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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:
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.
22 March 2022
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