Inclusive leadership: advice for HR and business leaders on ethnicity pay gap reporting

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Kiddy & Partners

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Many employers are committed to addressing inequalities in the workplace, but the global outcry in response to the tragic death of George Floyd has prompted a widespread sharpening of focus on racial inequality at work and many employers are looking at how they can re-focus their agenda.

What should and could employers be doing to bring about change? 

Whilst the moral case for change is and always has been undeniable, sadly it often takes legislative changes to prompt significant change. The UK government closed its consultation on ethnicity pay gap reporting in January 2019.  Whilst this has not yet resulted in legislation, the introduction of mandatory ethnicity pay reporting is widely anticipated.  Consequently, employers also have the anticipation of an increase in the number of grievances, complaints and claims as a result of greater internal and external scrutiny to motivate them into action.

Although many employers have made statements of intent, and a number of organisations have signed up to the Race at Work Charter, very few have voluntarily published data on their ethnicity pay gap.  

As organisations with over 250 employees who are already required to collate and report on their gender pay gap data will know, failure to address the need for workplace equality can not only give rise to grievances and legal claims but also can lead to equally costly damage to culture and reputation.

Taking positive, proactive steps to address workplace inequality will have a positive impact on an organisation’s reputation, improve recruitment and retention and, in some cases, help to defend discrimination claims which may still arise.

What do we need to know?

Collecting, and reporting on, ethnic pay data is more complex than gender pay gap reporting.  There are a number of legal, HR system and GDPR implications to consider with plenty of practical challenges to address. The government acknowledges that defining the overall approach to ethnicity pay reporting is an important step to encouraging consistency. Given the complexity of ethnicity data, contextual factors such as gender, location and age variations could also form part of the information that will need to be collected.

Many organisations also do not have systems in place to record data on ethnicity categorisation in a way that can be easily cross-referenced to payroll data.  As such, employers who choose (or, in due course, are required) to report, will have a significant data collection task which will require careful consideration of GDPR implications.

Some key points to consider:

  • Employees cannot be compelled to provide data on their ethnicity.  A strong internal communication plan and positive engagement with employees will be vital to encourage voluntary disclosure, support the data collection exercise and engender trust that it is being used to identify issues and deliver positive change.
  • Employers who decide to voluntarily publish ethnicity data will have the freedom to adopt an approach to data collection and analysis and reporting which aligns with their internal systems and objectives.  However, such approach may subsequently need to be adapted to align with any legislation which is ultimately introduced.  
  • As with gender pay gaps, having an ethnicity pay gap is not in itself discriminatory but it can be used by employees to support grievances and/or discrimination claims.  Furthermore, if an employer identifies ethnic pay disparities and takes the pro-active step of publishing them then it needs to be in a position to explain the gap and/or provide details of its plan for addressing the gap and then provide year on year updates on progress – once you publish once, it will be very difficult to turn back and not continue to publish every year even if there is not a legal requirement to do so.

Of course, whilst it’s important that employers prepare for the introduction of ethnicity pay gap reporting, it’s essential to recognise that reporting is part of the diagnosis and not the solution. However, it certainly shines a light on the importance of finding solutions and directs attention to the most problematic areas. 

Like gender pay gap reporting, ethnicity pay gap reporting will provide a welcome trigger for many organisations to review and revitalise their approach to diversity and inclusion (D&I). Many organisations have well-developed D&I agendas focused on building diversity – improving recruitment processes, educating about unconscious bias, reducing discrimination in policies and practice. However, diversity alone means little – and is unlikely to be sustained - without inclusion.  Too often, the issue of inclusion is delegated to D&I committees, allies, supporter networks and often lone representatives of minority groups to resolve.  However, your leaders have a key role to play in creating inclusivity.  

Read our other article to learn more about inclusive leadership and how you can ensure that inclusive behaviours become a core part of how ALL of your leaders lead.

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