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UK: Ethnicity Pay Gap Reporting

Authors: Robert Hill and Corinna Harris

The government’s response says that mandatory reporting may not be the most appropriate tool for every type of employer seeking to ensure fairness in the workplace, and that it wants to avoid imposing new reporting burdens on businesses as they recover from the pandemic.

However, there will be a process for voluntary ethnicity pay gap reporting – so those organisations that choose to publish ethnicity pay figures will be required to publish a diagnosis and action plan, setting out the reasons why any disparities exist and what will be done to address them. There will be support for employers carrying out voluntary pay reporting, with guidance due to be published in summer 2022.

Key Action Points for Human Resources and In-house Counsel

The hybrid solution of a voluntary reporting regime with certain requirements for organisations that choose to publish their ethnicity pay figures will mean that employers that do report will need to demonstrate their commitment to improving diversity by setting out tangible measures in an action plan, to show how the pay gap will be narrowed.

The Parker Review Committee has published a 2022 update report on the ethnic diversity of UK boards, outlining the results of its latest voluntary census on the ethnic diversity of FTSE 100 boards. Nearly all FTSE 100 companies have met the diversity target set in 2017, with at least one director from an ethnic minority background. That said, the vast majority of these were as non-executive directors rather than in key executive roles (CEO and CFO).

In addition to its position on pay reporting, the government’s response confirms:

  • its Office for Artificial Intelligencewill develop a national position on governing and regulating AI, and will set this out in a white paper in 2022 – including how to address potential racial bias in algorithmic decision-making.
  • the Government Equalities Office will create new updated guidance on positive action by December 2022.
  • by spring 2023, its Equality Hubwill create an “Inclusion at Work Panel” which will develop and disseminate effective resources to help employers drive fairness for all in the workplace.