Out-Law News

Ethnicity pay reporting challenges ‘not insurmountable’

Susi Donaldson tells HRNews about the challenges of ethnicity pay data gathering for multinational businesses


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  • Transcript

    Mandatory ethnicity pay gap reporting should be introduced by April 2023. That is the central  recommendation of the latest report by the Women and Equalities Committee. The committee said the ethnicity pay gap reporting laws should include the requirement for employers to publish a supporting narrative and an action plan alongside the raw data.

    You may recall the government consulted on the approach to take to ethnicity pay reporting in 2018. It said then that ‘it is time to move to mandatory ethnicity pay reporting’. However, it has yet to publish its response to that consultation, which closed in January 2019. Currently, in the UK while employers are obliged to report their gender pay gap on an annual basis there is no legal duty to report the ethnicity pay gap, although many do so voluntarily.  

    This latest report from the Committee followed a one-off evidence session held in January which examined the case for mandatory ethnicity pay gap reporting. The Committee says it had asked Paul Scully, the minister for small business, consumers and labour markets, for an update on the government’s proposals. Scully said the government is continuing to assess the next steps and will respond ‘in due course’ but that the situation was ‘not straight forward’. Scully has previously flagged what he considers to be the big challenges around this exercise which 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. In response to that the Committee is now saying that whilst it recognises the complexities involved in capturing and reporting ethnicity pay gap data, nonetheless ‘solutions are available as long as employers are willing, and the purpose of the exercise is clear.’

    Writing in Outlaw, Susi Donaldson agrees with the Committee’s view. She says: ‘In the absence of legislation, a number of employers have published their ethnicity pay gaps voluntarily using the same pay data and a similar methodology as that which applies to GPG reporting, demonstrating that the hurdles which the government has identified are not insurmountable.’

    On the proposed timetable she says: ‘In practical terms, this means employers may not be required to report until April 2023. In the meantime, employers should be focussing their efforts on collating and analysing their ethnicity data and opening up conversations about race and ethnicity more generally across their organisation to build trust and understanding.’

    The focus of the work being carried out by the Women and Equalities Committee is on UK legislation and UK businesses, not the international piece, nonetheless multinational businesses, including many of our clients, are following these developments and many of them are already addressing this issue, gathering data across a number of jurisdictions ahead of any new legislation imposing a mandatory duty. So let’s hear more about that - why they’re gathering the data and the challenges they’re facing doing it. Susi Donaldson joined me by phone from Glasgow to discuss it. I put it to Susi that the data gathering exercise must be a challenge:

    Susi Donaldson: “Yes, it has been a huge issue, actually, because many of the clients that we work with operate on a global level and, of course, they're very keen to take a consistent approach to their diversity data collection and to be using consistent categorisations across the business in order that they then have a consistent point for comparison but, in reality, that's very difficult because what is an ethnic minority in the UK may not be an ethnic minority in Asia, for example. So you need to make sure that the ethnicity classifications that you use in a particular jurisdiction are relevant otherwise employees are not going to respond, or aren't going to respond meaningfully. So what some of our clients have been doing, for example, is asking a more general question: do you consider yourself an ethnic minority in the location in which you work and, if so, please specify”

    Joe Glavina: “Yes, I see how that more general style of questioning is a better way to go, so adapting the questionnaires?”

    Susi Donaldson: “Yes, many employers who've embarked on this exercise have done so with the overrising objective of using consistent classifications that are consistent questions right across their business, but I think they've realised that in many cases that's not going to be possible if they want to obtain meaningful data and they may need to adjust their questionnaire depending on the jurisdiction that it's going to.”

    Joe Glavina: “The MPs debate highlighted two big issues with this exercise – data protection and anonymity. I guess the data is far more useful if you can put a name to it, but there’s data protection to think about.”

    Susi Donaldson: “Yes, obviously given that this information is sensitive data, assuming that this is not being obtained on an anonymous basis, and I would say more and more so, employers are trying to link the information to the individual rather than doing it on an anonymous basis because it's so much more useful, you can use it for purposes like ethnicity pay gap reporting, for example, if you can identify the individual and obviously that's not possible if it's done in an anonymous basis. But where you collect information on that basis you need to be absolutely clear with your employees about what you're using it for. So most employers are having to be very open with employees about the purpose for which they are obtaining this this data and how it will be used and I would say that most organisations are using it to inform their internal decision making and to inform their wider D&I strategy.”

    That report by the Women and Equalities Committee Ethnicity Pay Gap Reporting was published last week and is available from the government’s website. We have put a link to it in the transcript of this programme.

    - Link to report of Women and Equalities Committee on Ethnicity Pay Gap Reporting


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