The case for equal pay, Ethnicity Pay Gap Day

January 8 2024

Today marks Ethnicity Pay Gap Day which aims to raise awareness of stark pay disparities for working professionals from ethnically diverse backgrounds in the UK.

With junior doctors striking over pay making headlines for being the longest strike action in NHS history, the issue of how much people are paid to do their job has never been more prevalent. With a cost of living crisis and high inflation, pay needs to last longer and go further.

Supporting this is the need for equal pay, which is a requirement by law to help establish a fairer workforce that does not discriminate against women (or men). Hence the introduction of the gender pay gap - where companies with more than 250 employees must publish information about the gender pay gap in their organisation.

However, while gender pay gap reporting has made strides towards parity between the sexes, there is still more to be done. A stark inequality still remains, ethnicity pay gap reporting.

The ONS defines the ethnicity pay gap as 'the difference between the median hourly earnings of the reference group (white or white British) and other ethnic groups. Which simply put means, people are being paid different rates to do the same job, at the same company in the UK, simply because of their ethnicity/colour of their skin. There is no mandatory regulation in place for employers to report their ethnicity pay gap. Whilst the Government has set out voluntary guidance for companies to record their ethnicity pay gap data; this simply does not go far enough. 

Public organisations are being held to a different standard. Public sector organisations are subject to ‘public sector equality duty’. This means they must have what the law calls ‘due regard’ to the need to eliminate the types of conduct which are prohibited under the Equality Act 2010. 

According to the Office for National Statistics (ONS), 5.87 million people are employed in the UK's public sector - accounting for around a sixth of all those in paid work (June 2023). The NHS, alongside a large number of local authorities, universities, trade unions, the police, and professional institutes already publish their ethnicity pay gap data. These organisations are acutely conscious that there remains under-representation of culturally and ethnically diverse people in their workforces as well as at senior levels and are actively working to address this.

With the private sector employing an estimated 28 million people, many of these businesses are taking little action to address these glaring inequalities. ‘Closing the ethnicity pay gap could generate up to £24 billion a year for the UK economy, as well as countless benefits for organisations.’ Ethnicity Pay Gap Report 2021 Strategy & PWC.

People Like Us Research conducted with Censuswide has highlighted that ethnically diverse professionals in the UK are 38% more likely to experience underpayment compared to their white counterparts at the same career level and 47% of ethnically diverse professionals believe they are being underpaid in contrast to their white colleagues, leading to an annual financial loss of almost £2,000 on average.

Our research also highlighted that the reluctance to disclose pay gap information is attributed to concerns about public perception (23%), but the primary reason professionals think that companies refrain from reporting data is the absence of legal requirements (40%). For some companies, the lack of data (22%) is a significant hindrance.

To address these challenges, a practical first step for employers is encouraging employees to disclose their ethnicity voluntarily, with a remarkable 66% of professionals, including 67% of white professionals and 62% of ethnically diverse professionals, expressing a willingness to do so. This data is critical for exposing inequitable pay practices and unconscious biases that have persisted over time within companies.

Employees firmly believe that businesses perform better when their workforce is diverse. They are more than four times as likely to think that an ethnically diverse workforce enhances business performance (48%) rather than hinders it (11%). According to working professionals, this enhanced performance stems from diverse teams bringing fresh perspectives and fostering innovation, with 47% of employees concurring that diversity leads to more innovative businesses.

The case is clear, closing the ethnicity pay gap benefits employees and employers as well as the economy. There is a well of research  which highlights the need and financial imperative for ethnicity pay gap reporting. It is not just a nice to have, but one of the many tools that can be used to identify and improve disparities for staff in an organisation. 

The government has failed to deliver on its promise to make ethnicity pay gap reporting mandatory. Many organisations have taken it upon themselves to voluntarily report, as they see the benefits of this as a driver for changing their culture, systems and addressing deep rooted inequality within their organisations.

The government must now bring mandatory ethnicity pay gap reporting into force to make it on par with gender pay gap reporting, if it is truly committed to ending discrimination for all, as set out in the Equality Act 2010. 

Sheeraz Gulsher, co-founder of People Like Us