Why is it important for organisations to report on their ethnicity pay gap?

16 February 2021

Over the past 40 years, the makeup of the workforce in the UK has changed dramatically. Fourteen per cent of the working age population is now coming from a Black or Minority Ethnic (BME) background. Yet this change is not reflected in workplaces. In fact, BME individuals make up only six per cent of top management positions.

What is important here is the concept of the ‘diversity dividend’. This expresses the elevated commercial potential for organisations that are inclusive across all levels of business. Time and time again, reports have shown a significant ‘diversity dividend’ enjoyed by firms as well as enhanced profitability, efficiency, innovation and long-term business sustainability. The financial benefits of having diverse teams are less well known, yet 78 per cent of global HR and business leaders believe diversity and inclusion is a competitive advantage and 39 per cent say that advantage is significant. It benefits the whole economy, not just individual firms. In fact, recent figures show that having a truly representative workforce could add an £24 billion a year to the UK economy.

Ongoing social justice movements, such as Black Lives Matter, show that inequality and racism are still embedded in our society. Where racism is systemic and exists within the structures of our institutions, organisations can no longer sit by and wait for initiatives to become mandatory; rather, they must start to play their part in ensuring a more inclusive and diverse workplace. One of the first actions an organisation can take is to independently examine their own Ethnicity Pay Gap (EPG).

What is the Ethnicity Pay Gap?

A common misconception with the EPG is that ethnically diverse people are paid less for the same work. In actual fact, it is the calculation of the average pay of someone from an ethnic minority community as compares to someone that is white. According to the latest ONS figures, the median hourly pay for those in the White ethnic group was £12.40 per hour compared with those in ethnic minority at £12.11 per hour – a pay gap of 2.3 per cent, its narrowest level since 2012. Yet, there is still some way to go. From a financial perspective, it’s a clear way of showing the gap in senior representation across businesses.

There are a number of organisations that already report on their EPG, including ITN, Deloitte, PwC, KPMG, EY, Bank of England, Barclays, The Guardian and Network Rail. Alongside this, there are also a number of other public sector bodies such as the Greater London Authority and law firms such as Linklaters and Slaughter & May that have made this commitment.

Organisations need to function as agents of change and pave the way for inclusivity in the workplace and beyond. Policies that entrench inclusion must be implemented across all levels of the business – not just at the very top or bottom level. Therefore, examining and reporting on the EPG is an essential first step in beginning the process.

EPG reporting framework

We have created a general framework for employers to use for reporting the EPG. This simple framework takes employers through a seven-point plan, as well as how to analyse results, report findings and what steps to take next. Reporting the EPG is just the beginning, it is the actions taken after the report that really matter.

Addressing accountability, senior progression coaching, investment in returnships, work allocation and recruitment need to be investigated and appropriate actions and changes made.

  • Ensure accountability

Give senior leaders targets related to representation within their respective business units or functions.

  • Senior progression coaching

Senior sponsorship programmes aim to give high potential minority talent senior sponsors within their firm who are able to advocate for them in areas of the business they have yet to access.

  • Investment in returnships

By investing in comprehensive back to business programmes for those who have taken career breaks, diverse experienced hires may be more attracted to join the business.

  • Work allocation

Often overlooked, but equal access to the best work, career defining projects and exposure to key clients or stakeholders is crucial.

  • Recruitment

Ensure that all short and long lists have strong diversity credentials. Similarly, hiring and promotion panels should have a diverse composition.

By publishing their EPG reports and aspirational diversity targets, employers become transparent about their progress and can be kept accountable. No large business will be perfect, but by publishing this data employers can encourage others to do the same and inspire change in the workplace.

It’s an underlying issue that we have so far allowed to linger and grow in workplaces across the country; a problem that has already caused significant damage and continues to impact on the lives of thousands each day. It may be the first step, but the EPG report sends a vital signal that your firm is ready to have difficult conversations and take action to ensure each individual employee has the opportunity to thrive. The time to act is now.

Our mission is to champion each and every individual, to combat the lack of diversity and inclusion in the workplace, and reduce this ethnicity pay gap. Contact us today to see how we can help you recruit the highest quality talent for your business.