Charlotte, why is ethnicity pay gap reporting so important?
Pay gaps are a measure of the difference in average hourly pay between different groups and a good indicator of inequality in access to work, progression and rewards. There is an equality argument for closing pay gaps: no one should be disadvantaged by their gender, ethnic origin or disability status. There are significant economic benefits to decreasing pay gaps and improving the employment rate and workplace progression for people from ethnic minorities, which is estimated to contribute an additional £24 billion per year to the economy.
As well as the benefit to the economy, there is a clear benefit to employers in increasing the participation and progression of ethnic minority staff. The McKinsey & Company ‘Delivering through Diversity’ report found that organisations with the most ethnically and culturally diverse teams were the most profitable, being 33% more likely to outperform their peers on profitability. The benefits of increased ethnic and cultural diversity are not only profit-focused but are shown to improve customer orientation, employee satisfaction and increase the attractiveness of an organisation to top talent.
As we’ve seen with the gender pay gap, mandatory reporting has shone a spotlight on gender inequality in the workplace and forced employers to address their gender pay gaps. We now need the same level of scrutiny on opportunities for ethnic minority staff.
Collecting and reporting on ethnic minority workforce data, will mean employers can identify any areas where improvements need to be made, such as an underrepresentation of ethnic minority candidates at interview stage, and put in place effective solutions to combat these and ensure that people enjoy a working environment that allows them to reach their full potential.
What happens now the consultation period is over. The next steps?
Following on from the consultation period the department for Business, Energy and Industrial Strategy will be analysing all responses and will inform on its findings and the next steps for ethnicity pay reporting.
Why and how should companies start preparing to avoid the challenges they had with gender pay gap reporting.
It will be important for companies to start, or continue, thinking about how they collect data on the ethnicity of their employees and how they can use this data to inform any changes they want to to make to their practice. Most companies wouldn’t make business decisions without clear data on their market or of their customers. The same rigorous approach should be taken to collecting and using internal workforce data to give employers the tools to understand where they can make positive changes in improving access and quality of work for ethnic minority employees.
It will be important to build the foundations for collecting this data now. Employers should look at how they support staff to feel confident in self-reporting their ethnicity. Good practice examples that we have seen have included running long-term communication campaigns, explaining how the data will be used to drive improvements, and providing many different points where the information can be provided, such as during recruitment, on-boarding processes etc.
It may be most useful to wait until the Government give us further details of any possible legislation before making adjustments to HR, payroll, or other systems.