Mandatory ethnicity pay gap reporting: what is the Government proposing?

The Government has launched a consultation on proposals for requiring employers to report on their ethnicity pay gap. 

The Government plans to introduce mandatory ethnicity pay gap reporting after its preference for a  voluntary approach failed to achieve the desired result, with only 11% of employees saying that their employer collects data on ethnicity pay.

What are the main points of the proposal on ethnicity pay gap reporting?

The Government is seeking views on: 

• The main benefits for employers in reporting their ethnicity pay information.
• What pay information employers should report?  Options it is considering are:
  • One pay gap figure comparing the average hourly earnings of ethnic minority employees as a percentage of white employees
  • Several pay gap figures comparing average hourly earnings of different groups of ethnic minority employees (using standardised ethnicity classifications) as a percentage of white employees 
  • Ethnicity pay information by either £20,000 pay bands or by pay quartiles, showing the proportion of employees from different ethnic groups in each pay band or quartile.
• What supporting or contextual data (if any) employers should disclose to help ensure ethnicity reporting provides a true and fair picture? 
• Whether an employer that identifies a pay disparity should be required to publish an action plan for addressing the disparities? 

What are the problems collecting ethnicity data?

The Government recognises the difficulty employers face in collecting ethnicity data including:

• There is no legal obligation requiring an individual to disclose their ethnicity information and often they are reluctant to do so due to concerns about how the information will be used.   
• Employers who do collect this information may use different classifications from one another.
• Ethnicity data will be “special category personal data” for GDPR purposes and so employers will need to comply with data protection legislation when handling it and ensure that individuals cannot be identified from the pay data published.  

It therefore seeks views on ways to improve self-reporting of ethnicity data, whether a standardised approach to ethnicity classifications should be used (and the cost for your organisation of doing so) and what steps should be taken to preserve the confidentiality of individuals.   

As is currently the case for gender pay gap reporting, the Government considers that employers with fewer than 250 employees should not be in scope but is seeking views on whether the threshold should be higher or lower. 

The Government has not given any indication on when the new law is likely to be in force but suggests that it could work with “early adopters” across the public and private sector to test approaches before mandatory reporting is introduced.   

If you would like to respond to the consultation you will need to do by 11 January 2019.  You can read the consultation paper on Ethnicity Pay Reporting and respond here.