Race and ethnicity pay gap reporting – an NED’s perspective

As a NED you’re likely to be part of a Board that is already committed to promoting diversity, equality and inclusion within your company. 

Unlike the gender pay gap, there is no legal requirement for companies to publish their ethnicity pay gap. However, it’s likely there will be a number of companies reporting this data for the first time in their 2021 annual report and accounts.

For this blog, I wanted to look at the popularity of measuring and reporting the ethnicity pay gap and what we can learn from this evolution.

The popularity of ethnicity pay gap reporting

PwC published the results of a survey of 100 companies in September 2020, which found that the number calculating their ethnicity pay gap has grown significantly in recent years:

  • 67% are now collecting ethnicity data on their employees, up from 53% in 2018
  • 23% are now calculating their ethnicity pay gap, compared to 5% in 2018.

But not everyone is keen to report pay gaps. The report of the Commission for Race and Ethnic Disparities, which was published in March 2021, found that whilst ethnicity pay gap reporting is a potentially useful tool, it needs to be approached with care. 

The Commission recommended that whilst a number of employers (such as the NHS) have already published their ethnicity pay gaps, “we believe that ethnicity pay gaps should continue to be reported on a voluntary basis and that the government should provide guidance to employers who choose to do so”. 

The report went on to say that where employers choose to publish such data, care should be taken to break figures down by different ethnic groups.

Of those organisations that do not calculate their ethnicity pay gap, the most common reason was due to a lack of ethnicity data. This lack of data was reportedly caused by GDPR concerns, low response rates, HR system capabilities or unease around questions about race and ethnicity.

Looking at an example of pay gap reporting 

One group that has already published its race and ethnicity pay gap is Capita plc, making it one of only a few FTSE organisations to do so. Capita reported their ethnicity pay gap, comparing average earnings of Black, Asian and minority ethnic colleagues as a percentage of White colleagues. 

Year ended 31st December 2020Hourly pay
Asian, Black and minority ethnic 12.5%13.8%
Asian 12.6% 16.1% 
Black 12.2% 3.7% 
Mixed Ethnic 12.7% 13.3% 

Ethnic minority employees’ pay gap compared to White colleagues

The results show a black, Asian and minority ethnic median pay gap of 13.8% and a mean of 12.5%. By comparison, Capita’s gender pay gap for the same year was a median pay gap of 20.2% and a mean of 24.2%. Capita states that the ethnicity pay gap is driven by having more white colleagues in the upper pay quartile. 

Capita acknowledges that there is more to do and it has expanded its cross-company mentoring schemes and reviewed its employee life cycle processes to look for ways to remove bias and provide equal opportunities.

More information about Capita’s diversity and inclusion objectives can be found in Capita’s Annual Responsible Business Report.

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