The Bank of England and 14 other UK organizations are going to begin voluntarily reporting any gaps in pay between employees based on ethnicity, in the latest sign that some big businesses are taking seriously the need to address systemic inequities.
The announcement comes a year after the UK mandated that companies with 250 or more employees must report their gender pay gap.
The gender pay gap disclosures have led to criticism that the gulf in pay for men and women is narrowing extremely slowly (paywall); in some cases, like parts of HSBC bank, the gap has actually widened since reporting began.
The companies committing to declare their ethnicity pay gaps will open themselves up to similar scrutiny. But they’re also able to position themselves as trailblazers for a policy they want to see the UK government adopt as it did with gender-based reporting.
Alongside the Bank of England, the other 14 signatories of today’s pledge are: Citigroup, Deloitte, EY, KPMG, Lloyds of London, Santander, Sodexo, and WPP, Stella McCartney, Bupa, ITN, Jomas Associates, Creative Equals, and Reluctantly Brave. A handful already publish ethnicity pay gap data.
Despite criticism of gender-gap reporting, INvolve, the group behind the new collaboration of ethnicity-gap reporting companies, says it believes the policy has been a success: “Conversations are happening now that weren’t before. This is the point,” the group argues in a statement. The organization offers a toolkit (pdf) to help companies that want to start reporting.
Accountancy giant Deloitte is one of the firms that is already reporting its ethnicity pay gap, and has been doing so since 2017 (its mean ethnicity pay gap is 12.9% as of its latest report, mainly due to a lack of ethnic diversity in the most senior jobs). Emma Codd, managing partner for talent at Deloitte UK, said that she’d like to see mandatory reporting for all companies.
But she says that a couple of conditions would make it more meaningful. First, companies need a good “disclosure rate” from employees: If people don’t respond to calls to self-identify ethnically, firms can’t measure them. (Deloitte’s disclosure rate is 75% this year, down from 83% in the first year of reporting, in part due to the challenges of communicating with up to 2,000 new staff it takes on each year.) Codd also said companies should report not just numbers, but also a “narrative” to explain what they’re going to do about the issue.
Many businesses will find the point of reporting “a number” exposing, she said, but it’s important: “This is what we’re doing to make sure that our organization reflects society,” she said.
“I believe that gender pay gap reporting really focused attention,” Codd added. “It’s not going to change in one year, you’ll see some small ups and small downs, but it drives a longer term and sustainable, meaningful change. I believe exactly the same is the case with ethnicity pay gap reporting.”
In 2018, Theresa May’s government said it was launching a consultation into possible mandatory ethnicity pay gap reporting. That year the Resolution Foundation, a British think tank, estimated the total cost of pay penalties experienced by members of ethnic minorities was around £3.2 billion ($4.2 billion) per year.