Ethnicity pay gap reporting: the Government consults

As we trailed in April 2018, this month the Government has published a consultation paper on introducing mandatory ethnicity pay gap reporting. This was a manifesto commitment for the Conservative Party; however, some thought that this policy could get lost due to the amount of Parliamentary time taken up by Brexit.

Why consult?

This consultation comes on the anniversary of the Government’s Race Disparity Audit. This showed significant racial inequality in terms of access to good quality employment, housing and education for those from BAME backgrounds compared to their white counterparts.

It also follows a series of reports/reviews which have shown continuing racial disparity in the UK in terms of pay and employment status, namely:

• the Parker Review (2016) which highlighted the paucity of ethnic minorities in the boardrooms of Britain;
• McGregor-Smith review (2017) which emphasised the structural bias that pervades the workplace, depriving the economy of the benefits of a fully diverse workforce;
• the Equality and Human Rights Commission research report (2017) which found that “broadly speaking, in the period 1993-2014, there had been very little narrowing of ethnic pay gaps and for some groups they have actually increased”; and
• in 2017 the Greater London Authority (GLA) published the results of its pay audit which has found that ethnic minority workers in London’s public sector face a pay gap of up to 37%.

What is the consultation about?

The consultation seeks views on ethnicity pay reporting by employers, including:

What size of employer should such reporting should apply to?

The Government has indicated in this consultation that employers with fewer than 250 employees would not be required to do this reporting. However, they have asked for views on this issue. Baroness Ruby McGregor-Smith in her review considered that the reporting duty should apply to employers with 50+ employees. However, the Government’s view expressed in the consultation document is that this would place too great a burden on smaller businesses. A threshold of 250 employees would mirror the gender pay gap reporting scheme.

What categories of ethnicity should be used?

Should five broad groups be used (White; Mixed Multiple Ethnic background; Asian, Asian British; Black African/Caribbean/Black British; any other ethnic group); or the 18 categories used by the Office for National Statistics?

The broader the categories the less the data will tell the employer. However, if employers are required to use a large number of ethnicity categories then it may be possible to identify individual employee’s salaries which raises issues around confidentiality. Further, there is an issue around who decides which category an employee falls into (employers or the employees?) and the accuracy of that categorisation.

Support for employers

Should the Government use the same support mechanisms for employers which it used ahead of introducing gender pay gap reporting e.g. producing guidance notes and factsheets developed by the Government Equalities Office and ACAS? In the case of gender pay gap reporting, the GEO also used regional employer case studies to raise awareness.

Next steps

This consultation runs until 11 January 2019. It has been broadly welcomed by both the CBI and TUC.  It is reported that legislation is likely to follow later in 2019 with employers being given a further year to get ready for this change before the legislation is implemented.

We intend to submit a response to this consultation and will be seeking input from our clients in the coming weeks. Watch out for our short survey. In the meantime, if you have any comments or questions, please do not hesitate to get in touch.

Paul McFarlane (Partner) is a member of our London Employment, Pensions and Immigration team. Paul is also chair of the Employment Lawyers Association’s Legislative & Policy Committee and a member of the Law Society’s Employment Law Committee. Both committees comment on government proposals to reform employment law. In 2016, Paul was appointed as a board member of the Black Solicitors Network (BSN) which seeks to promote the interests of black solicitors

We are happy to assist you with any aspect of pay reporting or to provide diversity and inclusion training to staff at all levels of your organisation. To discuss your requirements, please do not hesitate to contact Paul (paul.mcfarlane@weightmans.com) or speak to your usual Weightmans advisor.