell Report in its response titled “Inclusive Britain”.

In the recent Inclusive Britain report, the Government commits to addressing the challenges with ethnicity pay reporting (although it doesn’t really say how) and to “support employers who want [emphasis added] to demonstrate and drive greater fairness in the workplace” but confirms it will not be introducing a mandatory reporting obligation on UK employers to report on their ethnic pay gap “at this stage”. It believes “ethnicity pay gap reporting is just one tool to assist employers in creating a fairer workplace. It may not be the most appropriate tool for ever type of employer seeking to ensure fairness in the workplace” and it wants “to avoid imposing new reporting burdens on businesses as they recover from the pandemic”. 

But for those employers who choose to report on their ethnic pay gaps, the Government supports the recommendation in the Sewell Report that employers should produce a diagnosis and action plan addressing any disparities in their data – arguably making it more burdensome for employers to voluntarily report on their ethnic pay at this stage. Whilst it promises that BEIS will publish guidance for employers on voluntary ethnic pay reporting in Summer 2022, which will include case studies of those companies who are already reporting and promises to give employers the tools they need to understand and tackle pay gaps within their business, without a legal reporting obligation and guidance on how employers can meet the Government’s expectations around reporting, many employers may find the prospect of voluntary reporting at this stage to be very uninviting.  

At the same time, some UK regulators are considering how firms and organisations within their sectors report on ethnicity pay and how this fits within their own supervisory and enforcement frameworks and many employers are already voluntarily reporting on their ethnicity pay gaps despite the lack of a legal obligation to do so. According to the Women and Equalities Committee report in 2022, in 2021 19% of UK employers voluntarily reported on ethnicity pay, up from 11% from 2018. Whilst that sounds positive and is a large increase in voluntary reporting, many believe that mandatory reporting obligations are needed – much in the same way as gender pay reporting obligations - for other employers to follow suit and really drive and achieve change across UK business. 

Many industry bodies and employers may feel frustrated at the Government’s lack of commitment to introduce mandatory ethnicity pay reporting so there is a consistent and legal framework for all eligible UK companies to follow. Whilst it doesn’t mean it won’t happen in the future, we aren’t expecting it anytime soon and it may be that more employers voluntarily choose to report on their own data in their own way, and/or UK regulators put in place their own reporting frameworks and requirements before the Government introduces any type of legal obligation – which may create a set of new challenges and obstacles for employers in the future. 

In the meantime, for those employers who are considering voluntarily publishing their pay gap data, it is clear that the power will lie in the narrative.