Department for Business, Energy and Industrial Strategy launches consultation into Ethnicity Pay Gap

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25 October, 2018

Following on from the Gender Pay Gap Reporting requirement, the Government launched a consultation into Ethnicity Pay Reporting earlier this month. The Consultation is currently underway, and responses are required by 11 January 2019.

The issue of ethnicity pay disparity has been on the government radar for some time, with Baroness McGregor-Smith being tasked to examine the barriers faced by people from ethnic minorities in the workplace and consider what could be done to address them back in 2016. Her 2017 report, 'Race in the Workplace', set out a range of actions for business and the government to take forward to help improve employment and career prospects for those from ethnic minority backgrounds. According to the report, equal participation and progression across ethnicities could be worth an additional £24bn to the UK's economy per year and ethnicity pay reporting was recommended.

In its response to the report, the government acknowledged that it was persuaded that the case had been made for ethnicity pay reporting and expected business to lead in taking this forward voluntarily. The government also committed to monitor progress and stand ready to act if needed. The Minister for Small Business, Consumers and Corporate Responsibility commissioned a One Year On Review of the McGregor-Smith Report in February 2018. The findings demonstrated that limited progress had been made on ethnicity pay reporting given just 11% of employees reported that their organisations collect data on ethnicity pay. In response to these findings, the Department for Business, Energy and Industrial Strategy (BEIS) is consulting on a mandatory approach to ethnicity pay reporting.

The consultation seeks views on ethnicity pay reporting by employers. It sets out options and asks questions on what ethnicity pay information should be reported by employers to allow for meaningful action, who should be expected to report and next steps. The objective of the consultation is to enable government and employers to move forward in a consistent and transparent way. Consultation responses will inform future government policy on ethnicity pay reporting. BEIS explained that it understood that this;

"is a complex and sensitive issue. Discussions with business and public sector representatives have highlighted challenges around collecting data and ethnicity classifications, as well as a lack of clarity around what information should be reported. Despite this, employers have expressed a determination to ensure that reporting ethnicity pay information leads to meaningful and targeted action."

Currently, there are wide variations in gross earnings between ethnic groups. Information collected through the Labour Force Survey indicates that, generally speaking, ethnic minority groups earn less per hour than white employees. The finding is not uniform across all ethnic minority groups, however, with some outperforming white employees in hourly pay. Although broadly speaking, people from ethnic minorities are more likely to work in low-skilled, low-paid jobs.

Over 12% of the working age population are from ethnic minority backgrounds, but make up only 10% of the workforce and hold only 6% of top management positions. More people from an ethnic minority background would like to work more hours than they currently do, compared to white workers (people from other ethnic groups have an 'underemployment rate' of 15.3% compared with 11.5% for white workers). Ethnic minorities are more likely to be overqualified than white ethnic groups, but white employees were more likely to be promoted than all other ethnic groups.

Ethnic pay disparities are not primarily about those from a white background and other ethnic groups being paid differently for the same job. The Equality Act 2010 makes it unlawful to discriminate (both directly and indirectly) against employees (and people seeking work) because of their race. Therefore, unless there is a failure to comply with existing law, pay disparities between ethnic groups are likely to be due to other factors that impose a disadvantage on people from ethnic minorities without being explicitly discriminatory.

The McGregor-Smith report noted that "even when overt discrimination is not present, there remains a lingering bias within the system which continues to disadvantage certain groups".

Given the lack of formal discrimination in employment legislation and precedent, the intention of any system of Ethnicity Pay Reporting would be to gather information to identify and hopefully assist in addressing transformative discrimination at play in the workforce. Transformative discrimination is often the hardest type of discrimination to address and the most resistant to change given the extent to which it is ingrained into the fabric of society. However, by gathering as much information as possible in relation to any Ethnicity Pay Gap, the government and the public should be equipped to form an idea of the extent and nature of any inequality and begin the long hard road to effect change.

More information about the consultation can be obtained from the government website.

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