Ethnicity Pay Gap Reporting: Data Says it Can Benefit Organisations

Ethnicity pay gap reporting is essential to be recognised as a fair, diverse and equal employer.

However, most organisations are reluctant to report on it publicly. This is a mistake that we need to address.

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In this guide, we cover: 

• What the Ethnicity Pay Gap is.
• Who reports it
• Why most organisations don’t do it
• Why organisations should report on their ethnicity pay gap
• How to get started

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What is Ethnicity Pay Gap reporting?

The Ethnicity Pay Gap refers to the difference in the average pay between all Black, Asian and Minority Ethnic (BAME) employees in an organisation and all White employees.

The current reporting methodology for the Ethnicity Pay Gap is the same as that used for Gender Pay reporting, with one important distinction; it is not mandatory in the UK.

There is no official way to measure the actual Ethnicity Pay Gap in the UK.

As of now, looking for “Ethnicity Pay Gap UK” on Google Search will only give you access to various organisations’ one-off reports.

Without proper legislation, we can’t see the bigger picture.

However, based on the available data, it appears that, on average, non-white employees earn less than white employees in the United Kingdom.

Now, if reporting on Ethnicity Pay Gap is done voluntarily at the moment, it’s worth mentioning that the number of organisations publishing their pay gap data has evolved from 11% in 2018 to 19% in 2021.

Will Ethnicity Pay Gap reporting become mandatory?

In March 2022, the government responded to a report by the Commission on Racial and Ethnic Disparity (CRE) with a few choice sentences on Ethnicity Pay Gap reporting.

The government confirmed that it would not be legislating for mandatory reporting. Instead, it will “support” organisations with voluntary reporting - as recommended by the CRE.

For now, it is clear that mandatory reporting will not be bought in, despite unions, businesses, and organisations urging the government to enforce it.

Read more on the topic: 'No excuse' for lack of Ethnicity Pay Gap statistics.

What we know from our Ethnicity Pay Gap Database

In the absence of real actions from the authorities, HR DataHub started to collect insight on Ethnicity Pay Gap. We call it the Ethnicity Pay Gap Database.

Since 2018, dozens of organisations in the UK have contributed to the database, thus starting to draw a relevant (yet incomplete) picture of the situation. 

Here’s what we can learn from it:

1. Progress on Ethnicity Pay Gap reporting could be faster: Since 2018, only 170 companies have disclosed their Ethnicity Pay Gap.
2. Commitment from organisations appears to be lacking: Of the 170 companies that disclosed their ethnicity pay gap, only four reported consecutively across the four years.
3. The want to create equal workplaces seems to have declined: The number of companies that have reported their Ethnicity Pay Gap isn’t just low; it is less than it was before the Covid-19 pandemic.

The current trend is not positive.

In 2021, 64 organisations reported their Ethnicity Pay Gap (50% less than in 2020). And we don’t expect to see much movement in the near future.

That’s because when we questioned 125 organisations - which included 12 FTSE 100 - for our Outlook 2022 report, 18% said they had no intention to report their Ethnicity Pay Gap. 

Additionally:

• Only 10% had published it.
• Only 16% planned to publish it between 2021 and 2023.
• 56% said they might publish their results.

Of course, because reporting on Ethnicity Pay Gap isn’t mandatory and because we can’t knock on every organisation’s door, our Ethnicity Pay Gap Database isn’t representative of the entire workforce in the UK. But it’s a start.

However, what our report (and other reports) show is that there’s a real gap between White employees and BAME employees when it comes to Pay and Reward.

In 2021, we found that the median Ethnicity Pay Gap was 10% (down from 2 points compared to 2020).

In our quest to find statistical significance, we’re also comparing our findings to the latest official information on the topic.

In 2019, the ONS reported on the UK’s Ethnicity Pay Gap and reported that “most minority ethnic groups earn less on average than White British people in 2019, though some groups earned more than their White British counterparts”.

This report used information from the Annual Population Survey (APS), the Annual Survey of Hours (ASH) and Earnings and the Labour Force Survey (ELFS).

Here’s a summary of the key findings:

• The median hourly pay for white British employees was £12.40 per hour (2019).
• The median hourly pay for employees from an ethnic minority was £12.11 per hour (2019)
• This average varied greatly amongst ethnic minority groups.

• White and Black African employees earned, on average, £10.75 per hour (2019).
• Pakistani employees earned, on average, £10.55 per hour (2019)
• On the other hand, Chinese employees earned, on average, £15.38 per hour (2019)

‍What does all of this data highlight? 

Considerable disparities in the kinds of employment and earnings received amongst ethnic groups.

Why are organisations NOT reporting ethnicity pay gaps?

All in all, UK organisations are grappling with Ethnicity Pay Gap reporting, despite wide acknowledgement that reporting this data is a vital step towards creating equal workplaces.

Here are the main reasons why a vast majority of organisations are yet to release any information regarding their Ethnicity Pay Gap.

Avoid difficult or uncomfortable discussions about race.

Fact: Discussions around race and ethnicity still cause stress among British employees. In fact, a study conducted by Business in the Community in 2019 revealed that 60% of employees in the UK are not comfortable discussing race in the workplace.

However, employees’ discomfort shouldn’t be an excuse for employers to ignore the elephant in the room.

Difficulties in explaining WHY

To share such information, employers must first collect it from their employees. Of course, without a plan, requesting employees to disclose information on their ethnic background publicly could 1. raise questions and 2. create tension.

Now, to encourage employees to disclose their data, organisations should explain why they need ethnicity data as well as what they will use it for.

Statistical significance

A report from the Commission on Race and Ethnic Disparities (March 2021) suggests that statistical significance and unreliability of sample sizes can be an important barrier to reporting on ethnicity pay gaps.

To explain this, the report takes the example of an organisation counting 250 employees. With 125 female and 125 male employees, the organisation can easily report on its Gender Pay Gap. 

However, with only 25 employees considered as ethnic minorities, reporting on Ethnicity Pay Gap would result in comparing two different numerical groups.

In other words, the low representation of ethnic employees across the UK can also explain the lack of actions on the matter.

However, this clashes with the current narrative (i.e. a growing number of organisations publicly announcing their commitment to building more inclusive workplaces).

As a result, it’s fair to say that if sample sizes do affect final numbers, they shouldn’t be a reason for organisations not to challenge themselves to be better.

Unwillingness from employers to take real actions to close the gap

Collecting data won’t change things. Data-driven actions will.

Just like for the Gender Pay Gap, the value of reporting on Ethnicity Pay Gap lies in what it says and how we - as a society - can work together to build more inclusive workplaces.

Now, 1,600 UK employees contributed to the 2021 Global Culture Report. It revealed that:

• 47% of employees believe that their employer is more interested in collecting data to categorise them rather than understand them.
• 39% say that their organisation has implemented D&I actions ‘just to look good’.
• 25% of employees say that discrimination is a real problem in their organisation.

Ouch.

Confusion around technicalities

An uncertainty around terminology has stopped people from having conversations about ethnicity. 

In fact, a 2021 report from the Black British Business Awards highlighted a pervasive sense of discomfort around discussing race in the workplace. No doubt, fear of saying the wrong thing is holding organisations back from addressing and actively engaging with the ethnicity agenda. 

Confusion around the ‘right’ or ‘appropriate’ categories of ethnicity to report and the complexity of the intersectionality of ethnicity has led to organisations burying their heads in the sand.

It’s not mandatory

It’s pretty clear that we are at a crossroads.

Without a mandate and clear guidance around Ethnicity Pay Gap reporting, it seems that most organisations won’t act on it.

Why should organisations report on Ethnicity Pay Gap now?

For organisations in 2023, it should be less a question of WHY and more a question of WHY NOT?

It’s the right thing to do.

Unquestionably, there is a moral argument for closing the Ethnicity Pay Gap.

No one should be at a disadvantage because of their ethnic origin.

In fact, the Equality Act 2010 makes it unlawful to discriminate (both directly and indirectly) against employees (and people seeking work) because of their race or ethnicity.

And yet.

People want to work for inclusive brands.

A study published in 2022 (Do Jobseekers Value Diversity Information? Evidence From a Field Experiment and Human Capital Disclosures) clearly states that diversity and inclusion are crucial factors for employees.

• 50% say that diversity is an important social issue and wanted to know whether a potential employer agreed
• 45% say that a score would indicate how much they would enjoy working at the company
• 37% say it would help them assess the prospects of working for such an employer.

As it’s becoming increasingly difficult for employers to attract and retain top talent, reporting on Ethnicity Pay Gap may prove valuable.  

If a genuine commitment is crucial, Ethnicity Pay Gap reporting will signify the commitment you have made to tackle discrimination and stamp out inequalities in the workplace.

Tools exist to make better pay decisions: Meet Pay Tracker Live

Pay and reward decisions should always be data-driven.

This is why we’ve built Pay Tracker Live, your guide for more informed pay-related decisions. 

PTL provides in-the-moment pay data in seconds, using any keyword and location in the UK (postcode, town, city, region).

Give it a try!

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How to start reporting ethnicity pay gap

We have used our extensive research to create a simple, step-by-step guide on Ethnicity Pay Gap reporting.

It includes nine practical steps required to start your Ethnicity Pay Gap reporting journey. 

Here’s the exact process:

• STEP 1: Create the business case
• STEP 2: Build the trust
• STEP 3: Define what data to collect
• STEP 4: Collect the data
• STEP 5: Analyse and benchmark data
• STEP 6: Set targets
• STEP 7: Create an action plan
• STEP 8: Track progress
• STEP 9: Share the results: The success and challenges

The important thing is to understand where you are now by analysing your data and benchmarking your score against your competitors.

That way, you can determine which areas need to be improved and what needs to be done to close gaps.

Stand out from the crowd. Be proactive.

To create a fair workplace, an organisation must understand how extensive its issues are from all perspectives. And not only through the lens of gender.

Although data is just the start of your journey, data-led decisions are the quickest way to make a difference in your organisation.

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Now it’s your turn:

• Have you reported your ethnicity pay gap?
• Do you have your Ethnicity Pay Gap data but don’t know what your next step should be?
• Or maybe you are looking to report for the first time?

‍Do you intend to report on your ethnicity pay gap? If so, we have a few things to discuss! Reach out!