Ethnicity Pay Gap reporting
Ethnicity Pay Gap reporting
Is there an ethnicity pay gap?
According to a study by the Office of National Statistics (ONS) on 2022 UK data, the ethnicity pay gap between white and ethnic minority employees still exists, even when the data is adjusted for pay-determining characteristics.
It is a complex matter - calculating an ethnicity pay gap is not just about ethnicity, but also includes other demographic factors such as gender, age and location. For most ethnic groups, men continue to earn more than women. This means that gender pay reporting remains a key exercise for employers, in addition to ethnicity pay reporting.
Why does ethnicity pay gap reporting matter?
Ethnicity pay reporting is about employers demonstrating a genuine commitment to equality, diversity and inclusion for the benefit of current and future employees alike, and not just for their clients or investors.
Employers need to demonstrate tangible action on all fronts of ESG, reflecting the mood of society and addressing issues for the common good. Equally, increased social conscience among the younger workforce, especially among Gen Z, means that organisations that are committed to transparency and improving equality are more likely to attract candidates in a competitive job market.
What are the challenges for employers?
There is no legal obligation for employees to divulge which ethnic group they identify with, and requests for ethnicity data can achieve poor response rates if they are not managed very carefully. This obviously means that many businesses do not hold ethnicity data on their employees.
You will need to build a workplace culture that encourages employees to disclose this information, and enable your business to take the positive step of analysing and publishing ethnicity pay data.
Another challenge is the fact that individuals may not identify with any of your proposed categories of ethnic groups. Determining what those classifications should be and how to compare pay across different ethnic categorisations is not necessarily straightforward and should be considered carefully. Getting expert support can help your business get your ethnicity pay gap reporting right first time.
As an employer, you must also ensure that the anonymity of your employees is maintained when collecting ethnic data – this raises the question of the potential ability to identify individuals if a certain ethnic category is particularly small within your organisation.
Finally, smaller employers’ figures may be less informative because of limited data. Even if your businesses has more than 250 employees, with a large diversity of different ethnic groups, there may only be a handful of employees in each category, making meaningful comparisons more challenging.
Is Ethnicity Pay Gap reporting mandatory?
Currently, it is not mandatory to report your organisation’s ethnicity pay gap. Gender Pay Gap reporting is compulsory for all businesses over 250 employees – and while you do not need to submit ethnicity pay data alongside, there are advantages to being proactive and publishing your ethnicity pay gaps as well.
Expected legislative changes to Ethnicity Pay Gap reporting
A Government consultation recently proposed that only employers of 250 or more employees should have to report, in line with the gender pay gap reporting obligations. The Draft Equality (Race and Disability) Bill calls for mandatory ethnicity and disability pay gap reporting for UK businesses with more than 250 employees. The consultation on this closed in June 2025, and we are waiting for the outcome.
The consultation sets out proposed ethnicity categories, a suggested general approach to reporting and how to deal with some of the practical complexities outlined above. We will have further clarity once the outcome of the consultation and details are published.
Do you need help with your Pay Gap Reporting?
We can support your organisation in analysing your ethnicity pay data and applying that data to start making meaningful organisational change. For help and advice, get in touch with our specialist pay gap reporting team.
