What does ethnicity pay gap mean?
To get a well-rounded view of what the ethnicity pay gap is, it is essential that we provide a definition for it. But this section does not stop there, it goes deeper by shedding some light on the difference between ethnicity pay gap and equal pay, which are often confused. We also look into reporting the pay gap and the contributing factors to the results.
A definition of ethnicity pay gap
Ethnicity pay gap is the term used to show the difference in the average pay between employees. It aims to understand whether ‘white’ employees are being paid more than their peers who belong to ethnic minorities. The difference is shown in hourly rate. The calculation follows the same principles as the gender pay gap. As such, the hourly rate of employees from minority ethnic backgrounds is compared with employees from white ethnic backgrounds, is compared with non-BAME employees in the organisation. When the percentage is positive, it indicates a difference in average hourly pay between groups. It does not, on its own, explain the cause of the difference.
The difference between ethnicity pay gap and equal pay
Ethnicity pay gap and equal pay are not to be confused. The Equality Act 2010 is clear. It is unlawful to discriminate against employees because of their race. Both direct and indirect discrimination are covered by the law. This means that differences or discrimination between ethnic groups are likely to be linked to other factors than pay that would disadvantage ethnic minorities. The ethnicity pay gap reflects average differences in pay across groups and may be influenced by a range of factors.
The contributing factors to the ethnicity pay gap
There is more to pay gap than just salary. Businesses may wonder what factors influence the ethnicity pay gap score. These factors vary depending on the type of organisation.
The first factor is hourly pay. This one is straightforward and based on the Equality Act 2010, which makes it unlawful to discriminate because of race or ethnicity. Under the Equality Act 2010, employees are protected from unlawful race discrimination, including in relation to pay.
Another critical factor that can be the source of the gap is the lower level of progression of BAME employees in the organisation. A lower retention rate can also be the source of the gap.
Organisations should not only look at salaries but they should also be vigilant about:
- Ensuring fair work allocation;
- Equal sponsorship opportunities;
- Constructing a culture of diversity and inclusion.
This means that, for example, some organisations choose to review the diversity of their leadership teams as part of wider inclusion initiatives.
Reporting on the ethnicity pay gap
As it stands, reporting on the ethnicity pay gap is voluntary. However, businesses who are willing to be transparent and who want to demonstrate their willingness to treat everyone equally report on their ethnicity pay gaps. They acknowledge their figures and implement actions for better equality among their employees. As such, pay gap reporting will shed some light on where the business is and might lead to actions such as:
- Putting a larger focus on diversity and inclusion initiatives;
- Increasing the awareness of the issues that BAME employees face in their career and at their jobs;
- Asserting the commitment to taking action to address discrimination.
There is much more that businesses can do to ensure they treat their employees equally. However, starting with voluntarily reporting the ethnicity pay gap is a step that demonstrates willingness and transparency. It sets the scene on the state of play and allows those in charge to look forward by implementing the appropriate actions to reduce inequalities and have an impact on the gap.
How can your business introduce ethnicity pay gap reporting in its practices?
As mentioned in the previous section, reporting on the ethnicity pay gap is voluntary for businesses. Organisations wanting to implement this should ensure that they fully utilise it and address its results. When wanting to put in place reporting, the following should be considered:
- Thorough and unbiased analysis of data
- Granular analysis of diversity data
- Transparency throughout the process and particularly about inclusion in the workforce
- Identifying what needs to be changed to address the gap
- Knowing the challenges that the organisation faces to address any required change
Considering the above can help inform longer-term actions aimed at addressing pay differences.
When collecting data, it is essential to consider that the information should come from the employees. The way they feel and their direct feedback is considered genuine and will bring a lot of value to the ‘how’.
Additionally, addressing the issue at its root is critical. For example, employees need to feel comfortable enough to share ethnicity information in the first place. If this step is not completed, it will be difficult to go beyond it. Building trust takes time and employers have their role to play in the process.
Below is some advice for employers to build trust with their employees when collecting data on the ethnicity pay gap:
- Explain why you are collecting the data.
- Provide details on how you will use the data.
- Communicate why accurate data is necessary to support the objective.
- Plan the methodology ahead.
- Know how you plan to calculate the gap and ensure there is no bias throughout the process.
- Analyse the impact that the gap has on people.
- Identify the key drivers of the gap.
- Put a plan in place to address those drivers for the long term.
In this process, looking at individual groups will bring more accuracy and might shed some light on some elements unknown to the organisation. The lead on the project should involve different groups of staff and ensure that everyone is represented.
Many organisations choose to preserve anonymity when collecting this type of workforce data.
Recommendations for businesses to take action and close the ethnicity pay gap
Identifying the gap and collecting your data is not the end of the journey, rather the beginning of it. Once you have spotted and acknowledged your state of play in terms of the ethnicity pay gap, the next step is to take action. For this, relevant stakeholders should be involved. A team should be created and clear accountability should be set. The stakeholders should come from different areas and work together to reduce the gap in the organisation.
The challenge with the ethnicity pay gap is that there is no magical action or cure that would reduce the gap in the blink of an eye. The solution will be different for each business and not all will progress at the same pace. There are nonetheless three actions that businesses should look into:
1. Promoting a culture of trust
Trust leads employees to feel comfortable sharing their ethnicity in the first place. It is essential to ensure the data collected is accurate.
2. Endorsing diversity
Endorsing diversity needs to be done from the top and cascaded down. Recruitment and internal promotions should consider diversity in their process.
3. Being inclusive
Being inclusive can be done by starting conversations. Businesses can create committees that encourage exchange and communication between employees.
While keeping the three points above in mind, businesses should look at making changes that will have an impact in the long term.
The ethnicity pay gap and its reporting should go beyond the results themselves. Being transparent about this data is one approach some organisations use to inform their wider work on fairness in the workplace.
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