To try and amend such prejudice, ethnic pay gap reporting is being introduced as a regulatory solution in both countries. Here is an overview of both British and American ethnicity pay gap reporting.
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In the UK:
Legal: currently it is a statutory requirement for employers with at least 250 employees to measure and report gender pay gaps, however ethnicity pay reporting is voluntary with no binding effect.
The reports inquire on various metrics, including mean and median hourly pay, bonus payments, and the proportion of employees receiving bonuses.
Data collection: organisations are asked to collect and categorise employee data based on specific ethnic groups, utilising recognised categories defined by the UK government.
Methodology: the UK government provides a standardised methodology for calculating ethnicity pay gaps, ensuring consistency across reporting organisations comparability between companies and sectors.
In the US:
Legal: with no federal legislation, ethnicity pay gap reporting requirements vary by state and are predominantly focused on gender-based pay gaps.
Some states, such as, California have implemented laws requiring certain employers to submit pay information on gender, race, and ethnicity broken down by job category.
Data collection: it is mandatory for every organisation with a 100 or more employees to collect data based on racial categories defined by the Equal Employment Opportunity Commission (EEOC).
Such categories do not capture the same level of granularity as the UK's ethnicity reporting.
Methodology: the lack of federal legislation specifically addressing ethnicity pay gap reporting has resulted in a lack of standardisation.
Varying state-level reporting requirements and the absence of a unified methodology can make it challenging to compare data across organisations and sectors effectively.
While the UK has made significant strides in implementing legislation and establishing standardised reporting requirements over the year, the US is gradually catching up through state-level initiatives.
Voluntary ethnicity pay gap reporting and encouragement for pay transparency are steps in the right direction.
Companies need to go beyond the basics of an ethnicity pay gap report.
To close the gender pay gap as well as the ethnicity pay gap, pay audits are key.
In the absence of a thorough audit, an employer’s claims to support pay equity may ring hollow.
Salary analysis must be completed by surveys, top management reviews, employee focus groups and practice and policy scrutiny to prove that companies’ commitment through reporting isn’t just a tick-box exercise.
Pay audits provide organisations with objective insights into their compensation practices throughout the employee lifecycle, allowing them to address any discrepancies and promote equal pay and equal opportunity comprehensively.
Such scrutiny can uncover systemic biases and barriers and help reveal hidden inequities by accounting for the adjusted pay gap in similar roles, considering factors such as experience, education, and performance.
Pay auditing such as the Equal-Salary certification can ensure legal compliance, mitigate the risk of discrimination lawsuits (just a year ago Google agreed to pay $118 million (£92 million) to settle a pay discrimination case), and allow organisations to demonstrate their commitment by going beyond the minimum requirement of pay reporting and sending a strong message to their industry, customer and shareholders.
Finally, organisations that prioritise pay audits help create a culture of transparency and trust among their employees through the communication of tangible values.
This, in turn, leads to improved employee morale, increased job satisfaction, and enhanced overall productivity.
Pay reporting is a step in the right direction but pay audits remain the most thorough and effective tool to effectively address and verify the absence of pay discrimination and unequal opportunities (glass ceiling) in the private sector.
In this regard, companies should exceed expectations and use the opportunity of pay auditing to position themselves publicly as pioneers in the fight against pay inequality.
Aurélien Joly, communication and fundraising officer at non-profit organisation Equal-Salary
