Despite evidence that some black and ethnic minorities face multiple disadvantages in the workplace and pressure from campaign groups, the government has stopped short of making ethnicity pay gap reporting compulsory. Instead, the government has published guidance designed to support employers who wish to voluntarily report on pay disparities.
How does the guidance help employers?
The new guidance recognises that some employers may wish to undertake ethnicity pay gap reporting as part of an internal exercise. Some may wish to publish their results externally, for example, on their own website. The guidance supports both options with different recommendations depending on which approach is taken: if an employer wishes to publish its ethnicity data, an ethnic group should have a minimum of 50 employees to ensure that the data set is robust, and employees are not identifiable. For internal reporting only, the guidance recommends that a minimum category size of between five and 20 employees should be used.
Methodology
The calculations and method largely mirror the gender pay gap reporting regulations and suggests that a comparison is made between the mean and median pay, and bonus gaps and the representation of ethnicities across pay quartiles. However, the guidance recognises that ethnicity pay gap reporting is far more complex than gender pay gap reporting. The guidance advises against comparing all ethnic groups against white British employees as the statistics will not be meaningful. Instead, the government recommends that employers should attempt to analyse the disparities between as many ethnic groups as possible using the self-classification system used by the government for the 2021 census, which contains 17 ethnic groups.
Obtaining the data
Some employees may not want to disclose their ethnicity and are not obliged to. The starting point for employers is to send out a questionnaire or survey to employees in order to gather this data on a voluntary basis and encourage employees to provide this information on a confidential basis.
Personal data revealing racial or ethnic origin is considered special category personal data and is subject to additional protection under the GDPR. This means that employers require a lawful basis for collecting and processing the data. As there is no legal obligation to rely upon as the reporting is not mandatory, the most relevant ground is the pursuit of a legitimate interest which requires the employer to undertake a balancing exercise. This involves considering the impact of the processing on employees against the interest being pursued by the employer. In some cases, this may mean a data protection impact assessment is required. Transparency and communication are, of course, key to ensure employees are fully aware of the purpose and intended benefits of analysing the data and to encourage full participation.
If employees answer “prefer not to say”, the guidance recommends identifying the proportion of employees in each category rather than including all in one category, as this will provide important context for the statistics.
What if a pay difference is revealed?
If a pay difference is found, employers are encouraged to analyse the reasons and consider what steps should be taken to address the causes of the disparity. Any action plan should set out clear achievable objectives, a deliverable timescale and an explanation of how success will be measured. The government advises that, where possible, the approach and the calculations should be checked with analysts.
As with mandatory gender pay gap reporting, employers can also choose to publish a supporting narrative that includes a contextual explanation and reasons for the pay gap.
What should employers do now?
Whilst ethnicity pay gap reporting is not yet mandatory, prudent employers should consider voluntary pay gap reporting as a strategic opportunity and demonstration of their continued commitment to inclusivity. For advice or support in producing either a gender pay gap report or ethnicity pay gap report speak to us
Emma O’Connor is legal director in the employment team at Boyes Turner LLP
