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Pay Gaps #29 – Government Guidance on Ethnicity Pay Gap Reporting – My thoughts

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Two months ago, the Department for Business & Trade (DfB&T) in collaboration with the Equality Hub (EqHub) and Race Disparity Unit (RDU) published Ethnicity pay reporting: guidance for employers.  This is “guidance for employers on how to measure, report on and address any ethnicity pay differences within their workforce” and fulfills Action 16 of the government’s Inclusive Britain action plan.  I was asked to write the draft version of this guidance and I have to confess to being disappointed with the final version published.  I will explain why I am disappointed and why I have decided to publish an edited version of my draft as well.

4 Years to Publication

Here is a chronology of my role in the publication of this guidance.

The 3 Audiences for EPGR Guidance

DfB&T original plan was to consult with employers before I wrote the 1st draft.  This became difficult to organise for a number of reasons and so I was asked to write an initial version and then revise after consultation.  This meant I erred on the side of putting too much detail rather than too little in the first draft so I fully expected to get feedback that it was too detailed.

In the event, the feedback was more varied than I expected.  Three distinct audiences emerged –

  1. Those who want to undertake EPGR – their feedback was good and they quite liked the detailed draft.
  2. Those who were curious about EPGR – feedback was still good but my first draft was too long and too detailed for this audience.
  3. Those who want to copy & paste GPGR – they are comfortable with the gender pay gap reporting methodology and think it can be reused with ethnicity.

Anyone who has read my blogs will know I have been adamant that one cannot in any shape or form copy and paste gender to ethnicity.  This was the very 1st point of my 9-point briefing note to Parliament but it would appear too many organisations do not understand the data and statistical reasons why this is the case.  From the consultation, it was clear the following organisations were in the copy and paste camp.

  • CIPD Chartered Institute of Personal Development
  • Fawcett Society
  • Business in the Community

I knew I could produce a revised draft that would work for the first two audiences but the copy and paste audience needed a different approach.  I advocated for some training, webinars, talks or videos explaining why copy and paste cannot work but I was not successful.  When it became clear I would not be involved in the final editing I feared the above organisations would lobby for copy and paste on the grounds employers were familiar with this and would find it “easier”.

This is exactly what happened.  In the Introduction & Overview section of the final version, here is what the 7th paragraph says –

“Much of this guidance – including the methodology for the calculations – mirrors the approach set out in the guidance for gender pay gap reporting. This should help employers to avoid having to run different processes to collect pay data for both sets of calculations.”

This is misconceived and pretty much guarantees that employers will not be able to make head or tail of the calculations.  I know from my own experience employers already struggle mightily with gender pay gap reporting using this methodology so why should they be able to do a better job with the more complex characteristic of ethnicity?

Outline of Final Version April 2023

The final EPGR guidance to employers has been broken down into 6 separate pages on .GOV as follows –

  1. Home page
  2. Introduction & Overview
  3. Understanding & Reporting your Data
  4. Collecting Ethnicity Data
  5. Preparing your Payroll Data
  6. Making your Calculations

The longest section by far is the last page Making Your Calculations.  I have already fed back to DfB&T that this needs to be split into 2 or 3 separate pages as it is way too long and confusing to navigate.  The full list of subheadings for this page is on the right here but broadly they cover these themes –

  1. How to choose ethnic categories and aggregate ethnicities into categories for your analysis.
  2. How to refer to aggregated categories
  3. Calculating and presenting pay quarter breakdowns
  4. How to present results for those employees who do not disclose their ethnicity
  5. Calculating mean and median ethnicity hourly pay gaps
  6. Calculating mean and median ethnicity bonus pay gaps

As I make clear in the next section, I strongly recommend you do not bother to read and perform calculations 2, 3, 7 & 8 from the list to the right.

My Comments on Final Version

DfB&T have assured me that what is published will be reviewed in a year’s time and changes will be made following feedback from employers.  So whilst I am disappointed with the final version, there is hope that changes will be made going forward.

My disappointment is the result of 2 major issues.

1 – Copying & Pasting the pay & bonus gap calculations from GPGR – The key calculation is of course the pay quarter breakdown by ethnicity but anyone reading the guidance will see one sub heading for this from the list above and then 6 more sub headings for the actionless and pointless mean and median pay and bonus gap statistics.  Naturally, readers will then infer those pay gap stats are the most important and will very likely overlook the pay quarter breakdowns.  In my draft version, I had 4 sub headings for pay quarter breakdowns and 1 sub headings for mean and medians which didn’t even include anything on pay gaps.  The chance to get employers to focus on pay quarter breakdowns and ethnicity representations has been lost here because the copy and paste gang wanted what they thought would be an easier way, not understanding that it actually makes things much harder.

2 – The Complete Lack of any Worked Examples – This was something I was aware could be an issue from the start.  The style guide for graphics on the .GOV website is exceptionally severe and basically means one cannot have graphics and tables on .GOV.  The explanation for this is accessibility for disabled people which I find ironic given that I am deafblind.  In the event, the lack of graphics and tables actually ends up making the guidance inaccessible to employers.  I was hoping I could persuade DfB&T to include links to PDF downloads of worked examples but I have not been successful.  It is this point which made me decide to publish my draft version of the guidance on my blog since it includes numerous worked examples to illustrate concepts and calculations.

There is a 3rd issue I want to mention but it is not as pressing as the above two.  It is the following passage found in part 3 Collecting Your Data–

“The Race Disparity Unit provides guidance on collecting ethnicity data which is relevant to any employer who wants to analyse their ethnicity pay. This guidance recommends using the Government Statistical Service (GSS) harmonised standards for collecting someone’s ethnicity.

Using the harmonised standards can help:

    • ensure comparability across different data collections produced by the government and other employers that use harmonised categories
    • derive more useful statistics that give people a greater level of understanding
    • employers be consistent with their calculations in different time periods”

This is more prescriptive than I wrote in the draft.  It defaults to using the census categories as the ethnicities for employees to choose from on the grounds of comparability.  This is actually lifted from the RDU guide to analysing ethnicity data that the Royal Statistical Society critiqued back in July 2022.  We pointed out that comparability is very much a public sector thing but there is no reason why the private sector should prioritise comparability.  In my draft, I tried to encourage employers to talk to their employees to find out how they see ethnicity and use that as the basis for their categorisation.  As I have said before (see point 2 of my 7+5 recommendations for improving pay gap reporting), the only comparison employers should be doing is where they are today with where they were in the past and where they want to be in the future.

Not everything is bad.  After all, I wrote the draft and some parts have been kept wholesale.  In particular I’d like to commend and see spread more widely section 1 of page 2 Understanding your Pay Calculation Results.  This is well written and lists many of the questions employers should be asking themselves.  It also cements a point I wanted to see which was the concept of Minimum Category Sizes.  My recommendation of a minimum of around 20 for internal reporting and around 50 for external reporting have been retained and are mentioned in this section.

Outline of My Draft Version

My main reason for publishing an edited version 5.1 of my final draft version 5.0 here on my blog is because the final version includes no Worked Examples at all.  The draft spends more time explaining why pay quarter breakdowns should be front and centre and why the mean and median pay gap statistics add no information or value.  In the PDF document link below, page 2 explains what edits have been made in version 5.1 which are mostly me removing some stuff relevant to DfB&T rather than employers.  My draft also included sections without text since these were placeholders to enable text written by other people to be inserted.  I have retained these where necessary so that the layout of the draft still makes sense.

Turn ethnicity pay gap data into insights and actions – BEIS guidance – v5.1 DRAFT

Here is a list of the main headings in draft versions 5.0/5.1.

PART 1 – ENGAGING YOUR EMPLOYEES

This is all about setting the scene before you start collecting data.  Whilst I am happy with what I wrote here, particularly part 1.3, I do not regard myself as an expert in employee engagement (part 1.1) & continuous improvement (part 1.2) and I urged DfB&T to seek feedback from more experienced people than me in this field.

  1. The importance of employee engagement
  2. Why pay gap reporting is continuous improvement
  3. Answers to common questions asked by employees

PART 2 – COLLECT YOUR DATA

This is all about data collection, categorisation and aggregation.  I was able to write this using the benefit of my professional expertise in this area but there are some parts around data protection where I asked DfB&T to seek expert advice on.

  1. Can you reuse your GPG Reporting data file?
  2. Choosing a list of Ethnicities for your employees to select from
  3. How to collect and record the Ethnicities of your employees
  4. How to aggregate Ethnicities into Ethnic Categories

PART 3 – TURN YOUR DATA INTO INSIGHTS

This is the statistical analysis heart of the guidance and is based on my 30+ years experience of helping non-statisticians in all industries around the world draw conclusions from data using statistical thinking.  I decided to split this into 2 parts, part 3A listing essential calculations and part 3B describing more advanced calculations that employers could choose to do if they wished.

PART 3A – Basic calculations

  1. Calculate and interpret your Pay Quarter Breakdown (PQB) by Ethnic Category
  2. Calculate and interpret your Overall Breakdown by Ethnic Category
  3. Which representation gap is more important?
  4. Do you see the same or different narrative in different parts of your employer?

PART 3B – (Optional) Advanced calculations

PART 4 – TURN YOUR INSIGHTS INTO ACTIONS

It was always the plan that part 4 would be written by someone with more relevant experience than me as this part is not notably statistical in nature.  I still wrote something to act as placeholders and I have kept these in my edited draft but they should not be read as gospel.

I hope you find my draft version easier to read and use.  I would love to receive feedback on this so please do contact me directly if you would like to do this.

 

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