New Era in Equality: Mandatory Ethnicity Pay Gap Reporting

Sandra Kerr

• Uncategorized
• Race Equality
• Diversity and Inclusion

Nearly 30 years ago, Business in the Community (BITC) alongside His Majesty The King, started working with business leaders to address the inequalities faced by Black, Asian, Mixed Race and other ethnically diverse employees in UK workplaces. In the mid-1990s, senior managers in UK corporates were predominately white men. Since 2005 only 6.4% of managers, directors and senior officials were from a Black, Asian, Mixed Race or other ethnically diverse background. In 2024, this figure increased to 12.1%.¹ This shows we have come a long way since then, but I know there is still so much work to do.  

Mandatory ethnicity pay gap reporting – making the case  

We do, however, have to celebrate the wins when they come. And recently, we had a big win. Over seven years ago, following the publication of the independent Race in the Workplace: The McGregor-Smith Review, BITC alongside business leaders, recognised that one of the most important ways to address pay disparities facing Black, Asian, Mixed Race and other ethnically diverse employees was to mandate ethnicity pay gap reporting. Since then, we have spent years working with businesses, presenting clear evidence and gathering insights from over 25,000 UK employees.  

The evidence is clear; more employers are voluntarily tracking and reporting on their pay gaps and employees want more transparency on pay from their employers. However, despite this overall trend, there is still a reluctance from some employers to publish their pay gaps and be fully transparent. From 2018 to 2021, the percentage of employees who worked for organisations that collect ethnicity pay gap data increased from 11% to 19%. Despite this increase, only 56% said that they published this data.  

In addition, in 2023 BITC surveyed over 200 employers and found that 67% of employers were monitoring data on pay and ethnicity, yet only 44% published this data. Despite the challenges in gathering this data, employers have shown that it is possible to collect and report on pay gap data, and BITC has significant evidence of businesses highlighting the effectiveness of ethnicity pay gap reporting. Data is power and without it, the best workplace decisions cannot be made. 

The Draft Equality (Race & Disability) Bill  

At The King’s Speech 2024, it was announced that a Draft Equality (Race & Disability) Bill would be brought before Parliament, with the view of making ethnicity pay gap reporting mandatory for companies with over 250 employees. This is an extremely welcome step, as we know the best decisions are made when data and the transparency it brings, is used to guide decisionmakers in understanding the problem and tracking progress. 

We know that mandatory ethnicity pay gap reporting will be successful as all we need to do is look at the success of gender pay gap reporting. Since the introduction of mandatory Gender Pay Gap reporting in 2017, the median pay gap has reduced from 18.4 to 14.3 overall in 2023, and for full time workers has decreased from 9.1 to 7.7 over the same period.²  

There is still much work to do to ensure that employers are heard as the Draft Equality (Race & Disability) Bill goes through Parliament, but I am looking forward to this next step in our campaign to make UK workplaces a fairer place for everyone to enter, work and progress in, regardless of their background.  

This legislation is a long time coming, and the credit sits with those employers who recognised the importance of capturing and publishing their ethnicity pay gap data, even though there was no requirement to do so. They started a trend that will have significant positive impact on people from Black, Asian, Mixed Race and other ethnically diverse backgrounds now and in the future. 

Expert opinions on the Draft Equality (Race & Disability) Bill 

Baroness Ruby McGregor-Smith CBE said: 

“I am delighted that the Draft Equality Bill will be brought before Parliament, and once and for all mandatory ethnicity pay gap reporting will be a legal requirement. Since the publication of my independent review, I have been working closely with BITC to make mandatory ethnicity pay gap reporting a reality, so that businesses are held accountable as they act to address any pay disparities. While there is still a long way to go to close the pay gap, the Bill is a welcome step, and I am confident that it will make a real difference in making UK workplaces fairer.” 

Richard Iferenta, Partner and Vice Chair at KPMG LLP and Chair of BITC’s Race Leadership Team, said: 

“As Chair of BITC’s Race Leadership Team, I am delighted to see that the Draft Equality Bill will be brought before Parliament. One in five working age adults in the UK come from a Black, Asian, Mixed Race, or other ethnically diverse background, yet a far smaller proportion of ethnically diverse employees are in senior management roles. I believe that making ethnicity pay gap reporting mandatory is vital, but so are business action plans to address the pay gaps that are highlighted during this process. It is also essential that we close the ethnicity pay gap and support more people from Black, Asian, Mixed Race, or other ethnically diverse backgrounds into more senior roles. The Bill is a welcome step and I look forward to seeing it progress.”  
 
Claire Camara, Global Chief People Officer at Essence Media, said: 

“The Draft Equality Bill is a welcome step towards addressing pay disparities in the workplace. Since gender pay gap reporting was made mandatory in 2017, we have seen the positive impact that mandatory reporting can have. While there is still much more work to be done before we can close the ethnicity pay gap once and for all, the Bill will make a big difference to Black, Asian, Mixed Race, and other ethnically diverse employees across the UK.” 
 

Carmen Watson, Chair of Pertemps Network Group, said: 

“Transparency on pay is essential if we are to close the UK’s unacceptable ethnicity pay gap. Evidence shows that while there are lots of employers who monitor and collect ethnicity pay data, there is a limited number of employers that publish their data. 

“The Draft Equality Bill will help highlight ethnicity pay gap issues, and track progress around the areas in need of improvement. The Bill being brought before Parliament is a big step in the right direction.” 

Justin Onuekwusi, Chief Investment Officer at St. James’s Place, said: 

“The UK population is becoming increasingly diverse, shedding a light on why addressing disparities in the workplace is essential. While making ethnicity pay gap reporting mandatory is not a silver bullet, it will be an important step in closing the ethnicity pay gap, leading to positive impacts on ethnically diverse employees across the UK. Once employers start publishing their ethnicity pay gap data, we will be able to work out the scale of the problem and begin to address it so that we can close the gap once and for all.” 

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References

¹ Annual Population Survey, 2005 figures use SOC2010 classification for occupation, 2024 figure use SOC2020 classification for occupation.

² Annual Survey of Hours and Earnings from the Office for National Statistic.