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Leading British companies including Aviva and BT have backed ethnicity pay gap reporting, something the UK government has pledged to make mandatory for all large employers in a bid to reduce workplace inequality.
Labour promised in its election manifesto, and in July’s King’s Speech, that it would force big organisations to report on the pay differential between staff from different ethnic backgrounds, building on gender pay gap regulations introduced in 2017 for employers with more than 250 staff.
The change would impose a new burden on employers to collect, analyse and disclose data, though more than 100 large companies are already moving voluntarily to track ethnicity pay gaps.
“Ethnicity pay gap reporting is very important because it shines a light on the systemic causes of inequality,” said Fiona Vines, group chief inclusion officer at BT. “Only by asking the question about what is driving the pay gap can we see the changes we need to make, both inside and also beyond our organisation.”
Danny Harmer, Aviva’s chief people officer, said the insurer’s ambition was for its workforce “to reflect the customers and communities we serve”.
She added: “We are using data to drive improvements and our ethnicity pay gap report is a fundamental source of that data.”
Aviva and BT are among 120 companies that have joined Change the Race Ratio, a group set up as part of the CBI in 2020 and spun out of the business lobby group last year.
Members — which also include Abrdn, Centrica, Deloitte, Diageo, ITV, Sainsbury’s and Schroders — pledge to publish ethnicity pay gap data within two years of joining, alongside other commitments to increase ethnic minority representation in senior roles.
Office for National Statistics data shows that many ethnic minority groups are paid less than white workers on average, which the Trades Union Congress has previously blamed on “structural racism”. However, some minority groups are among the highest paid cohorts, including people of Chinese and white Irish ethnicity.
Pay gap data shows the disparity in average earnings between groups of workers, which can reflect factors such as the relative seniority of different groups, even where there is no direct pay discrimination between people doing the same job.
As with gender pay gap reporting, employers may face pressure to identify and eliminate causes of large disparities. Labour has also promised to introduce disability pay gap reporting.
Comparing data across companies is complicated by the fact that there is not yet a standardised format for reporting ethnicity pay gaps, something new regulations would address. The government has yet to set out detailed proposals or a timeline for introducing the new requirements.
Change the Race Ratio said its members that report the gap show a 10 per cent difference between white and non-white staff, with white staff paid more, though this is lower than the 12 per cent reported in 2022.
While there are roughly equal numbers of men and women in the population, ethnic minorities account for only 18.3 per cent of the population of England and Wales, according to 2021 census data.
Experts have noted that this could result in the data at individual employers being quite volatile from year-to-year, as a relatively small number of new hires, departures or promotions could have a significant effect on the average pay of a minority group.
Employment lawyers have warned that ethnicity pay gap reporting would be a compliance burden for companies and could fuel more discrimination claims.
The UK’s Financial Conduct Authority faced a backlash from industry last year when it proposed introducing mandatory disclosure of diversity data in areas such as age, sexual orientation, ethnicity and religion. Companies’ concerns included legal challenges with compelling staff to disclose data about themselves in cases where they do not wish to do so.
The government said: “We are determined to root out racial inequalities and address disparities, including through our draft equality (race and disability) bill, announced in the King’s Speech, which will introduce mandatory ethnicity and disability pay gap reporting for large employers.”
