Business Law & Compliance

Is ethnic pay gap reporting too complex to implement – and do politicians really care?

7 min read

01 June 2017

Deputy Editor, Real Business

We canvassed the business landscape for opinion on the Conservatives and Liberal Democrats’ manifesto pledges to introduce ethnic pay gap reporting.

February 2017 saw Baroness McGregor-Smith publish a report, The Time For Talking Is Over, on workers being held back due to the colour of their skin. In large part, her recommendations were the basis for both the Conservatives and Liberal Democrats’ manifesto pledges to introduce ethnic pay gap reporting.

McGregor-Smith’s research, which found the employment rate for ethnic minorities is 12.8 per cent lower than that of white workers despite on average being more qualified, is a bitter pill to swallow. And the revelation that only one in 16 top management positions are held by what she termed BME individuals (someone from a black or minority ethnic background), is made more worrisome when combined with Fawcett Society findings.

It claimed that while the biggest pay gap difference was between white men and women, black African females have been largely left behind. Sam Smethers, the society’s CEO, even proclaimed that “Pakistani and Bangladeshi women are today only where white British women were in the 1990s”.

The gender pay gap is an issue the UK government has already sought to tackle by making it mandatory for companies with over 250 employees to publish pay figures. Now, it is seeking to introduce ethnic pay gap reporting. But while the move has been praised, it seems industry experts and business owners are dubious as to how it would be implemented – and are suspicious of why both parties only chose to do something about it so close to the election. Here’s why.

The general consensus seems to be that whoever wins the election won’t be able to just copy and paste the format used for gender pay gap reporting.

Curo Compensation’s senior consult, Ruth Thomas, said the endeavour would fail to portray the real issues impacting a company’s approach to pay.

She told Real Business: “If ethnic pay gap reporting is done using the 19 categories of ethnicity used by the ONS, it will make comparisons complex due to lack of representation or difficulty in categorisation. Not to mention, the Data Protection Act maintains that information about someone’s racial or ethnic origin is sensitive, personal data.”

The hurdle of categories was touched upon once more by Shainaz Farfiray, associate professor of organisation and human resource management at Warwick Business School. “While it is straightforward to measure the gender pay gap, the large number of ethnic categories white British workers would have to be compared with implies it would be challenging to find meaningful differences, especially if the number of individuals within specific ethnic categories is small.

“Also, because ethnicity data is voluntarily reported, it is likely to be incomplete and hence it is debatable whether it can enable businesses effectively unravel the ethnic biases that exist within workplaces.”

Read on to find out why some believe it’s a political ploy

The easiest way to compare white British with other groups is through a binary approach – grouping all groups together as BME. The issue here was best explained by Denise Keating, CEO of the Employers Network for Equality and Inclusion, in an article for Personnel Today

“Whereas gender is binary, the attribute of race sits in a far broader range,” she said. “Simply splitting the workforce down to white or BME is obviously flawed, as nationality must be considered, and sub-groups within both groups will have very unique cultural differences. Even the government’s own census options for race can’t be considered perfect.”

This, the article’s author – Rob Moss – noted, would skew ethnic pay gap reporting and make it of questionable value.

Of course, it’s definitely a step in the right direction, raising awareness and casting an iron hand on negligent bosses. There’s more to it than that though, said Emma Amadi, an analyst at Corporate Citizenship specialising in Black African and Caribbean relations in Britain. “The pledge made by both parties is vital because whilst migration has been a hot topic, especially in recent times, we’re not a country that’s comfortable or practiced in talking about ethnicity and race.

“This development has the potential to open-up necessary discussions around ethnicity and equality at the very least. It will provide the evidence and the motivation for companies to do more about the lack of opportunities and progression available to ethnic minorities.”

But perhaps more surprising is the concept that politicians have perhaps used the announcement as a ploy for more votes, something numerous business owners believes ruins the very essence of the announcement.

Raj Tulsiani, CEO of Green Park, believes just that. He told us: “If a political party were really interested they would have allowed the Financial Reporting Council to bring it into the good governance code already. Unfortunately, race has become part of a staged political sport during the election with no party taking a stand around equality and inclusion and merely trying to score points.

“Yes, conditions will not improve without legislation, but organisations are not going to be able to move the dial without focusing on advocacy and trust within the communities that are looking to engage with. Quite frankly it’s the blind leading the blind.”