Pay gap reporting outstrips strategy in D&I efforts

The majority (88%) of businesses plan to report their ethnicity pay gap next year despite most (75%) not having a formal framework and analytics in place to tackle D&I.

A poll from financial consultancy firm Barnett Waddingham found an increasing sentiment towards introducing other pay gap data too, as over half of respondents said they were planning to report on disability and CEO pay ratio.

Though further segmentation of pay gap data is an encouraging step, the firm suggested more strategic consideration is needed when it comes to creating impactful change in D&I.

Melissa Blissett, senior consultant for pay gaps and financial wellbeing at the firm, said: “D&I is more than lip service, conducting deeper data analytics and employee sentiment exercises, will help employers to stop working in the dark and make the most informed, efficient and effective decisions for their workforce and organisation to thrive.”

It is possible that ethnicity pay gap reporting could become mandatory in the next few years as the issue is set to be debated by Parliament and, according to the BBC, would receive the backing of UK employers.

In order to be effective though, Blissett encouraged businesses to go further than statutory requirements.

“To be a leader, you need to conduct deeper analysis, beyond mandatory reporting, so you can identify underlying drivers and the impact this is having on employees and the organisation collectively,” she said.

Throughout 2020 PwC reported a rising trend in the number of businesses opting to report their ethnicity pay gaps, yet the data also showed more businesses could improve their accountability by acting on the findings.

Barnett Waddingham’s poll found that just 16% understood why they had a pay gap.

Over one in 10 also said they felt uncomfortable capturing employee sentiment or experience, which Blissett argued would strength an organisation’s D&I narrative and help to drive a plan with tangible outcomes in culture.

“Basing insight and action planning around perception is dangerous, as there is often a sizeable gap between perception and reality, particularly between employers and their employees,” she said.