Employers unable to report on ethnicity pay due to missing data

The CIPD calls on businesses to publish narratives and action plans to tackle ethnicity pay disparities

The CIPD is calling on Government to make it compulsory for large employers to publish a narrative and action plan alongside their ethnicity pay report to kick-start efforts to reduce ethnicity pay disparities.

These calls are in response to the Department for Business’s consultation on ethnicity pay reporting launched in October 2018 as part of a series of measures to tackle ethnic disparities. The consultation ran for three months and asked businesses, trade unions, and employer groups to call out the benefits and challenges related to mandatory ethnicity pay reporting.

CIPD’s submission to Government is backed by evidence gathered from a survey of 250 HR practitioners and findings from member roundtable discussions which took place in six locations across the UK, including London, Manchester, Leicester, Cardiff and Edinburgh.

Of those surveyed, just over half (53%) reported that they collect some form of ethnicity data in their organisation, highlighting one of the most commonly cited barriers to ethnicity pay reporting – businesses don’t have the data. 

In order to increase employee ethnicity self-declaration rates, companies should work to create a culture of trust, build the collection of information into the recruitment process, and explain to their employees effectively how the data will be used. One roundtable attendee argued, for instance, that there is a “danger of a psychological impact for people in trusting, particularly if their trust has been broken before”.

58% of respondents also believe that organisations should be required to produce a narrative and action plan alongside their ethnicity pay information, chiming with the Prime Minister’s explain or change challenge to businesses. HR professionals argued that reporting the numbers won’t be meaningful until organisations are prepared to have a plan to do something about it and hold themselves to account. 

However, the Government have recently responded to the Business Select Committee’s report on the gender pay gap, outlining that they will not make it compulsory for businesses to produce a narrative or action plan alongside their pay gap report. They argue that new rules might make the process ‘too prescriptive’ adding ‘limited value’ and that companies genuinely committed to change would produce one anyway.

The Government has also ruled out extending gender pay gap reporting to small and medium-sized businesses with fewer than 250 staff. This likely means that we will not be expecting a mandatory narrative report or action plan to be extended to ethnicity pay reporting when it is put in place, or for any new legislation to be extended to small business of at least 50 employees, as the McGregor-Smith Review recommended.

CIPD senior reward and performance adviser, Charles Cotton, called the Government’s response a “missed opportunity” to improve the regulations but argued that reducing the threshold for reporting should be considered a long-term goal rather than something which can happen immediately.

If ethnicity pay reporting follows the gender pay gap reporting process, we can expect a Government consultation on draft regulations and the first reporting deadline in 2021 at the earliest.

You can read the CIPD’s full submission here.

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