Our first 2025 ED&I Knowledge share forum bought together ED&I professionals from our member organisations to share their insights for an important roundtable discussion with government on their plans to introduce ethnicity pay gap reporting for businesses with 250 or more employees.
This was chaired by our CEO, Richard DeNetto, with our guest speakers Seema Malhotra FRSA MP, Minister for Equalities, and Jisha Hales, Senior Policy Advisor, Office of Equality and Opportunity.
In the Kings Speech in 2024, the government announced plans to introduce the Race and Disability Bill, which would make it mandatory for businesses with more than 250 staff to report on their ethnicity pay gap (EPG). The UK government define the ethnicity pay gap as “the difference in the average pay between staff from ethnic minority backgrounds in a workforce, compared to ‘white’ staff.” The ONS data demonstrates that average pay for ethnic minority individuals is lower than the average pay for white colleagues and reporting on EPG will help reveal any pay disparity that may exist and prompt action from employers.
Change the Race Ratio have been supporting and encouraging member firms to voluntary report their ethnicity pay gaps since our launch in 2020. We recognise the benefits of transparency and the need to use data to ground decision making on actions taken to close representation gaps.
Change the Race Ratio members are the leadership group of businesses reporting their pay gaps with 80% of firms reporting and the remaining 20% on a pathway to their first report.
We saw four important emerging themes from the roundtable discussion which included ED&I practitioners within our member firms across the economy from businesses of all sizes.
How businesses are collecting their ethnicity data
Unlike with the process of gender data collection, businesses operate on a principle of self-identification, where employees choose whether to share their ethnicity with their employer. The experience of businesses who have been collecting ethnicity data for a number of years is that whilst some employees may feel hesitant about sharing their data, achieving disclosure levels of 90% and above is achievable.
To collect the data, the vast majority of firms have been using the ONS ethnicity categories as the template for ethnicity data collection and have cited the importance of using this framework as the standard for data collection.
Here are some of the approaches businesses are taking encouraging employees to share their ethnicity data:
- Trust and transparency - It’s imperative to provide clear communication to colleagues around what the data is used for and exactly who has access to it. Furthermore, explaining what the business is planning to do with the data and how this contributes to more informed decision making.
- Building a communication strategy - Having ongoing engagement with employees about how robust data can build a fairer workplace can help achieve a higher disclosure rate. Data collection isn’t a one-off exercise, it should be treated as a long-term employee engagement campaign.
- Leadership engagement - Leadership team engagement and championing is essential. Leaders can encourage data collection by using their platform to highlight the importance of data collection and the need for the business to address barriers to progression for underrepresented groups.
- Make disclosure accessible - Make sharing data easy, clear communications and easy access to systems. It’s important to be inclusive to encourage data disclosure from colleagues who work in operational non office-based roles without easy access to company systems.
Here are 5 top tips to encourage data disclosure for non-office-based colleagues:-
Provide colleagues with a designated private area and laptop and give them the opportunity for completing this during their workday, as opposed to completing in their breaks
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QR code to link to online form on a work or personal device.
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Paper form; secure collection box and data recording processes
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Daily floor-walks of shopfloor / warehouse by HR to build 1:1 rapport and encourage completion
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Briefing for line leaders to include collection campaign details in team cascades
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How businesses are reporting their ethnicity pay gap data
Whilst businesses recognise the benefits of disaggregated data and use disaggregated data wherever possible for internal analysis and decision making, there are significant challenges for disaggregated data reporting as a result the vast majority of firms report the binary white v’s non white pay gap.
Recent data collected by Change the Race Ratio support this position, the data shows
- 61% of members report the binary pay gap
- 23% of members disaggregate to the 5 ONS groupings
- 15% of members are reporting the binary gap alongside a black pay gap
The key challenge to reporting disaggregated data is the GDPR risk of exposing individuals, this is particularly challenging for smaller businesses and businesses located in areas of the UK with lower-than-average ethnic minority representation. Larger businesses also cite difficulties in disaggregated reporting as representation is often not well distributed across the 5 groups, leading to small sample sizes in certain groups.
How businesses are taking action to reduce inequalities
Many businesses have taken action to reduce and remove barriers to recruitment and progression of ethnic minority staff, key actions include:
- Setting targets for ethnic minority representation
- Ensuring people management training and systems are inclusive by design
- Increasing employee voice through by establishing Employee
- Resource Groups that are a part of ED&I governance and sponsored by a senior leader
- Providing mentoring and sponsorship opportunities to ensure underrepresented colleagues have the tools and opportunity to progress
- Reviewing recruitment processes to ensure job descriptions are free from bias and recruitment processes and suppliers support the outreach to all available talent
- Using data to understand the whole employee lifecycle and identifying trends and differences in retention, progression and tenure between groups.
What does success look like in addressing the ethnicity pay gap
Pay gap reporting is an important process as part of a businesses drive to create an inclusive workplace and demonstrates commitment to tackle disparities and increase transparency.
It’s important to remember that the pay gap measures average pay, differentials in average pay can be the result of under representation in senior roles and regional differences in pay. It is possible to have negative ethnicity pay gap, this isn’t necessarily a sign of reducing inequalities. Negative pay gaps often exist because of proportionality higher levels of representation in roles and areas were pay is higher such as London.
Taking action to address under representation in a business can often have the short-term impact on making your pay gap larger. This is because the larger volumes of vacancies are often for more junior roles, which then skews representation and can create a larger pay gap.
As with the gender pay gap the measure can be a blunt instrument, pay gap figures are often misunderstood and the aim of closing the gap to zero may not be possible and doesn’t equal achieving equality. It is therefore important that pay gap reports are accompanied with a clear narrative and an action plan setting out how businesses are planning to tackle the pay gap and the underlying under representation in leadership levels.
Despite its obvious imperfections the pay gap figure and report are a useful catalyst for action. The pay gap report, published with a narrative and action plan serves as an important annual update to all stakeholders of the action the business has taken to increase representation at senior levels and importantly the steps they are committing to take in the future.
