The mandatory reporting of ethnicity and disability gaps is coming to large employers. Kavitha Sivasubramaniam speaks with employers who have already reported theirs and discusses the impact that its introduction could have.
The UK has welcomed the requirement for organisations with at least 250 employees to report their gender wage gap. More than 10,400 companies submitted their data last year.
The progress in implementing mandatory reporting of ethnicity and disability gaps has been painfully slow. was first proposed by the Conservatives in their 2017 election manifesto. However, governments have since decided to reject it.
The ‘Next Steps document’, which was published along with the Employment Rights Bill several years ago, confirms the Labour government’s intention to consult and publish a draft Equality (Race and Disability) Bill that will cover the extension and protection of equal pay rights. The bill will also include a pay gap reporting obligation, equal pay rights when outsourcing is undertaken, and a new regulatory enforcement unit.
Inequalities and their treatment
Employers with over 250 employees will have to report their gender pay gap, as well as ethnicity and disability pay differences. The draft bill also aims to reduce inequality among ethnic minorities and people with disabilities, by giving them a right to fair compensation.
According to the Office for National Statistics report Disability Pay Gaps in the UK: 2014. to 2023 the pay gap between non-disabled and disabled employees is 12.7%. This has been relatively stable since 2014
TUC statistics released in November 2024 show that non-disabled staff earn approximately PS2.35 per hour more than their disabled colleagues.
Labour’s Baroness Thornton, who debated the issue of mandatory reports in Parliament last Year, said: “Requiring big companies to report their ethnicity gaps and disability gaps is an easy way to start the process of tackling such glaring inequality.”
Fazilet Hadi of Disability Rights UK, the head of policy, highlighted that more people with disabilities are likely to join the workforce, as they stay in employment longer.
She says that if you analyse and measure what is happening, you can take the necessary actions to correct things based on these findings. Employers must create an environment where employees feel comfortable to bring up any adjustments that they need. They should foster a culture in which monitoring is seen as an improvement tool.
Effectively using data
In its recent report Pay performance and transparency 2024 the CIPD called for mandatory ethnicity pay gaps reporting to be introduced by 2021. It revealed that there is growing interest. The report found that 40% of large organizations chose to conduct an ethnicity gap analysis while 27% reported their disability pay gaps.
Lutfur Ali is senior policy and practice advisor for equity, diversity, and inclusion at the CIPD. He says that using pay data effectively as part of EDI can help create a workplace more inclusive, fair and motivated, as pay disparities (including structural inequality) are a key indication of bias and inequality.
The collection of sensitive data on ethnicity and disabilities is more difficult than gathering gender information, especially because employees must give permission to their employers for them to keep this data. Employers are forced to use incomplete information to calculate pay gaps.
Many organizations rely on their employees to provide information about ethnicity and disability. While they may have 100% completion rates when it comes to gender, the rate will be much lower for ethnicity and even lower for disability.
Vivid, a UK-based affordable housing provider with more than 1,000 staff, has reported voluntarily its ethnicity pay gaps for the last five years.
Susan Noone, director of human resources, said: “Employees feel more comfortable stating their gender rather than their ethnicity or disability. Especially with the last, where they are afraid of unintended consequences. “We struggle to explain to our staff that the data is only used for monitoring and not shared with those making internal decisions about promotion or hiring.”
Pay gaps are caused by a variety of factors. The government has identified ethnicity, disability, and gender as some of these. Sam Greenhalgh explains that social mobility could be another factor. He is a partner at the law firm Birketts in their employment team.
He says that the key issue is the way in which the pay gap is calculated (for whatever characteristic), and what steps are taken by the organization to close it. It will be interesting to see if any meaningful data will be collected or a cultural shift occurs if ethnicity pay gap reporting and disability reporting are introduced. Such reporting relies on employees categorising themselves and disclosing their information, which can be difficult.
Aviva publishes ethnicity-based pay gaps data since 2021 and supports ethnicity-based pay gap reporting. Jonny Briggs, director of diversity equity inclusion and executive recruitment at Aviva, says that gathering diversity insights from staff helps organizations provide support to colleagues and learn when and where interventions are needed. Accurate data plays a crucial role in this journey.
Employees feel more comfortable stating their gender rather than their ethnicity or disability. Particularly when it comes to the latter, where they are concerned about unintended consequences.
He explains that the company continues to strive to increase completion rates for all diversity characteristics data in order to better understand it and to inform data-backed decision and action plans.
Briggs states: “No mater what size organisation you are, analysing the data and being transparent about the diversity in the workforce with your colleagues is a crucial step to driving meaningful change and shaping an inclusive, fairer workplace.”
The business case
Nikki Lees explains that QBE International, the people director, decided to report its ethnicity pay gaps in 2020. The group wanted to be transparent and accountable, and do the right thing.
She adds: “Although this is not a requirement, we feel that publishing these data along with our annual gender gap report shows our commitment to make QBE a more diverse and inclusive workplace.”
The McGregor Smith Review of 2017 found that closing the ethnicity gap in pay is good for business and economy. Organizations with diverse cultural and ethnic backgrounds could see a 36% boost in profits. Tackling racial disparities on the UK labour market would also benefit the economy by PS24bn annually.
Aviva has six employee resource groups that bring together support networks across the company. Its Aviva Ability community is aimed at ensuring accessibility for all.
In the most recent survey of colleagues, 91% said they would recommend this company as a good place to work. Its people leaders scored highly for supporting inclusion, well-being and helping people understand how they can advance their careers.
It’s not only the large businesses who have much to gain by reporting their pay gaps based on disability and ethnicity.
Ali says that smaller organisations should analyze their pay data, even though they are not legally required. Understanding disparities helps to understand wider inequalities, allowing for proactive action. This includes enhancing employee engagement and attracting and keeping diverse talent.
Hadi is in agreement that businesses of all sizes benefit from a strategy for fair and inclusive compensation.
She adds, “smaller employers may not have as many policies, processes and procedures in place as large employers, but they can still create a supportive culture, set up an open environment and make reasonable changes.”
Action Points
QBE is committed to addressing the existing pay gap highlighted in its report by actively reviewing processes and practice across the employee’s life cycle. This will reduce systemic bias. It has also embedded inclusive recruitment principles for a fair, inclusive and educational approach, and raised awareness of its existing pay gap to hold people accountable on their responsibility to decrease its pay gaps.
Pay gaps are easily misinterpreted, so it is important to provide a narrative so that people understand the reasons for any gaps. Lees says that this is about more than just pay equity. Last year, we introduced new targets for a sense of belonging because we knew that equality of experience was just as important as the representation levels.
Noone says that the findings of the data have caused Vivid to change some recruitment processes. This is especially true for advertising and middle managers or senior leadership positions. It encourages all recruiters to make ethnic diversity a minimum requirement.
She insists that what initially may seem like a big challenge will become less daunting over time, if you take small steps consistently.
Noone says, “Once you identify any gaps, aim high and you may be surprised at how much you achieve.”
Ali advises that the data should be accompanied by an explanation of any disparities, and a plan for addressing them and measuring progress.
He said: “The plan must not only focus on improving the diversity of employees, particularly at senior levels. It should also create inclusive workplace cultures which promote and deliver equal outcomes for everyone.” This includes eliminating inequalities regarding access, opportunity and training, and progress, and empowering marginalised people to thrive.
Employers can be held accountable and adhere to their organizational objectives by publishing data on ethnicity. This transparency, even if employers fall short of their goals, can improve their brand image because it shows a willingness to admit areas for improvement as well as a commitment to make progress,” Greenhalgh says.
He suggests that employers improve their data collection in order to get accurate and complete results. This includes pay, bonuses and working hours. It is important to incorporate social mobility frames, as well as the industry, environment and sector in which they are located.
Greenhalgh states: “Employers must understand their own situation and the impact of these factors on data produced. Data can be used to create actionable plans. “This requires significant work up front, but it is the foundation for meaningful change.”
He warns that if non-compliance is not reported, it could lead to fines, legal action and damage to reputation, and the Equality and Human Rights Commission can enforce regulations and impose sanctions.
Greenhalgh concluded that “for companies committed to diversity, inclusion and stakeholder investment it will be essential to engage with these proposals, not only in the perspective of legal requirements but also stakeholder investments, to meet customer demands and to attract talent.”
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