Pay gap reporting isn’t perfect, but greater transparency is necessary

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While COVID-19 has undoubtedly accelerated new ways of working, the Black Lives Matter movement has – rightly so – created an unprecedented urgency for more genuinely diverse and inclusive workplaces and societies.

There are few things more important to an organisation than its reputation, culture and people. And there are few issues that test the strength of these assets more than workplace equality. 

Of course, most employers have long accepted the benefits of diversity and many have devoted significant resources to diversity and inclusion initiatives – with previous CIPD research highlighting that the majority (77%) believe workforce diversity is a priority.

However, companies across the UK are still not as transparent as they should be, as evidenced by new data we published which found that just 13 FTSE 100 companies currently report their ethnicity pay data


Knowing where to start with D&I:

Radical transparency is needed in the workplace

Complexity not a barrier to ethnicity pay gap reporting, say MPs

Taking positive action on ethnicity pay


With ethnicity pay reporting being one of the few levers currently available to employers to assess inequalities in the workplace and to catalyse meaningful behaviour change, it undoubtedly needs to become a cornerstone of inclusive, responsible businesses

As stressed by MPs during this week’s parliamentary debate, unless ethnicity pay gap reporting for larger organisations is made mandatory, organisations will struggle to make the progress needed to close the gap. 

So, what has been holding businesses back?

There is no doubt, that establishing a framework for the reporting of the pay gaps is complicated. The data is not binary, it can be easily skewed and there are numerous challenges with anonymity and how the findings are collected and presented. 

However, my message to businesses and HR leaders is simple – don’t fear the data. Instead, focus on the opportunity and action that such transparency can bring. Initially some of the numbers may be uncomfortable, but without consistent data and insights, it’s very hard to know where and how to take action to improve.

It's important to keep sight of the end-goal here. This isn’t about fulfilling quotas, or simply improving data for reputation’s sake, it’s about improving the lives of the people behind the numbers.

It's true too that change will take time as the ebb and flow of employees in any organisation and at different levels is not constant, and actions have to be applied fairly. There is no one-size-fits-all approach, across and even within organisation, some parts of our will need different levels of support. 

That’s why we have launched our new guidance, to help organisations take action.

Real progress will only come when organisations consistently gather the data and insights and provide a narrative to explain how differences in roles, progression and opportunity are contributing to any ethnicity pay gaps, and how it will be improved.

It’s about demonstrating how the business understands its workforce, and your commitment to creating a more inclusive workplace and culture in the longer term.

Although there are more complexities to ethnicity pay reporting, our guide recommends collecting the same six data points organisations already collect for gender pay gap reporting, but with a two additional data points focused on encouraging greater representation of ethnic minorities in the workforce. 

As we wait to see how this week’s parliamentary debate translates into legislative progress, now is a good time for the HR community to reflect on the benefits of ethnicity pay reporting.

It’s true too that while organisations may not yet be compelled to report on this, employees, investors and other key stakeholders are all giving greater focus to and demanding action on issues of fairness, inclusion and equality.

Through better transparency and reporting, HR has a real opportunity to the driving force that helps instigate meaningful insights and change on these key issues. 

 

Peter Cheese is chief executive of the CIPD