Mandatory ethnicity pay gap reporting: closing the gap towards race equality at work

In 2018, BITC launched its Race at Work Charter, asking signatories to commit to seven actions to help improve race equality in the workplace. One of these actions is capturing workplace ethnicity data and publicising progress – it calls for increased transparency to enable accountability surrounding the recruitment, access to opportunities, and fair pay of Black, Asian, Mixed Race, and ethnically diverse employees.

Photograph: iStock/PeopleImages

Why capture ethnicity data?

Capturing data on ethnicity and pay can help employers understand and identify trends and gaps in their workforce.

With one in five of the working-age population in the UK coming from Black, Asian, Mixed Race and other ethnically diverse backgrounds, it’s essential evidence of fairness and equality that the representation of ethnically diverse people in the wider UK population is reflected at all levels of the workforce, from entry to ExCo level.¹

But the reality is that ethnically diverse employees make up a far smaller percentage of senior management roles, with only one in 10 senior management roles occupied by Black, Asian, Mixed Race and ethnically diverse employees.² Ethnically diverse workers can also often find themselves in lower-paid and less secure roles which are paid below the real Living Wage. By tracking and capturing ethnicity data, employers can identify gaps and trends in the workforce for ethnically diverse employees, helping to highlight where there is space for progression and allowing them to advance into more senior, higher paid positions, so that they can better work to close the ethnicity pay gap.

Capturing and monitoring ethnicity data is a vital way for employers to track their progress, set achievable and ambitious targets, and ensure that everyone gets fair and equal opportunities at work. While employers may encounter some barriers to collecting ethnicity data, with some employees less likely to disclose their diversity data, two-thirds of employees would not mind at all if the Government collected data on business ownership – a good example of how the UK workforce feels about the capturing of ethnicity and diversity data.³

Closing the gap

By monitoring and publishing ethnicity pay gap data, businesses can track their progress, hold themselves accountable, and ensure that they are moving in the right direction towards closing the ethnicity pay gap once and for all. Although ethnicity pay gap reporting is currently voluntary, many businesses are already showing leadership in championing and prioritising race equality at work by publishing their data.

In 2023, two-thirds of UK employers reported that they collected ethnicity and pay data. But while a number of businesses did so, only four in 10 businesses actually did anything with this data, with only 44 per cent of businesses publishing their ethnicity and pay data.⁴

Publishing ethnicity data is a great way for employers to hold themselves accountable and ensure that they are sticking to and achieving their organisational targets and goals. Even if businesses are not reaching their targets, this type of transparency helps to boost brand reputation, showing that businesses are willing to be open about where there is room for improvement and demonstrating their eagerness to grow.

Preparing for a new era in fairness and equality

BITC has been campaigning for many years for ethnicity pay gap reporting to be made mandatory. In The King’s Speech in 2024, it was announced that the Draft Equality (Race and Disability) Bill will be brought before Parliament. Among other things, the Bill will call for mandatory ethnicity and disability pay gap reporting for all UK businesses with more than 250 employees. While this is a welcome step in the journey to race equality at work, it’s clear that there is still a lot of work to be done to close the ethnicity pay gap. Businesses need to act now.

Sandra Kerr CBE is race equality director at Business in the Community (BITC). Photograph: BITC

And it’s not just large businesses that can take action. Businesses with more than 250 employees should be taking the lead in voluntarily reporting their ethnicity pay gap figures to set an example for smaller businesses, helping to pave the way for those that might be less inclined to collect and report this data, or those that face barriers to data collection.

The UK’s ethnicity pay gap sits at 19.04 per cent, and even though the mean hourly wage for ethnically diverse individuals has increased by £1.17 in the year since March 2023, the mean hourly pay for White employees has risen more, by £1.39.⁵

When looking ahead to the introduction of mandatory ethnicity pay gap reporting, we need to learn from the successes of gender pay gap reporting. Since mandatory gender pay gap reporting was introduced in 2017, the gender pay gap has decreased from 18.4 per cent to 13.1 per cent.⁶

Employers of all sizes can prepare for the new Bill by ensuring that they are collecting and reporting their ethnicity and pay data voluntarily, as soon as possible. By starting their reporting ahead of the curve, employers can ensure that they are supporting their ethnically diverse employees, while also positioning themselves as a leading business when it comes to championing race equality.

No one business can tackle the inequalities faced by ethnically diverse employees by itself. All businesses have a role to play in closing the gap so that ethnically diverse employees are paid fairly and supported to progress at work. Everyone deserves to feel valued and respected at work, and to receive equal opportunities for progression, no matter their background. Employers need to think ahead and act now to close the ethnicity pay gap so that no one gets left behind.

Sandra Kerr CBE is race equality director at Business in the Community (BITC).

For more information see:

bitc.org.uk/race

linkedin.com/company/business-in-the-community/

@BITC

@SandraKerrBITC

References

1. Office for National Statistics, Census 2021 data, ons.gov.uk/census
2. Parker Review, Improving the Ethnic Diversity of UK Business, March 2024, tinyurl.com/4anv3jme
3. Business in the Community, Diverse and Inclusive Supply Chain Insights Report, October 2024, tinyurl.com/y5k6hfj3
4. Business in the Community, Race at Work Charter Survey Report 2023, tinyurl.com/yyfatdcd
5. Homes England, Homes England – Gender and ethnicity pay gap report 2024, tinyurl.com/ckfem46r
6. House of Commons Library, The gender pay gap – Research Briefing, November 2024, tinyurl.com/htrhw27h