Ethnicity Pay Gap Reporting
In October 2018, the government started a consultation into whether organisations should be required to report on the pay differentials between people from different ethnic backgrounds. This consultation was largely a response to a report by Baroness McGregor-Smith: ‘Race in the Workplace – The McGregor-Smith Review’.
McGregor-Smith’s review found that there are barriers to the career opportunities and progression of people from ethnic minorities, and they are disadvantaged compared to their White British counterparts. These disadvantages manifest themselves in a pay gap. It is important, however, to understand that this pay gap is not often related to unequal wages. Under the Equality Act 2010, it is already an offence to pay a person with a protected characteristic less for the same work as another person who does not have that protected characteristic. The ethnicity pay gap is more indicative of an under-representation of people from ethnic minorities in higher-paying roles, hence the barriers to opportunity and progression found by McGregor-Smith.
The benefits of engaging with ethnicity pay gap reporting
Identifying these problems, the government in its Ethnicity Pay Reporting Consultation stated that, ‘barriers that prevent under-represented groups from realising their full potential need to be broken down’. It is for employers to determine the best way to break down these barriers, and that is perhaps why it is so important that employers have the data with which to determine the best course of action. Indeed, McGregor-Smith highlighted that, ‘transparency in organisations is crucial. Career ladders, pay and reward guidelines, and how and why people are promoted are often opaque. Perhaps more importantly, many organisations do not even know how they are performing on this issue overall’. It is clear, then, that it would benefit businesses to engage with ethnicity pay gap reporting in order not only to address the barriers faced by people from ethnic minorities. Additionally, it would benefit the economy as a whole, since the potential benefit to the UK economy from full representation of BME (Black and Minority Ethnic) individuals across the labour market is estimated at £24 billion a year.
Pay discrepancy among organisations
Nevertheless, it may be naïve to presume that there is not more to the story than a person’s ethnic background. Educational attainment, age, gender, among numerous other cultural, societal and personal conditions can detrimentally affect a person’s career opportunities and progression. The government consultation addressed this issue and determined that ethnicity pay gap reporting would help businesses to identify whether pay disparities are caused by ethnicity alone, or whether they are caused by a host of factors to which an alternative approach beyond a sole focus on ethnicity might be more appropriate. In essence, it is difficult for anyone to decisively name the cause to the pay discrepancy experienced by ethnic minorities relative to their White British counterparts, which is an unfortunate matter of fact. However, we will never be in such a decisive position until we confront the uncomfortable truths, cultivate a transparent approach to recruitment and promotion within companies, and require those companies to publish reports on the status and progress of the ethnicity pay gap.
The crux of the issue, however, as with the gender pay gap, is under-representation. As stated, there are often a number of reasons why a person may get a job or a promotion over another person. However, the EHRC found that most people from ethnic minorities have higher qualifications than White British people. Additionally, BEIS research has shown that the representation of ethnic minorities in senior management positions is below the level expected given the levels of educational attainment, suggesting an under-used talent pool. It could be that conscious or unconscious biases play a larger role in recruitment and promotion than people expect, which reinforces the importance of ethnicity pay gap reporting and a call for transparency as a way of investigating, confronting and addressing those biases.
A recent example providing a warning to employers
Furthermore, there is a danger for employers who take a heavy-handed approach to diversity and inclusion, and perhaps who act without the benefit of the data which would be collected as part of an ethnicity pay gap report. A recent case involving Cheshire Police and a white, heterosexual male applicant, Mr Furlong, demonstrates this danger. The employment tribunal judge ruled that he lost out on his dream job “simply because he was a white, heterosexual male”, and found that Cheshire Police set an “artificially low” pass rate for applicants, awarding a simple pass or fail instead of making decisions based purely on academic merit. This, to Cheshire Police’s understanding, would make the majority of applicants identically qualified, thus enabling them to rely on positive discrimination under the Equality Act to diversify its workforce. However, the employment tribunal disagreed with this practice.
The propriety of such positive discrimination is beyond the scope of this article, but the example should serve as a warning to employers who may seek to use the same tactics in the future. A recommendation to employers is to maintain transparent and fair procedures, and that engaging with an ethnicity pay gap report will provide the best method of addressing inequalities with its workforce. Acting without the benefit of such information may result in more cases like Mr Furlong’s which will prove costly and potentially damage the reputation of employers.
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