REWARD
Voluntary ethnicity pay gap reporting guidance
Danny Done, managing director of Portfolio Payroll, provides details of the newly published government guidance to help with voluntary ethnicity pay gap reporting I n March 2022, the government confirmed it wouldn’t introduce ethnicity pay gap reporting as a
to work in specific roles than other ethnic groups in an organisation, which is reflected in the pay for those roles l some ethnic groups being more likely to work in particular locations, which subsequently impacts pay. The process for compiling an ethnicity pay gap report is similar to the requirements for gender pay gap reporting, which is a legal requirement for employers with 250+ employees on the snapshot date. But, instead of the comparison being between two groups (male and female employees), employers will have to determine how to group employees based on ethnicity. The guidance recommends following the Census for England and Wales (or Census for Scotland) ethnicity groupings, as this provides a ready-to-use set of tested and legally sound questions. Employers should also report on those who opt to ‘prefer not to say’ what their ethnicity is and those who didn’t disclose their ethnicity (e.g., didn’t respond to / complete an equal opportunities survey, or similar form). What does the guidance say? The new guidance is split into five main parts: l introduction and overview l understanding and reporting your data
l mean (average) and median ethnicity pay gap using hourly pay l mean (average) and median ethnicity pay gap for bonus pay l percentage of each ethnic group receiving bonus pay l percentages of employees in different ethnic groups in your organisation. Employers can choose how and where they wish to publish their ethnicity pay gap report. Some may wish to use it for internal analysis, to consider in the development of future organisational actions and goals. Others may wish to publish it on their intranet or internet sites. Regardless of how the information is released, it’s useful to also include a supporting narrative, which outlines the measures the business will take to close any existing ethnicity pay gap. An employer’s action plan for tackling the ethnicity pay gap should closely align with their wider equality, diversity and inclusion (EDI) strategies. Doing so keeps the business on track and ensures all decisions are made with consistency and transparency. To assist with this, organisations may wish to facilitate ethical leadership. Profitability and efficiency tend to be the main influencing factor in decision making but businesses can reap the rewards of creating an ethically focussed culture. This prioritises managing teams through reference
mandatory requirement for businesses, but it did promise to publish guidance for those who wanted to report voluntarily. After being in the pipeline for over a year, the government finally published its guidance on ethnicity pay gap reporting on 17 April 2023 to help employers produce effective and consistent reports. Many employers choose to report voluntarily, to show their commitment towards achieving genuine equality, diversity and inclusion at all levels, and the actions they’re taking to do so. The ethnicity pay gap shows the difference between ethnic groups’ average pay. However, it’s important to highlight that an ethnicity pay gap doesn’t necessarily mean that employees are paid unequally. An ethnicity pay gap may arise where all employees who complete the same role are paid the same. But, for example, a higher proportion of black and Asian employees are in the lowest pay bands, and a higher proportion of white employees are in the highest pay bands. This means that the average hourly pay for black and Asian employees is lower than the average hourly pay for white employees. As such, there would be a pay gap, despite having equal pay. Ethnicity pay gaps can also arise because of: l an imbalance in individuals from different ethnicities applying for, and achieving, promotions l certain ethnic groups getting ‘stuck’ at certain levels within the organisation l some ethnic groups being more likely
to core values and helps create a standardised EDI framework.
l collecting ethnicity data l preparing payroll data l making your calculations.
However, to ensure the most benefit, organisations must foster a culture of EDI beyond an updated policy or annual awareness day. To do this, equality and inclusion practices should be ingrained into daily activities and regularly communicated to workforces and stakeholders. n
Like gender pay gap reporting, the guidance recommends employers calculate the: l percentage of each ethnic group in each hourly pay quarter
| Professional in Payroll, Pensions and Reward | June 2023 | Issue 91 48
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