This move, the body argues, will help to bolster workplace equality and create consistency of disclosures among organisations.
The professional body for Human Resources and People Development, the CIPD, have called for mandatory ethnicity pay gap reporting to apply to all large employers from 2023.
This comes ahead of an upcoming parliamentary debate on the need to introduce Mandatory Ethnicity Pay Reporting, prompted by a petition which garnered over 100,000 signatures from the UK public.
At present, although gender pay reporting is compulsory for large organisations with over 250 employees, this type of reporting does not yet exist for ethnicity or race.
The CIPD highlighted the disparity between what businesses are classing as important and action actually being carried out.
Specifically, the body found that the Black Lives Matter movement which occurred last summer shone a light on issues linked to diversity and inclusion. However, since then, only 13 companies within the FTSE 100 voluntarily released information about their ethnicity pay gaps.
Despite this, the body insists progress has been made, as, of these 13, ten organisations published this data for the first time which suggests that greater public scrutiny of race inequalities prompted these employers to act.
As such, the CIPD is calling for ethnicity pay reporting, including the requirement to publish a clear narrative and action plan, to become mandatory for all large employers from April 2023.
This would function similarly to the gender pay gap reporting with data being collected in March-April of 2023 and being reported on within one year.
The body also states that businesses should also publish an action plan detailing how they are going to close the gap, noting “numbers without a narrative are less likely to drive real change”.
The CIPD recommends three data points that businesses should be made to report on, including:
- A uniform set of eight commonly defined statistics to profile pay by ethnicity including median ethnicity pay gap; mean ethnicity pay gap; median bonus gap; mean bonus gap; bonus proportions and quartile pay bands.
- The proportion of their total UK workforce from ethnic minorities, ideally presenting this in the context of external demographic data (displaying the extent to which their workforce mirrors the ethnic diversity of their local community).
- The proportion of employees who have disclosed their ethnicity, as low ethnicity disclosure rates have been a challenge for many employers.
It further expresses that companies can add a supporting narrative to explain the nature and causation of any pay differentials and gaps by ethnic group evident in their statistics.
Peter Cheese, chief executive of the CIPD, stated:
Ethnicity pay reporting is an important lever for businesses and their stakeholders to assess if and where inequality based on ethnicity exists in their workforce.
That’s why we believe it is so important that businesses both capture and learn from this data. While it’s positive to see some organisations voluntarily report their ethnicity pay, it’s clear that progress is slow and reporting is very inconsistent. Some companies just report their data while others report a commitment without sharing the data behind it.
Mandatory reporting of data, and the associated narrative that shows understanding of the data and the actions being taken to improve, for both ethnicity and gender pay, will help create fairer workplaces and societies and kickstart real change.