UK Companies Call For Mandatory Ethnicity Pay Gap Reporting

Almost a year since companies were required to report on the gender pay gap, fifteen companies have today signed a commitment to work towards mandatory ethnicity pay gap reporting and encourage other businesses to do so as well. Signatories include the Bank of England,Deloitte, KPMG, WPP, Santander and EY.

The commitment, driven by membership organisation INvolve which champions diversity and inclusion in business, aims to get more businesses voluntarily reporting on their ethnicity pay gap. It is also encouraging the government to implement mandatory ethnicity pay gap reporting when it announces the outcome of its ‘Ethnicitypay reporting’ consultation, which closed in January.

In 2018 The Resolution Foundation estimated the ethnicity pay gap at £3.2bn1. A report from INvolve also showed that white people earn on average between £67 and £209 more per week compared to similarly qualified individuals of a different ethnic background, and that the most ethnically diverse workplaces are 35 percentage points more likely to financially outperform industry averages2. Yet, there are more CEOs in the FTSE 100 called Steve than ethnic minority leaders put together, and 51% have no ethnic minority board members,reflecting the disparity of opportunity in business for ethnic minorities.

The fifteen signatories, Bank of England, Bupa, Citi, Creative Equals, Deloitte, EY, ITN, Jomas Associates,KPMG, Lloyds of London, Reluctantly Brave, Santander, Sodexo, Stella McCartneyand WPP have committed to:

  • call for mandatory ethnicity pay gap reporting for UK businesses
  • work towards reporting the ethnicity pay gap ahead of any government mandate to do so
  • bring about institutional change through visibility of data and open discussion of why the ethnicity pay gap exists within their organisations
  • encourage other businesses to engage in voluntary reporting by endorsing the reporting framework laid out by INvolve

To support both signatories and the wider business community, INvolve has created a framework and white paper which businesses can consult to work towards reporting their ethnicity pay gap. The white paper is intended to support those firms looking to send a signal that they are ready to take action through ethnicity pay gap reporting to ensure everyone at their company receives equal opportunity and treatment. Download here: https://www.out-standing.org/news/epg-mandate/

The news comes almost a year after UK employers with 250 or more staff were first required by law to report on their gender pay gaps. Commenting on why it’s vital that the ethnicity pay gap receives the same scrutiny, Suki Sandhu OBE, CEO and Founder of INvolve said,

“Addressing hard issues like disparity and race is never easy, but the moral and business case for taking action must win out. For many businesses the idea of increasing corporate reporting is not a welcome one. But, as shown by mandatory gender pay gap reporting, it is vital to encourage discussion and help businesses to deliver impactful change.

“We know firms who are more diverse and inclusive enjoy a significant diversity dividend – enhanced profitability, productivity, innovation and sustainability. We hope by publishing this framework and white paper more businesses will voluntarily take up reporting on the ethnicity pay gap, while we await the outcome of the government’s policy decision.”

Only about 3% of large employers have so far voluntarily reported their ethnic pay gaps.3 Of the signatories, Bank of England, Deloitte, EY, KPMG and ITN already voluntarily publish ethnicity pay gap data.4

Bank of England Chief OperatingOfficer, Joanna Place comments:

“Reporting on the gender pay gaphas helped us better understand some of the challenges we face in progressingour inclusion and diversity agenda. Extending this scrutiny to the ethnicitypay gap is not only the right thing to do, it also makes good business sensefor companies wanting to recruit and retain talent. The Bank is alreadycommitted to reporting annually on the ethnicity pay gap and hopes thisframework will encourage other businesses to do so too.”

Emma Codd, Managing Partner forTalent at Deloitte, said: 

“Deloitte has voluntarily reported its ethnicity pay gap since 2017; this year we have also published our total ethnicity earnings gap, which includes all equity partners. While ethnicity pay gap reporting is not without its challenges, I believe such transparency is critical to improving diversity in business. I would also encourage all firms to publish the factors driving their gap and actions they are taking to close it. Only through this can we help ensure that change is both meaningful and sustainable.”

Sarah Perry, Human ResourcesDirector, Sodexo UK and Ireland said:

“Driving the diversity and inclusion agenda must be a priority for any business that wants to thrive, rather than just survive. It is our belief that ethnicity pay gap reporting will help promote action within organisations and encourage constructive collective dialogue amongst organisations committed to reducing the gap.

“Through signing up to INvolve’s mandate we are demonstrating our commitment to transparency. We acknowledge that reporting on our ethnicity pay gap is not going to be without its challenges but one we are determined to overcome these as another step on our journey to creating an inclusive culture where everyone can flourish.”

A Framework for Ethnicity Pay Gap reporting from INvolve:

  1. Identify the right drivers:

Engage the heart and the gut of your senior leaders and wider population. Key stakeholders must be genuine advocates for ethnicity pay gap reporting, and this often means engaging them with the business case as well as helping all understand the lived experiences of ethnic minorities in your firm.

A useful perspective to start from is risk: the ethnicity pay gap is about the firm’s reputation and your license to operate. Not reporting and not being transparent has negative impacts for the sustainability of the business.

  1. Audit your current data infrastructure:

Some useful questions to ask: How robust is your existing data? Is ethnicity data collected – if so, where in the employee life cycle? If not, can your current systems be adapted to store this data? What is the current self-disclosure rate for ethnicity at your firm? What mediums do you use to collect ethnicity or people data and where is it stored e.g.employee engagement surveys, people data held by HR. Who are the gate keepers for confidential data?

  1. Position the initiative:

Communicate to your people that you are looking at the ethnicity pay gap and your firm is looking to report this publicly. Announcements can be phased internally to key stakeholders and affinity groups to begin with, then more widely internally. Firms should signal externally that the EPG is being looked at as the initiative is officially undertaken.

This stage is also when you begin trying to increase disclosure rates for ethnicity data – a communications campaign may be necessary or simple reminders to complete people data may be sufficient (Section 4).

  1. Analyse and contextualise the data:

Build the necessary ‘headline statistics’ for reporting (Section 5), and take an additional deep dive into the data to uncover pressure points at the firm and where interventions might be most impactful (Section 6). Contextualise the data with the labour profile of the UK market as well as more granularly for each of your offices. For example, the labour profile of London will look very different from that of Edinburgh.

  1. Report and Respond:

Report your pay gap internally and externally through appropriate channels. Some firms only publish on their website while others actively engage with media. Choose an approach which is fitting for your firm and ensure managers and senior leaders are equipped to respond to queries about the pay gap and why you have reported.

It is essential to communicate about interventions being undertaken by the firm alongside reporting your EPG. Reporting without any accompanying actions to ameliorate issues identified dissolves trust and makes reporting less impactful.

  1. Qualitative engagement

Speak to your people post-reporting to unpick nuances in issues identified. Host focus groups and town halls to have open discussions about the ethnicity pay gap at your firm. Feed in feedback year on year into your D&I initiative and ensure the actions and interventions taken are having the desired impact on your people.

  1. Repeat

Follow the same process as you have previously to effectively compare data year on year. If you communicated any targets or enacted any interventions in the previous year alongside pay gap reporting, provide an update on the status of these.

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