The ethnicity pay gap—out of sight out of mind?

‘While progress has been made, many barriers still exist in today’s businesses which means people aren’t able to reach their full potential. The more we understand what these barriers are and why they exist, the quicker we’ll be able to work towards creating truly inclusive organisations.’ Kevin Ellis, Chairman and Senior Partner at PwC

Equality. Diversity. Inclusion. These are the buzzwords that every respectable organisation is keen to associate themselves with these days. However what happens if this is just lip-service—if no real and meaningful action is taken to tackle this issue and the weight that these words carry?

About this time last year, there was much talk about the gender pay gap and it’s not too distant cousin, the ethnicity pay gap. In October 2018, the government started a consultation on the ethnicity pay gap. Kelly Tolhurst MP commented that:

‘Sometimes stronger action is needed to drive change. That is why we are consulting on a mandatory approach to ethnicity pay reporting.’

According to the Race in the Workplace: the McGregor-Smith Review fourteen per cent of workers in Great Britain hail from a BAME background, but occupy only six per cent of top positions as discussed in our article: ‘Show me the money!’Diversity and the Pay Gap. With the success of gender pay gap reporting, many are calling for reporting along the same lines to help improve this issues around race in the workplace. Baronness McGregor-Smith reasoned:

‘No employer can honestly say they are improving the ethnic diversity of their workforce unless they know their starting point and can monitor their success over time. Simply stating a commitment to diversity or establishing a race network is not sufficient to drive lasting change.’

In light of the consultation that closed in January 2019, a number of companies have noted the difficutlies with reporting. Firstly, similar to the gender pay gap, an ethnicity pay gap report would be created using statistics from a small minority group—in this case, Black And Minority Ethnic (BAME) employees. An example of this would be that a workforce of 300 people that employs a number of BAME individuals proportional to the wider population, in this case 3%, would have pay gap figures determined by only nine individuals. If one more BAME person was hired at a lower level or a new BAME board member was employed, this would significantly alter the pay gap numbers. The pool of BAME employees providing these statistics is futher reduced if a pay gap needed to be established for each ethnic minority group. In addition to this, many companies currently do not collect the necessary information to inform an ethnicity pay gap report, and where they attempt to, employees often opt out of answering these questions as they are generally optional. Many have also highlighted the fact that different classifications for each ethnic group across organisations cause difficulty when attempting to compare results.

Although releasing an ethnicity pay gap report is not currently mandatory, a number of organisations have done so voluntarily—among these are the Civil Service, ITN, KPMG and PwC. The legal sphere however, seems a little slower on the uptake. As of January 2019, Linklaters became only the second major UK law firm to release ethnicity pay gap figures, having been preceded by Allen & Overy and followed more recently by Slaughter and May. Echoing the sentiments of Baroness McGregor-Smith, these organisations appear to have understood that a problem can often be ignored if it is not acknowledged and quantified.

Although the difficulties with reporting are valid, what is more important is the need for each organisation to identify the inequalities within their firms and work to provide balance and equality of opportunity where possible. Solutions such as unconscious-bias training, name-blind applications and gender neutral job specifications are more likely to be implemented when there is a clear view of where the problems lie and why such resolutions may be necessary. The figures provided by Linklaters for example reveal a partner inclusive mean of 30.3% and a median of 0% which help in understanding the scale of the issue and provide guidance as to how to implement targeted solutions.

Tolu Olarewaju commented on the efficacy of public data in ‘shaming’ organisations to action. While the companies that are publically releasing figures are clearly ready to take action or at least investigate the causes, it is the companies that have neither addressed the issue nor have any desire to do so that we should be concerned about. These companies are the reason we must ask ourselves if mandatory ethnicity pay reports are the way forward since organisations are not likely to act if they do not know that an issue exists, and more importantly if they are not aware that the issue affects them. Encouraging companies to present their ethnicity pay gap results ensures that they are accountable not only to their employees but also to the public.

As the government decides on whether ethnicity pay reporting should be mandatory, it is important to emphasise it’s benefits. It shouldn't be thought of as a box-ticking exercise or a way to pacify the masses but as a tool to encourage an atmosphere of real diversity within the workforce, a diversity of thought. It is almost impossible to work in the dark, however our eyes often adjust to the darkness—reporting helps to shed light on those hidden and often forgotten areas. Maybe it’s time we turn on the lights.

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