In July 2023, the UK government’s finally published its response to its 2018 consultation on whether #ethnicity #paygap #reporting should be made mandatory for UK employers. A number of paragraphs from this response were quoted in an article published at the time in The Voice newspaper.
I want to go through two of those paragraphs because they highlight what is wrong with the current debate. I think the debate can be reset in a more productive direction if campaigners and the government were to focus on Action 71 of the Inclusive Britain action plan instead of Action 16. In short, those who wish to implement mandatory ethnicity pay gap reporting should use existing Disability Confident reporting scheme as a template to build on and not copy and paste Gender Pay Gap Reporting.
Why pay gap reporting is needed
“Key to this is gaining a good understanding of the particular issues which may be driving those disparities. Introducing an effective pay reporting system is one way to achieve that because it helps employers build an evidence base for relative pay across ethnic groups and identify unexplained gaps. But, employers need flexibility to do this well,” Page 7 of PDF version of government response.
This is absolutely correct on both points. Unless you analyse your own data to understand why ethnic disparities exist in your organisation, you won’t know where to start on addressing them. To do this effectively, employers need flexibility as the issues faced by an investment bank in central London will differ from those faced by a primary school trust based in Cumbria.
That paragraph also tells me the government is signed up to the principle of mandatory public reporting. After all, this is the same government that brought in gender pay gap reporting, pay ratio reporting, modern slavery act, etc, so they have a track record in this regard. However, …
How should pay gaps be reported?
“This consultation highlighted genuine difficulties in designing a methodology for ethnicity pay reporting, with mixed views on the best metric to use. It is therefore clear that it is not appropriate for the government to mandate a particular methodology.” Page 7 of PDF version of government response.
The last sentence is again spot on. Mandating a particular methodology takes away the employer flexibility to address disparities peculiar to their location and sector e.g. London Bank, Cumbrian School, National Fast Food Chain, Scottish Energy Firm, etc.
The first sentence is also correct, but it goes to the heart of the confusion around this debate. If different areas and sectors face different challenges in respect of ethnic disparities, there is no way on earth you can come up with a single metric that can be used by all employers. Yet campaigners have consistently and explicitly called for the gender pay gap reporting metrics to be copied and pasted to ethnicity (with only minor tweaks). The government quite correctly states it is not possible to do that which is a point I have been making for a number of years.
The failure by campaigners to explicitly think about how ethnicity pay gap reporting should be done is a serious one which I have repeatedly warned about. My own experience of writing the draft version of the government ethnicity pay gap guidance in order to fulfil Inclusive Britain action 16 showed me how campaigners’ belief that gender pay gap reporting could be copied and pasted to ethnicity, was distorting the government’s understanding of what they were trying to do.
This distortion resulted in a final version of the guidance that included much of what campaigners wanted in terms of metrics. As a result the guidance has serious flaws and is unfit to be used for any mandatory reporting scheme and therefore action 16 (shown below) has not been completed in my view. I was not involved in the final version hence why I was unable to prevent these flaws from appearing.
Reset the debate with Action 71 not Action 16
So how should campaigners progress this debate and bring about mandatory ethnicity reporting?
Ironically, the government’s Inclusive Britain action plan points the way forward. Action 71 on pages 95 & 96 commits the government to publish by Q4 2023 an Inclusion Confident scheme which builds on the current Disability Confident scheme introduced in 2016. I reproduce the second paragraph of the backdrop for Action 71 shown below.
“Models such as the Disability Confident Employer Scheme help organisations to take action to improve how they recruit, retain and develop disabled people within the workplace. A scheme that includes but is not exclusive to ethnicity and race would, in a similar vein, provide the tools for employers to overcome barriers to in-work progression and retention of their ethnic minority staff, helping them to navigate a sensitive area with confidence, to deliver tangible results that benefit the employee and employer long term.”
The highlighted phrases are the reasons why people campaign for mandatory ethnicity pay gap reporting in the first place. The fact that Action 16 appears 46 pages earlier on page 49 of Inclusive Britain shows the government and campaigners have not joined the dots between actions 16 & 71. The goals of pay gap reporting and inclusion confident schemes are identical, the difference is the starting point for employers. I only became aware of Disability Confident late in 2022 but I can now see it starts in a much better place.
Why Inclusion Confident is the better starting point
In 2022, I explained why I preferred Disability Confident reporting to Disability Pay Gap Reporting. I started by stating the disability pay gap was a lie to someone who is disabled like me and why the disability representation gap was the relevant metric. I then pointed out how the Voluntary Reporting Framework (or VRF) required for Level 3 Disability Confident employers was already close to what I would require employers to report on for disability representation gaps. Specifically, the VRF guidance document has these features –
- Aimed at employers with 250 or more employees. This is the same threshold for gender pay gap reporting though I have pointed out this is too low for ethnicity and possibly for disability.
- Part A requires employers to publish a narrative on how they recruit, retain and support disabled employees. Note this doesn’t explicitly call for action plans to address disparities but it is implied from the points that must be addressed.
- Part B requires employers to report the percentage of employees who consider themselves to be disabled or have a long term physical or mental health condition. The guidance gives details on how to collect this information from employees which is similar to what is needed for ethnicity though a major difference between ethnicity & disability is that there are no commonly used categories for disability.
All that is missing is a Part C which I explained and demonstrated in my disability article which is –
- Part C requires employers to repeat part B for each of the 4 pay quarters required in gender pay gap reporting. If employers have too few disabled employees, then part B can be repeated for the 2 pay halves instead.
This layout is more or less how I wrote my draft guidance for ethnicity pay gap reporting. By the way, I wrote my draft before I became aware of disability confident and wrote my disability pay gap article.
I note the following on page 10 of the VRF guidance PDF under the heading of how to collect data and where to report it.
“This decision is entirely for the reporting employer who will determine what works best for their own organisation.”
This reinforces the point I made earlier when affirming the government’s contention that employers need flexibility in what they report for ethnicity even if they support the principle of mandatory reporting.
Can Inclusion Confident be mandatory?
Yes it can but for now, action 71 will be voluntary. The reason why I know it can be mandatory is in 2021, the government said it would consult on how to encourage greater use of VRF for employers.
- “encourage employers to recruit, retain and progress their disabled employees and to create inclusive workplaces by reviewing Disability Confident, promoting the Voluntary Reporting Framework and consulting on taking this further, and disseminating best practice to employers”
Employer reporting in accordance with VRF is already mandatory for Level 3 Disability Confident as from November 2019. I was informed separately that wider mandatory reporting was not being ruled out during this consultation. In any event, it looks like action 71 will supersede this since it calls for expansion of Disability Confident to Inclusion Confident.
Would mandatory Inclusion Confident reporting work?
For me, it will have worked if the racial and ethnic disparities we currently see in employment start to narrow and eventually disappear. In other words, employers continuously improve the way they recruit, retain, promote and pay their staff so as to reduce and eliminate the gap between where they are today and where they want to be in the future. Such an endeavour is known as Continuous Improvement and there is whole host of ideas, methods, processes and expertise in many fields that can be applied to tackle ethnic disparities.
However, governments can’t make that happen even with mandatory reporting, it requires employers have the necessary capabilities to deliver Continuous Improvement in the first place. From my 10 years as a member, Chair & Secretary of the Quality Improvement Section of the Royal Statistical Society, I am aware the gap today between the required capabilities and where employers actually are is considerable. That is why the QIS section was established by the RSS (LinkedIn group is here) because statistical thinking and methodologies are at the heart of nearly all continuous improvement frameworks. An example of a continuous improvement methodology applicable to pay gaps is 
described in my article “How to Close Pay Gaps with DMAIC” which is essentially a variant on the Data – Evidence – Decisions strapline used in the Royal Statistical Society’s logo.
Recap of why Disability Confident is the template for Ethnicity Pay Gap Reporting
We are where we are today because campaigners for mandatory ethnicity pay gap reporting started in the wrong place. They were successful in communicating why employers should be reporting on their ethnicity representation gaps but when it came to the how, they made the mistake of using gender pay gap reporting as the starting point for an ethnicity reporting system.
The UK gender pay gap reporting system is inherently binary from the point of view of its metrics and reporting. It was a copy and paste of the Office of National Statistics (ONS) process used since 1997 to measure the UK’s gender pay gap. The ONS process was designed by statisticians for statisticians and was never intended to be used by HR professionals with no understanding of statistics. I consider this to be one of the reasons why mandatory gender pay gap reporting has not had an observable effect on the UK gender pay gap since 2017.
Ethnicity is not binary as evidenced by the recent 2021 census which listed up to 19 ethnicities to choose from. White and ethnic minority populations are not of equal size like men and women, they are majority and minority. The ethnic majority to ethnic minority ratio varies enormously between geographical areas in the UK unlike gender which has virtually the same ratio of men and women in all areas. These are three reasons why campaigners should not have started with the existing mandatory gender pay gap reporting system as the basis of an ethnicity reporting scheme.
Campaigners should have started from the Disability Confident scheme. Like ethnicity, disability is a majority v minority. Like ethnicity, disability has multiple (poorly defined) categories. Possibly like ethnicity, there are geographical variations in health and health outcomes but not as variable as is observed for ethnicity. Most of all, Disability Confident already has a mandatory reporting framework for those employers who wish to reach Level 3.
I wrote the draft version of the government’s ethnicity pay gap guidance for employers which was called for by Action 16 of Inclusive Britain. It was only afterwards, I realised what I wrote actually follows the principles of Disability Confident which Action 71 calls to be expanded to Inclusion Confident encompassing ethnicity. I urge all campaigners and the government to make the same mental switch and to explore how Action 71 can deliver a potential mandatory framework that will foster and encourage the continuous improvement capability needed among employers in order to tackle and close their racial and ethnic disparities.
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