The employee pay gaps that companies should be reporting on

Gender pay reporting forced all employers with over 250 employees to publish their gender pay gap in April 2018, that is the average (mean and median) pay gap between male and female workers.

Since that reporting date, the UK government’s Business, Energy and Industrial Strategy (BEIS) committee launched an inquiry in March 2018 into fair pay, the findings of which were published on 2 August 2018. That inquiry focused on gender pay gap reporting requirements, but witnesses to the inquiry advocated data be collected on other characteristics.

The front runners for that are ethnicity and disability. Research from the Fawcett Society suggests that women with multiple protected characteristics tend to experience greater gender pay gaps.

Since compulsory pay gap reporting came in, it has been revealed that many accounting firms have a long way to go, with PwC having the highest pay gap of the Big Four. Many firms are working on diversity initiatives across different characteristics with the aim of closing pay gaps relating to all characteristics.

There are obvious challenges with disability pay gap reporting, namely availability of data.  Many disabilities are hidden and often this is information not known to the employer, and sometimes information which employees are not comfortable sharing.  Ethnicity data, however, is often more readily available.  The inquiry’s report recommended that the government consults upon introducing requirements to collect and report pay gap data in respect of disability and ethnicity and have those requirements ready for pay gap publication in 2020.

The government has now launched this consultation in respect of ethnicity pay gap reporting, which will run until January 2019.  The consultation was supported by both the CBI and the Equality and Human Rights Commission (“EHRC”).

In 2014, the disability pay gap in the UK was 13 percent for men and seven percent for women, according to research carried out by the EHRC on both the ethnicity and disability pay gap (Report 108 – Pay Gaps Research).

In the UK, the ethnicity pay gap is defined as the difference between the average hourly pay of ethnic minorities and white British people. The ethnicity pay gap varies between ethnic groups so it is not possible to state an average gap, but gaps vary from around 48 percent (male Bangladeshi immigrants and White British men) to an almost zero percent pay gap (Indian and Chinese men and white British men).

The gap for women was quite different with a 12 percent gap for Bangladeshi and Pakistani immigrant women, and white British women, and a negative pay gap of -21 percent for black African British women and white British women.

There has been significant dialogue written about these issues, and it is often suggested that newly arrived immigrants may face difficulties in the labour market of the host country. However, studies have shown that there are smaller ethnicity pay gaps for ethnic minorities born in the UK.  There may also be discriminatory reasons which cause a pay gap and that is something which reporting may help to eradicate.

What the gender pay gap clearly showed was that there is a difference between a general average gender pay gap, and an occupational gender pay gap, the latter being more akin to what you might think of as pay equity or equal pay – i.e. the gap between men and women in the same occupation versus the average gap across an organisation.

When you look at ethnicity, the general pay gap favours white British people, while the occupational pay gap is generally smaller.  What that also tells us is what much of the gender pay gap data tells us: the gap is often down to occupational segregation – for example that certain lower paid roles are occupied by more women than men or vice versa, and some more by ethnic minorities than white British employees.

However, pay inequality still exists even within similar occupations with reports suggesting that black doctors are paid almost £10,000 a year less than their white counterparts – a trend reported across the whole health service, not just doctors.

What then should employers do to prepare for possible ethnicity pay gap reporting?

Nothing is required at present, but, they should be aware of the issue, and consider steps which can be taken to reduce any discrimination which might exist.  One such step might be blind recruitment, ensuring that ethnicity cannot be a conscious or subconscious influencing factor at the selection for interview stage.

Employers may also want to consider an equal pay audit – both on ethnicity and gender.  Some employers with a large gender pay gap actually have quite a small equal pay issue, the gap being reduced significantly when comparing those performing similar work.

If employers are conducting an audit, consideration must also be given to whether this will be legally privileged, or whether documents and data generated will be disclosable and therefore legal advice should be sought at the outset.