Out-Law News

CMI calls for mandatory ethnicity pay gap reporting

Susi Donaldson tells HRNews about the challenges with ethnicity pay gap reporting


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    Too few employers are taking action on ethnic diversity. That is the warning from the CMI following its latest research showing that just 47% said their organisations were taking active steps to increase the proportion of employees from diverse ethnic groups through their recruitment practices. The same poll found that 43% of managers reported their senior management teams had no staff from diverse ethnic groups. Only a third said their organisations were taking at least one measure in relation to reporting their ethnicity pay gap or enacting an ethnicity pay gap action plan. The research polled 857 managers during the first two weeks of October.

    Personnel Today reports on this and quotes chief executive Ann Francke who says the survey results made it clear that firms must do more.  She said: ‘The evidence is clear, businesses that are truly more inclusive and representative are more productive organisations’. She pointed to recent CMI analysis which found full ethnic minority representation could contribute an additional £24bn to the UK’s GDP.

    She also called, once again, for legislation on the issue. She said: ‘The government has quite rightly mandated gender pay gap reporting for large organisations. There is no excuse for not introducing similar requirements around the ethnicity pay gap.’

    MPs have been looking at this. On 20 September there was a parliamentary debate in response to a petition calling for new laws, which shows the strength of feeling on this issue. In that debate the chair, Conservative MP Caroline Noakes, along with a number of Labour MPs, were pressing for a commitment from the government is make ethnicity pay gap reporting mandatory. Pushing back on that was Paul Scully the minister for small business, consumers and labour market. He said ethnicity pay gap reporting is ‘far from straightforward’ and how there needs to be a method that allows for meaningful interpretation for businesses. He said the consultation launched in 2018 identified 5 big issues that haven’t gone away. They are: (1) Statistical robustness, (2) Anonymity of data, (3) Data collection barriers, (4) The wide range of ethnic groups within the UK; and (5) The potential for results to be skewed. He said establishing an ethnicity pay reporting framework is considerably more challenging than was the case for gender pay gap reporting, a point we have made in this programme many times. 

    An issue that was discussed at length during the debate was the challenge of categorising the data effectively and that is one of the biggest challenges our clients have been facing. Susi Donaldson joined me by phone from Glasgow to discuss this. I asked her what the approach to that will be:  

    Susi Donaldson: “It isn't yet clear what classifications will be used for the calculations - the consultation document proposed various options. So for example, one pay gap figure comparing white employees to BAME, or several pay gap figures using, for example, the 5 or 18 ONS ethnicity classifications and you can see how that could morph into quite a complicated exercise - conducting calculations on so many variables will be much more complex than the gender pay gap reporting, and then what do you do about, for example, individuals with mixed ethnicity. There’s a challenge, and rightfully so, that comparing white with BAME and lumping everyone together is overly simplistic and ignores the different issues, experiences, by each ethnic group. But equally, many of our clients have said that they feel that it’s a good starting point and employers always have the option of breaking their data down into the five ONS classifications on a voluntary basis if they want. Many of our clients and other businesses that I've spoken to have said that they believe that reporting on 5 or 18 classifications would meet the results are too diluted and create a report that was very complex and granular.”

    Joe Glavina: “What's your message to HR about what they should be doing about this now?” 

    Susi Donaldson: “I think the starting point is to is to obtain the data. Many of our clients are seeking support on diversity data collection exercises, they're seeking our support on what ethnicity classifications to use to try and ensure that whatever data they do obtain can be utilised when the regulations are finally passed and we know what the methodology is going to look like. As I say, you can't underestimate the importance of achieving positive employee buy in into all of this. A hearts and minds campaign is absolutely essential. You need to explain to employees why you're doing this and how the information will be used because the data is only as good as the data that the employees are willing to volunteer. That's the bottom line.”

    Joe Glavina: “Final question Susi. There’s a debate going on as to whether employers should be mandated to provide an accompanying narrative, including an analysis of the gender, age and location of those from BAME backgrounds. Thoughts on that?”

    Susi Donaldson: “When we spoke with our clients about this, they felt that contextualising the information, the ethnicity information, would be particularly important in the context of ethnicity pay gap reporting. So, for example, many of our clients from Scotland felt that providing supporting context would be particularly relevant to them given the comparatively low levels of ethnicity diversity within the Scottish population and other businesses I've spoken to have said, for example, that they think identifying the location of employers who are producing data might be beneficial as it would allow companies to compare themselves against other businesses who are who are located in similar geographical locations.”

    The government has still not reported back following its consultation which closed in January 2019 so we still don’t know the timetable for any new legislation. Recognising that, the CIPD has published guidance to help employers measure and report their ethnicity pay gap in the absence of legislation – that came out last month. We have put a link to it in the transcript of this programme.

    - Link to CIPD’s Ethnicity pay reporting: a guide for UK employers

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