Debrief and checklist for employers

Ethnicity pay gap reporting
guidance

How to measure, report on and address any ethnicity pay
differences within your workforce.

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Employers need to get ready for the introduction of ethnicity pay gap reporting

The King’s speech on 17 July 2024 confirmed “legislation on race equality will be published in draft to enshrine the full right to equal pay in law [Draft Equality (Race and Disability) Bill]”.

The Labour Government have also committed to introduce mandatory ethnicity – and disability – pay gap reporting for organisations with over 250 employees. This builds on the previous Government’s publication of guidance for ethnicity pay gap reporting in April 2023, although their approach was to maintain it as a voluntary provision.

To date, there are no announced dates for the introduction of mandatory ethnicity pay gap reporting, or whether requirements will deviate from the guidance previously published. However, employers are best advised to spend this time enhancing their disclosure rates, collecting data and considering running preliminary calculations and analysis to understand how they measure up, ahead of their results being publicly reportable. 

In this briefing, we'll cover:

  • Is ethnicity pay gap reporting mandatory?
  • Should you report on your ethnicity pay gap?
  • The difference between ethnicity pay gap reporting and gender pay gap reporting
  • A closer look at each of the requirements
  • Our pay gap consulting and analytics approach at BW, and how we can help you get the best results
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Is ethnicity pay gap reporting mandatory?

Public reporting is currently voluntary

However, the new Labour Government have committed to introducing ethnicity pay gap reporting. Timings of this have not yet been announced.

Should you report your ethnicity pay gap?

Our research found that only 6% of respondents said they would wait until it became a legislative requirement before reporting on their ethnicity pay gap.

Employers currently reporting their gender pay gap but not their ethnicity pay gap may wish to consider how this may be interpreted by others, particularly prospective talent, clients and the supply chain.

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Core reporting data requirements

The core ethnicity pay gap reporting calculations that the guidance suggests are:

  • the percentage of employees who have disclosed their ethnicity;
  • the percentage representation of ethnic groups across the organisation as a whole;
  • the mean and median pay gaps for average earnings and bonuses between different ethnic groups within the organisation; and
  • the percentage representation for different ethnic groups within each pay quartile.

Our pay gap analytics consulting service can help you get started on reporting and ensure you’re doing everything correctly.

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The difference between ethnicity and gender pay gap reporting

Ethnicity pay gap reporting adds a significant layer of complexity over how to best analyse and represent your data. Gender pay gap reporting is binary - comparing only male and female. By contrast, ethnicity pay gap reporting, if using the Government’s Statistical Service (GSS) harmonised standards, offers 18 categories, 19 including “Prefer not to say”. It becomes inordinately more complicated to compare each ethnicity not just against their white counterparts, but against each other. This is where professional analysis can be helpful.

These complexities also mean that employers should meticulously explore the causes of any ethnicity pay gaps. Pay differences could be due to many reasons, but it’s up to employers to investigate these and decide when further action may be needed. Our analysts can help you understand the reasons for pay gaps and advise on action planning.

 

A closer look at employer requirements

Employers should consider using the GSS harmonised standards and guidance for collecting someone’s ethnicity - this will allow benchmarking against other employers and government data. The guidance lists five ethnic groups and employees can only select one option, including opting out.

The Race Disparity Unit provides further guidance on collecting ethnicity data.

It is recommended that each ethnic group in the analysis should have a minimum of 50 employees. Groups below this number should be amalgamated or not published.

For less diverse employers, care needs to be taken not to identify individual employees - it may be necessary to provide data limited to ‘White’ compared to all other ethnicities combined.

Employers are encouraged to assess whether some ethnic groups are more likely to work in particular locations, and if this has an impact on pay.

Another measure could be to map workforce data against local ethnicity population data, which may be more relevant than comparing against national averages.

A tablet displays a colorful dashboard analyzing overall representation by ethnicity and hourly wage gaps. Graphs and charts illustrate data comparisons across different ethnic groups, situated against a minimalistic background.
A tablet displays a multicolored data visualization, showing proportions of different ethnicities across pay quartiles and bonus distribution. The information is organized in horizontal bars and graphs for analysis.

Employers may consider questions which examine:

  • internal factors (resulting from company practices); and
  • external factors (relating to wider contexts outsidethe company’s control).

The guidance recommends including:

  • an explanation of the pay gap reporting figures;
  • why any pay disparities exist, based on data analysis and wider workforce statistics (be mindful that these gaps are likely to be complex and multi-dimensional);
  • the efforts already taken to understand and address any pay disparities;
  • confirmation of the method adopted and any inconsistency with previous years; and
  • how any disparities in the organisation are changing.

Having clear, measurable, and time-bound targets is recommended, which commit to addressing specific issues identified as likely causes of unfair pay gaps. Carefully consider the legalities of hiring policies and practices which are targeted at employing people of certain ethnicities. Employers may wish to consult the Government’s positive action guidance.

 

An important note on GDPR

The guidance confirms that an employee’s ethnicity is also regarded as a special category under General Data Protection Rules (GDPR), so before an employer requests employee ethnicity data they must provide:

  • a description of how the ethnicity data will be used; and
  • a description of how their disclosed ethnicity data will be kept safe and secure including ensuring no individual can be identified from any data or analysis published.

You can refer to how to collect special category data on the Information Commissioner’s website to fulfil the legal requirements.



Our approach

The Government’s guidance reinforces the value of our approach – going far beyond mandatory reporting.

We explore further than many other market solutions, working closely with employers to help them understand exactly where their pay gap is concentrated and why. With ethnicity pay gap reporting being more complex than gender pay reporting, now is the best time to enlist the help of an analyst.

With the help of our expert team, your action planning is guaranteed to be:

  • more impactful;
  • better prioritised; and
  • more cost efficient.

All you need to do is provide your data and leave the rest to us – our expertise and knowledge will save you time, money, and resources, and make hitting your objectives much easier.

Our pay gap reporting services
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