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Ethnicity Pay Gap: How to Prepare for Mandatory Reporting





Posted by Emer Bucukoglu on 29 October 2020

Emer Bucukoglu

Ethnicity Pay Gap: How to Prepare for Mandatory Reporting

BAME reporting | Ethnicity Pay Reporting


The analysis on ethnicity pay gaps in Britain, released by the Office for National Statistics (ONS) on 9th July 2019 showed that the ethnicity pay gap between white and ethnic minority employees has narrowed to its smallest average level since 2012 in England and Wales at 2.3%. However, the ethnicity pay gap differs across regions and is largest in London, standing at a substantial 23.8%. Clearly ethnicity-based inequality in the workplace remains an issue. Yet, two years after a consultation into Ethnicity Pay Reporting was released, and more than 130,000 people signed a petition earlier this year calling for mandatory legislation, we are still waiting to see any concrete action.

Despite the delay in much-needed legislation, according to People Management News almost a quarter (23%) of large companies are now calculating their ethnicity pay gap, a jump from just 5% in 2018. This is good news but clearly the large majority have yet to following suit.

Up to now most employers will admit to struggling or postponing ethnicity data collation, most likely because ethnic identity is a complex and subjective topic, and employers struggle to frame the appropriate questions, thus generating low response rates. But the reality is the UK is becoming increasingly ethnically diverse, and with mandatory reporting a likely introduction in the next year organisations simply cannot afford to ignore it and need to put significant effort into collecting this data. 

So how does an organisation kick start or move the process on?


An organisation should address the following questions: -

  • Are we being very clear with our employees as to why we are collecting this type of information and what we plan to do with it?
  • Do we confirm that that all declarations are confidential?
  • Do we outline who will have access to it? 
  • Have we done enough to secure our employee’s trust in the process? i.e. is this coming out of nowhere or have we been consistently sharing insights to date as to what we have done to examine the ethnic makeup and pay gaps of the organisation? Sharing any level of insight or preliminary reports such as Equal Pay Reporting or BAME composition of your senior board is a great way of reassuring employees that this is not a box ticking exercise; that despite the absence of legislation your organisation is committed to driving down the ethnicity pay gap. 
  • Does our collection process follow the same ethnicity categories as those defined by the ONS?
  • Do we make the process of self-reporting on ethnicity an easy one? e.g. through online forms or via online employee platforms?
  • Do we consider employee concerns - particularly how their ethnic identity does not always fit into a defined category thus providing an option to add comments which would help reduce false/incorrect declarations?
  • Do we identify every potential opportunity to self-report on ethnicity? To what extent do we make the data collection part and parcel of our processes i.e. are our new joiners asked to provide their ethnicity information?
  • Have we thoroughly considered any other ways to encourage self-reporting? According to PwC nearly seven in 10 companies said they are planning new initiatives to encourage more staff to voluntarily share their ethnicity data.


According to PwC’s recent study, 67% of respondents said they were now collecting and recording data around their workforce’s ethnicity, up from just over half in 2018. 
Best practice is to use the 10-category ethnicity breakdown from the ONS which includes: White British, White Other, Mixed or Multiple ethnic groups, Indian, Pakistani, Bangladeshi, Chinese, Any other Asian, Black African, Caribbean or Black British and Other ethnic group. Once collected, you can thoroughly investigate your company’s data, summarising the proportions in each category. If you have not got the data categorised in this way you may simply have to review proportions of White, BAME and Undeclared employees.

Creating this baseline means you can understand the extent of the work required to build a more robust and comprehensive data set. For example if you find that your categories aren’t consistent with the ONS or over half your workforce has yet to declare, you should consult Step 1 and determine where you can improve or implement changes to enhance the quality of data.


There are thousands of organisations yet to begin Ethnicity Pay analysis. They may be waiting for the regulations to come into force or more likely, struggling to curate a complete data set. 

Our advice would be to use what data you have and test the water; e.g. set a target of 70% of your employees having an ethnicity category and conduct a dry run of the analysis. This is a pragmatic approach to accepting the data you have is not perfect and your initial ethnicity pay gap picture might not be as robust as you would want it to be but it is a genuine start on the journey. As we have seen with Gender Pay Gap reporting, postponing the opportunity to start could result in long-term reputational damage to the business.  

When it comes to the analysis you may find that you do not have the option to crunch the numbers at the most granular level - i.e. the ONS’ ten-categories - and in this instance a five-category level of White (White British, White Other), Black African, Caribbean or Black British, Mixed or Multiple ethnic groups, Asian (Chinese, Indian, Bangladeshi, Pakistani, Other Asian), or Other ethnic group (Arab, Other ethnic group) would suffice. If you find that reporting at this level is still not feasible, then a simple two-category ethnicity breakdown of White (White British and White Other) and all other Ethnic minority groups is still a good place to start.

There is a strong likelihood that Ethnicity Pay Gap reporting guidelines will mirror those of Gender Pay Gap reporting, so for those of you already running your Gender Pay Gap numbers, adding the Ethnicity category is a simple addition to the picture. The hard part of compiling, cleansing, and validating your pay data against the existing Gender Pay regulations has already been done! 

At Innecto, we are already working with our clients on Ethnicity Pay Gap reporting. 

  • We help with practical initiatives to help the build of a more comprehensive Ethnicity related data set. 
  • We help create the baseline Ethnicity picture and advise on the best options for varying levels of analysis 
  • We utilise the already great work they have done on their Gender analysis to generate the same outputs through an Ethnicity lens. 

The majority of clients are encountering issues along the way but have the comfort of knowing what needs to be done ahead of the pending legislation… can your organisation say the same? 

If you would like to find out more about the process involved, please contact me on 020 3457 0894 to discuss further, or email me at 

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