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Government launch consultation on Ethnicity Pay Gap Reporting

26 October 2018

Following the first gender pay gap reporting deadline earlier this year, the government have now launched a consultation looking at how organisations should disclose their ethnicity pay gap.

A small number of organisations, including the civil service, and some universities, have already chosen to voluntarily publish their ethnicity pay data. However as different methodologies were used, which limits comparability, the consultation is seeking views on the scope, method, challenges and benefits of ethnicity pay gap reporting.

The consultation identifies various methods for reporting ethnicity pay data although these methods are not without their own challenges. One approach suggested by the government is to present one pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees. Whilst this mirrors the gender pay gap methodology and gives the advantage of simplicity, all classifications of ethnic minority groups would be rolled into one resulting in the differentiation in outcomes for different ethnic groups being lost.

An alternative approach suggested is to produce pay gap figures for different ethnic groups. This would therefore compare average hourly earnings of different ethnic minority groups as a percentage of white employees. This method would still combine ethnic minority groups, meaning variations within those groupings would not be highlighted. A number of contextual factors may also form part of the information including geographical variations, age variations and gender variations, making the methodology more complex, however this is a more instructive approach.

A final suggested method is to break down ethnicity pay information by pay bands or quartiles showing the proportion of employees from different ethnic groups by £20,000 pay bands or by pay quartiles. This would allow employers to identify where ethnic minorities are concentrated and the apparent barriers to progression, however the difficulty is that not all pay bands are structured and fixed which could therefore limit comparability.

The consultation suggests the government believes it is time to move to mandatory ethnicity pay reporting however it is very difficult at this stage to determine what this is going to look like in practice. Even once the scope and methodology is decided, the effectiveness of the reporting will still very much depend on whether employees are willing to state their ethnic origin.

The consultation is open until January 2019 here.

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