Why ethnicity pay gap reporting should be mandatory

COMMENT Following this year’s International Equal Pay Day on 18 September, we at BAME in Property are calling on the government to make ethnicity pay gap reporting mandatory.  Although the day has traditionally focused on gender pay gap elimination, we know that in the UK, pay gaps between ethnic minorities can be high and that it’s important to acknowledge and act on these too. At BAME in Property, encouraging the built environment sector to report on the ethnicity pay gap is a priority, and there are moral and financial reasons for reporting on this.  However, we also recognise some of the challenges around ethnicity pay gap reporting. Taking guidance from the House of Commons’ Women and Equalities Committee and our own resources, we want to support and encourage the built environment sector to consider releasing this data even without it being mandatory.  Where are we now In February 2022, the Women and Equalities Committee recommended that “reporting the ethnicity pay gap should be mandatory, and is the first step to addressing pay disparities between employees from different ethnic backgrounds”. The committee called on the government to introduce legislation that would require large companies to publish their ethnicity pay gap data. In response, the government said it would not be making ethnicity pay gap reporting mandatory “at this stage” to avoid burdening workplaces during their post-pandemic recovery. Despite stating that such reporting would be an effective tool to assist employers in making a fair workplace, the government has said it may not be suitable for all workplaces. In 2017, as part of the Equality Act 2010, the government introduced mandatory reporting on the gender pay gap for all companies with more than 250 employees. The result has been companies reporting these figures annually, a national archive of data and solutions to move forward where gaps are identified.  By comparison, the Office of National Statistics has only released official statistics on ethnicity pay gaps twice since 2019, the last time in 2020. Since then, we have had the Covid-19 pandemic, which has disproportionately impacted ethnic minorities, their employment status and opportunities and, as a result, their pay. No doubt, mandatory reporting would allow us to collate data, which could be helpful in responding to such societal events.  The argument from the Women and Equalities Committee is that companies that are already reporting on gender pay gap will have some practices in place to support with ethnicity pay gap reporting. In recognition that the built environment industry lags behind when it comes to ethnic diversity, Cushman & Wakefield has for the past few years voluntarily published its mean ethnicity pay gap, with reductions in the gap from 29.4% in 2020 to 26.9% in 2021.  Many people are now calling for ethnicity pay gap reporting to become mandatory for all companies with more than 250 employees, in a bid to encourage them to take tangible action to reduce injustices between BAME and non-BAME workers. The challenges  Even though many companies will already be reporting on their gender pay gap, we acknowledge one of the biggest challenges is data collection for ethnicity pay gap reporting. Many ethnic minorities are reluctant to disclose personal information about their ethnicity and religion, often fearing this could be a hindrance in their progression within a company. Lack of or incomplete data would distort the results and its effectiveness. You only have to take a look at the industry to see the complete lack of diversity within companies at senior levels. The perception this gives is that ethnic minorities are less likely to be considered or put forward for such positions. As a result, many people would rather keep their ethnicity to themselves to even make it beyond the recruitment screening process. A continuous communications campaign will be necessary, explaining why the data collection is happening, what it will be used for and how it will guide future pay and policies. This complete transparency will help people be more willing to disclose their personal information. Unlike gender pay gap reporting, which is quite binary, ethnicity pay gap reporting is nuanced. Within the BAME umbrella, different ethnicities do better than others. Focusing on ONS’s 2019 data, the Bangladeshi (£10.58 per hour) and Pakistani (£10.55 per hour) ethnic groups had some of the widest positive pay gaps, respectively earning 15.3% and 15.5% less than white British employees (£12.49 per hour). Those found to earn more included: white Irish by 40.5% (£17.55 per hour); Chinese by 23.1% (£15.38 per hour); and Indian by 15.5% (£14.43 per hour). As such, ethnic pay gap reporting is important for understanding the differences within the umbrella term “BAME”, as well as within white counterparts.  There is also the issue of back office and client-facing roles. The reality is that ethnic minorities, on balance, tend to have more back office positions, such as in admin or finance. Companies might be able to meet an ethnicity pay gap quota through such positions. However, the real question we should be asking is whether a BAME person and a white person in the same client-facing role are earning the same. Why it’s important The challenges should not be a reason to stop the built environment sector in tackling the ethnicity pay gap but an opportunity to be more inclusive. This is not just an issue for ethnic minorities as the ethnicity pay gap affects everyone. It is extremely discouraging for prospective BAME professionals looking to enter an industry to see there is a substantive ethnicity pay gap. They are already questioning their value, worth and, ultimately, their place in the company. Companies could miss out on vital talent and diversity in thought, crucial for any sector to continue thriving. Putting aside the talent argument for ethnicity pay gap reporting, at the very least, it is morally right to pay two people doing the same job the same amount. Companies that do not are essentially classifying BAME professionals as second-class workers, suggesting: “We want your talent and skills but we don’t think you should be earning the same as your white counterparts”. Ultimately, companies will financially benefit from diverse talent. McKinsey’s report Diversity wins: How inclusion matters demonstrates how companies with greater ethnic and cultural diversity outperform their competitors by 36%. The likelihood of outperformance continues to be higher for diversity in ethnicity than for gender. As such, it’s not just morally right, it makes financial sense.  Key recommendations The Women and Equalities Committee has recommended the government introduces mandatory ethnicity pay gap reporting by April 2023 for all organisations that currently report for gender. Legislation should include the requirement for employers to publish a supporting narrative and action plan. To accompany this, the government should produce guidance, with clear explanations on: (a) data protection to reassure employers how they can legally capture, retain and report ethnicity pay gap data; (b) methods for capturing, analysing and reporting ethnicity pay data; and (c) the body responsible for enforcement and what powers that body will have. We want current and future generations entering the industry to see that equal pay is a priority and that it is an inclusive industry to work in. Our corporate members will be discussing this issue at a high level, sharing ideas and best practice on how to approach this task. This is not a competitive process, as no company can wholeheartedly admit it has eliminated the ethnicity pay gap. Rather, collaboration will be encouraged, as the whole industry needs to improve. It won’t be an easy task but it is necessary. We are calling on the government to make ethnicity pay gap reporting mandatory.   E-mail hello@bameinproperty.com if this is something we can support you with.  Priya Aggarwal Shah is founder of BAME in Property