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Organisations may ask why they should calculate the Ethnicity Pay Gap if the Government doesn't see it important enough to legislate on.
In 2023, the Government stopped short of introducing legislation to make Ethnicity Pay Gap reporting compulsory like the Gender Pay Gap reporting which has been required since 2017 for employers with at least 250 UK employees. Instead, they launched guidance which aims to provide a consistent approach to measuring pay differences.
The Ethnicity Pay Gap (EPG) shows the difference in the average pay between people from minority ethnic backgrounds in the workforce, compared to those of white ethnic origin.
Much like the Gender Pay Gap, the calculation of the number itself isn't going to change the fundamental issues that drive the pay gaps, but it will help start the conversations and encourage organisations to create focused action plans to address any pay disparities and understand the underlying issues causing them.
So why would an organisation take the time to work out something that is not a statutory requirement? Some reasons may be:
What considerations should be borne in mind before embarking on Ethnicity Pay Gap reporting?
When discussing if they should embark on calculating their Ethnicity Pay Gap, we hear clients say that they simply don't have the data and are concerned that the report will not be credible if all the data is not available. Gaining trust in the employee group so that as many people as possible share their Ethnicity is key. Telling the story as to why the data is being collected and what will be done with it is critical.
They are also concerned about protecting confidentiality - whilst Gender Pay Gap reporting only recognises 2 genders, there are a number of different options in Ethnicity Pay Gap reporting which can lead to up to 18 categories, some with only a handful of people in an organisation.
Related to this is that, due to the variations in the way companies are categorising ethnic groups, there is little benefit in comparing how organisations are doing against each other in this area. The 'simple' approach is 'white' and 'non-white' but this can hide more than it reveals.
Regional differences are also relevant in EPG where there are concentrations of certain groups in certain areas in a way we do not see with Gender.
So how can we help?
With every client assignment we always ask 'what is the problem you are trying to solve?'
For Ethnicity Pay Gap reporting, the answer is that organisations want the ability to use data to identify any underlying factors potentially contributing to pay disparity in order to implement action plans to close these gaps. Fundamentally, both employers and wider society want everyone to be able to fulfil their potential, to deliver the most that they can.
This means the focus is on engaging employees on the journey and why it's important to the organisation and to them. They should be encouraged to engage in the sharing of their information because they understand the impact this can have. Ask them to share their experiences to help back-up what any data is saying and work with employees to create action plans. The important part is not the report itself, rather it's taking the time to really understand anything that may be impeding the progress of certain employee groups then coming up with clear action plans to address these.
Ethnicity Pay Gap reporting will not be an overnight quick fix to any identified disparities but is a tool employers can use to identify and investigate any unjustifiable disparities that exist.
Once you have the data, some questions we would ask:
We'd like to see stronger guidance and greater progress from the Government around Ethnicity Pay Gap reporting to help ensure that everyone can fulfil their potential, both for themselves and their employers, and in its absence, we would encourage employers to understand their current position.
We have a range of tools to support clients including calculation spreadsheets based on the Office For National Statistics (ONS) categories for ethnicity at the 2,5, and 10 category level.
One of the modules in our online coaching curriculum looks at EPG - Ethnicity Pay Gap Reporting
The over 50s are an increasingly important segment of the workforce with many years of skills and experience. They could be working for many years to come. Their Reward packages need thinking about in the context of their life situations and future plans.
We would love to support you and so if you would like to talk to us about starting this journey and what we can do to help, reach out to us rewardsolutions@rewardheads.co.uk
Jo Cole - Consulting Manager