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The ethnicity pay gap: latest figures and next steps

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A report last year from The Resolution Foundation revealed that black and ethnic minority employees are losing out on a shocking £3.2bn a year. Black women graduates earn on average £1.56 less per hour than white women graduates. To that end, the Government launched a consultation asking employers to contribute their opinions on introducing mandatory ethnicity pay reporting. Previously, voluntary and business-led reporting was encouraged but the minimal uptake has prompted a move towards mandatory reporting.

Among the proposed figures to be reported are one pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees, several pay gap figures for different ethnic groups, using standardised ethnicity classifications, ethnicity pay information according to £20,000 pay band and ethnicity pay information by pay quartile. The consultation, which closed in January this year, asks whether reporting should also include contextual data such as geographical variations, age variations and gender variations as well as a narrative or action plan as a result of the findings.

“I believe that ethnicity pay gap reporting will become mandatory within the next three to five years,” says pay gap consultant Michelle Gyimah, “Pay gaps can and do have intersectional impacts which differ from group to group,” she says, “By focusing just on gender we’re missing out on the nuances that pay gaps have, as well as the experience of women from different backgrounds, as well as male BAME employees and those with disabilities.”

Some companies are already voluntarily reporting. ITN was one of the first UK media organisations to publish its Black, Asian and Minority Ethnic (BAME) pay gap, disclosing a mean pay gap of 16.1% and mean bonus gap of 66%. It has announced it plans to halve its pay gap within the next five years, with at least one BAME candidate to be interviewed for every role.

Deloitte first reported its ethnicity pay gap in December 2017 and this month published its 2018 figures. The Deloitte figures make for interesting reading. The median hourly pay gap for Deloitte UK’s BAME employees stands at 7.9% (it was 6.9% in 2017) and the mean ethnicity pay gap at 12.9% (11.7% in 2017). The median bonus gap for BAME employees is 25% (30% in 2017) and the mean ethnicity bonus gap is 45% (40.8% in 2017).

Deloitte also published two additional, voluntary calculations, the equity partner earnings gap and the total earnings gap, which takes into account the earnings of the whole firm, including equity partners. The earnings gap stands at 10.6% (median) and 43.9% (mean). It’s worth noting, however, a reduction in disclosure rates from 83.1% in 2017 to 75.4% in 2018.

So what is Deloitte doing with this information? Emma Codd, managing partner for talent at Deloitte, says, “Our analysis shows that the gap is due to the lower proportion of BAME employees holding the most senior positions within the firm, an issue that we’re working hard to address. While BAME people made up 22% of our overall workforce in April 2018, only 5% of partners and 10% of directors (the grades attracting the highest levels of remuneration) are BAME.”

For Deloitte, reporting has opened up conversations. Says Codd, “I believe that transparency around pay gaps and their drivers helps to focus attention on where change is needed – so, from my perspective, reporting does make a difference. Meaningful and sustained change takes time but we are starting to see the results of some of our actions. This year we’ve seen a rise in the proportion of BAME promotions to partner level and an increase in the number of BAME students applying to join our firm – both encouraging signs that our actions are starting to have an impact.”

“There is natural nervousness around conversations about race,” agrees Gyimah, but, she says, there are some things firms can do: “Be vocal about the intent of the data being collected. Employees need to trust that no negative impacts will happen due to providing this data. Foster and promote an authentic culture of openness and trust – if you really want to know what your BAME employees think/feel/experience then allow them the space to tell you with no negative come-back on them. Embrace the challenge - these conversations and what the data reveals may be tough to swallow, but knowledge is power. See it as an opportunity to really engage with your employees on a deeper level. An opportunity to address business cultural issues that is negatively impacting on the BAME talent you have already working for you.”

Deloitte has agreed on targets in line with the Parker Review, committing that, by 2021, 10% of its partners will be BAME, its executive committee and at each of its business teams will have at least one BAME member.

It might sound like an obvious thing to commit to but ethnicity pay gap reporting certainly has its challenges. One main difficulty of ethnicity pay gap reporting, says Gyimah, “lies in which definitions to use when deciding on how to measure ethnicity pay gaps.” Indeed, there is currently no legal obligation for individuals to disclose their ethnic group and no obligation for employers to collect this information so it’s important to clarify the ways in which this will be collected and how self-reporting or non-disclosure rates can be taken into account.

Codd says Deloitte encourages all new joiners (around 4,000 per year) to provide such details and regularly repeat this request to our employees, she says, “we still have fluctuating disclosure rates that make like-for-like comparison between reporting years difficult.”

Like Byimah, Codd agrees that a critical element of encouraging disclosure is workplace culture: “We’ve introduced mandatory respect and inclusion training for the whole firm and our senior leaders undertake hard-hitting inclusion workshops. Diversity is a business priority and ownership, therefore, sits with our CEO and executive committee. But I also believe that organisations should explain the factors driving the gap and how they plan to close it. Each organisation has to consider the most appropriate action for their own business in order to ensure that change is meaningful and sustainable.”