Differences in pay between genders and different ethnic groups have always existed, and after many organisations have campaigned for decades, we are starting to see these inequalities being addressed more formally and given more focus. The ONS started to analyse ethnicity pay data in more detail in 2019, and reported an ethnicity pay gap between white and ethnic minority groups of 2.3% in favour of white employees, and this is the smallest pay gap since records started in 2012.  Pressure from Baroness McGregor’s ‘Race in the Workplace’ report, the BITC’s 'Race at Work Charter’ and the ‘Black Lives Matter’ movement amongst others, have highlighted the need to remove barriers and prioritise action on race equality.

Additional research by PWC reports that a significant number of organisations have accelerated their work around ethnicity data collection, analysis and reporting with two in three companies surveyed now collecting ethnicity data, one in 10 companies surveyed now reporting their ethnicity pay gap, and 50% of companies planning to disclose in the next three years.  Many organisations are starting to report on wider diversity and inclusion criteria which will highlight areas for further attention. 

HR have an important role to play in lowering these barriers and reviewing inequality in pay between gender, ethnicity and other protected characteristics. Whilst gender pay gap reporting is now a legal requirement for companies with 250+ employees, ethnicity pay gap reporting is not yet mandatory but is considered ‘best practice’.  This shows commitment to prioritising and investigating pay differentials between different ethnic populations which is an important message to send externally to investors, customers, and potential employees.  With legislation looming on the horizon, we encourage organisations to start thinking about how to collect data or review ethnicity data collected and fill the gaps.  We can offer this advice:

1. Review the GDPR and legal considerations by country to understand any local restrictions.  
2. Define the categories that you will use for ethnicity collection.  For starters, refer to the ONS breakdown for ethnicity groupings or use local census data or similar to determine data categories.  Note that ethnic group categorisation differs between England and Wales, and Scotland and Northern Ireland.
3. Understand your workforce by listening and talking to employee networks through informal sessions to understand and test ethnic groupings and diversity categories.
4. Identify how you will collect the data.  If you have a HR system enabling employees to enter their own details, this would be preferable for collecting ethnicity data.  If this technology is not available in your organisation, using other data collection tools will need to be considered ensuring protection of the data and the ability to link it to the individual for analysis purposes.
5. Communication is key.  The reasons for collecting such data can be easily misunderstood, but clear communication from the start on the purpose, reason and outcome will help to encourage individuals to provide their data.  Gaps in the data will result in an unclear picture and ultimately will be limited in uncovering any ethnicity pay gap that may exist.  It is only with the input of the workforce that we can uncover and start to close any inequalities in pay.

As there is currently no official legislation surrounding the requirements of what or how to publish, many organisations are calculating their ethnicity pay gap following the methodology of gender pay.  A binary approach (white compared to black, Asian and minority ethnicities (BAME)) appears to be the most common, but depending on data available, organisations can calculate ethnicity pay gaps to a more granular level, down to the 17, 10, or five-category approach used by the ONS, if data allows.

At Innecto, we have been calculating ethnicity pay gaps for organisations wanting to get ahead of the curve.  By doing a ‘dry run’ we can help you to calculate your ethnicity pay gap, uncover any potential areas of risk ahead of any requirement to publish, and take control of policies and practices that may be unintentionally biassing pay. If you'd like to know more, please contact me via email (sarah.nash@innecto.com) or call our consultancy team on +44 (0)20 3457 0894.

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