The government has released guidance to assist employers who want or need to analyse or report on ethnicity as part of their pay reporting. This guidance forms part of the government’s response, Inclusive Britain, to the report by the Commission on Race and Ethnic Disparities.

The Commission was established in July 2020 to “review inequality in the UK, with a particular focus on education, health, employment and criminal justice. Its report included 24 recommendations for government, other public bodies and the private sector”.

Employers with more than 250 employees already have a statutory requirement to measure and report on gender pay gaps and adding ethnicity pay as a voluntary addition can be used to create further transparency, gain trust, and help businesses identify issues. By identifying and investigating disparities, be it gender, or between different ethnic groups, employers can further understand why disparities occur and create an action plan backed up by evidence. Many employers already do engage in this reporting, but this government guidance helps businesses create a consistent approach for meaningful comparisons. It will be of particular guidance to those who employ those from a variety of ethnic groups and where the workforce is particularly diverse, as this adds complexity to ensuring methodology is consistently applied.

This guidance includes advice on:

• collecting ethnicity pay data for employees
• how to consider data issues such as confidentiality, aggregating ethnic groups and the location of employees
• the recommended calculations and step by step instructions on how to do them
• reporting the findings
• further analysis that may be needed to understand the underlying causes of any disparities
• the importance of taking an evidence-based approach towards actions

It is likely that in due course ethnicity reporting will become law, so it is worth getting your internal reporting at least in line so that you are collecting the relevant data to be able to conduct the analysis. By considering the guidance, this should ensure that any data collected is compliant with GDPR and also allows for relevant comparative analysis. The calculations indicated by the guidance should also help ensure that your reporting is accurate, therefore gaining trust from employees and, if so desired, also PR benefits of transparency.