GottaBe!’s guide to Mandatory Ethnicity Pay Gap Reporting

11th February 2022

In 2020 we saw several businesses across the UK calling for mandatory ethnicity pay gap reporting. This is down to the lack of equality in the workplace, and whilst there are steps in place to improve equality, they are not going far enough. GottaBe! Ethnic will look at the proposed mandatory ethnic pay gap reporting in more detail and will be outlining the importance of equality in the workplace. 

What is Ethnicity Pay Gap Reporting?

Just like we have seen in recent years with the gender pay gap reporting, ethnicity pay gap reporting shows the difference in average pay between ethnic minority staff compared to white staff. It looks at comparing the pay between those of different races doing the same job. Whilst it is not as simple as measuring the rough 50/50 split, we see in gender pay gap reporting that it is possible to measure ethnicity pay gaps across the UK, as long as employers are willing and the purpose of the exercise is clear. 

A report by the Office for National Statistics in 2018 indicated some considerable disparities in the kinds of employment and earnings received between employees across the UK based on the colour of their skin. On average, they found Black employees earn around 9.2% less, whilst Bangladeshi or Pakistani heritage employees earn 16.9% and 20.2% less than White employees. The introduction of mandatory ethnicity pay gap reporting will outline the issues faced in the UK and underline the steps needed to take to ensure there is racial equality in the workplace.

In the absence of legislation, some organisations have decided to report their ethnicity pay gap data voluntarily, and the number of employers publishing their ethnicity pay gaps increased from 11% in 2018 to 19% in 2021.

How will it affect businesses?

The government has finally acknowledged the need for mandatory ethnicity pay gap reporting; they will need to set clear guidelines to help employers across the UK.

We must note that this will only be applicable for companies with over 250 employees. 

Research shows that closing the ethnicity pay gap makes business and economic sense. With ethnically and culturally diverse businesses set to see up to 36% more profitability. Labour’s shadow minister for employment rights, Imran Hussain, claimed that introducing mandatory ethnicity pay monitoring could boost the UK economy by £24 billion a year.

The legislation will drive the understanding of racial inequality in the workplace, and mandatory reporting will mean no business is left behind. Whilst many companies are welcoming the latest announcement with open arms. There is concern from those with low levels of ethnic minorities. As ethnic minority groups are spread across the UK, the levels will vary between reports, and there is concern that this would not give a fair indication of salary.

Charles Cotton, Senior Performance and Reward Adviser at the Chartered Institute of Personnel and Development (CIPD) suggested that reporting ethnicity pay data, along with a narrative and action plan, will demonstrate to employees, customers, and investors that a company is serious about tackling inequality. Therefore, they will see a better working environment where employees differ in beliefs and opinions, which will benefit the company in the long run. Not only will a diverse staff force be beneficial in-house, but it also sends out a message to consumers and investors with a clear brand purpose. 

Why a diverse workforce can benefit your company!

It is not currently compulsory to report on ethnicity pay gaps within your company. Still, the rising data showing such large gaps is pushing the government to make it mandatory to help tackle racial inequalities.

We know here at GottaBe! Ethnic that a diverse workforce gives brands a better return as they are composed of differing opinions and cultural understandings. According to McKinsey Diversity, diverse companies are top financial performers. 

Mandatory ethnicity pay gap reporting is hoped to improve the understanding within companies to help them reach their full potential. “Diverse organisations that attract and develop individuals from the widest pool of talent consistently perform better.”- Lord Boateng

When people from various cultures and backgrounds work together, your workplace will benefit from increased creativity, cultural awareness and an increase in opportunities. A truly diverse team expands your companies’ connections as your employees all have different interests and beliefs that connect them with different people. Not only does your brand become more productive when you have a multicultural team, but you will be more trustworthy as your brand purpose is authentic. The Harvard Business Review found that diverse teams can solve problems faster than cognitively similar people. 

Whilst inequality is seen across industries; some perform better than others, so the benefits will be varied across the board. 

When will it be put in place?

The Commission on Race and Ethnic Disparities published a report in March 2021 that called for ethnicity pay gap reporting to continue on a voluntary basis. However, many businesses, trade unions and other stakeholders agreed that mandatory reporting is the best way forward so that ethnicity pay gap reporting will be mandatory from April 2023. 

Sandra Kerr stated that employees from ethnic minority groups are often “at the bottom of organisations, so highlighting the issues within large corporations will hopefully level out the playing field and see a boost in the economy. Providing equal opportunities based on skill and talent rather than race will benefit your company in a way you may not have recognised before. 

As a multicultural agency, we drive inclusivity and diversity to other agencies and our clients. We welcome the mandatory ethnicity pay gap reporting and hope it improves racial inequality in the workplace. We know the power ethnic audiences have and understand that by ensuring you have a diverse workforce, you will see huge returns on investments. As a truly diverse workforce, GottaBe! Ethnic employs a range of staff from differing backgrounds who bring something unique to the table! See how you can drive a more diverse workforce.

Let's see how we can work together