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Mandatory ethnicity pay reporting debated by MPs: Key points


United Kingdom

An e-petition debate on ethnicity pay reporting on 20 September 2021 revealed broad consensus on the need for mandatory data collection, but failed to acknowledge some of the nuances of diversity in the workplace.
On 20 September 2021, UK MPs took part in an e-petition debate on the introduction of mandatory ethnicity pay reporting for UK organisations.

The petition, which received more than 130,000 signatures, followed the introduction of mandatory gender pay reporting and the publication of the McGregor-Smith review of race in the workplace, both in 2017, and a government consultation from October 2018 to January 2019 on ethnicity pay reporting (for a timeline of events leading up to the debate, see our pay gap timeline).

MPs highlighted evidence suggesting that, as well as lower pay rates, there are fewer job opportunities and less job stability for people from ethnic minorities than their white counterparts, even among ethnic minority workers who were born and educated in the UK.

They also discussed the lack of reliable information on different ethnic groups in the UK, and obstacles to collecting the accurate data needed to drive change.

Below, we summarise some of the key points from the debate and offer our analysis of the discussion.

Broad consensus on the need for mandatory reporting

This was not a debate in the traditional sense, in that there was general consensus that there should be mandatory ethnicity pay reporting in the UK.

The views put forward by MPs on 20 September indicated there is cross-party political support for compulsory data collection, underpinned by strong public support and the backing of business leaders, trade associations and unions.

MPs also highlighted that many employer organisations feel uncomfortable with voluntary reporting and want it to become mandatory, because they feel nervous about creating risk for themselves or causing offence to their staff.

It was noted that, without data, it will be practically impossible for employers identify and address discrepancies, or define progress.

Mandatory reporting is effective in reducing inequality

MPs broadly agreed that mandatory reporting of gender pay data for organisations in the UK with more than 250 people has been effective in narrowing the gender pay gap and improving recruitment and retention of female employees.

Based on this evidence, it is assumed that similar advances can be made for ethnic minority workers, subject to the need to categorise data subjects and report data in a different way (see below).

Employers should not be afraid of mandatory reporting

MPs stressed that the overall aim of pay gap reporting is to create more equal workforces, understand organisations and industries and identify gaps in opportunity for underrepresented groups.

They also acknowledged that there are challenges for small businesses around reporting data, and that many withhold information citing legal and/or GDPR concerns.

However, it was suggested that the obligation to report pay data should not be seen as a burden, as lessons from big business that report voluntarily show this is an opportunity for employers to reduce structural inequalities in the workplace, maximise value in the workforce and access a wider talent pool.

To address some of the concerns of individual employers connected with reporting and tackle likely imbalances in the data, it may be that ethnicity pay is reported (at least initially) on an industry rather than employer level.

One size does not fit all

MPs acknowledged that while gender pay reporting has been deemed successful in reducing pay inequality between men and women, ethnicity pay reporting will require a different framework.

Gender difference is more, though not exclusively, binary and more evenly spread throughout the UK than ethnic diversity.

The fact that ethnic diversity is unevenly spread throughout the UK was identified as a challenge for reporting, and it may be that a trial in a particular city like London is needed to iron out some of the difficulties in data collection and ensure there is statistical robustness and anonymity.

It is also important to be careful about the language used in reporting and categorisation. Ethnicity refers to heritage and cultural background, as opposed to colour – two concepts that were confused by some speakers during the debate.

MPs did however recognise the issue of intersectionality, where one individual can be disadvantaged in several ways and that employers and policymakers should not ignore the combined effect of ethnicity, gender and class.

Now is the time to take action

Some MPs noted that the combination of Brexit and the Covid-19 pandemic have significantly disrupted the world of work and there is more upheaval to come with the end of furlough on 30 September 2021.

They suggested that this period of flux, when many aspects of employer-employee relationships are under review, is an opportunity to take decisive action on equal pay.

However, they stopped short of making the more radical suggestion that the current approach to delivering workforce equality is piecemeal and narrow and that there may be room for more creative solutions, ideally ones that take account of disability and socio-economic background as well as gender and ethnicity.

What next?

The point of any kind of pay gap reporting is to identify disadvantage, in the hope that this disadvantage can be alleviated.

The debate on 20 September 2021 revealed general agreement with, and support for, the principle of mandatory ethnicity pay reporting; the only bone of contention is how to move from that consensus to the detail of how to implement reporting.

Whatever methodology is used, employees need to feel reassured that the aim of the data is to understand the organisation or industry they work in, not to identify them as individuals. Without that reassurance, which was not discussed in the debate, there will not be engagement from the workforce.

The debate also failed to address some of the challenges facing international organisations, which while they may be able to report on their UK workforce might not be able to collect ethnicity data for every country in which they operate. This could mean some equality action plans become UK-centric, rather than organisation-wide.

One of the strong arguments for mandatory reporting is to generate data that can be benchmarked and compared. It may not be possible to achieve this with ethnicity in the way it has been with gender, however an alternative approach may be to let employers and organisations, both national and international, identify their own categories.

This will help organisations decide what action plans to put in place.

This article was authored by Ranjit Dhindsa, Head of Employment, Pensions, Immigration and Compliance at Fieldfisher.

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