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The first step to addressing racial inequality in the workplace: more transparency through ethnicity pay gap reporting

Black and minority ethnic people are much more likely to be in deep poverty – being paid less than the real Living Wage, being subject to insecure working hours and workplace discrimination. To tackle this, ShareAction and Runnymede Trust are calling on the Government to make Ethnicity Pay Gap reporting mandatory for employers.

UK poverty statistics show the stark income inequalities faced by Black and ethnic minority people across the country, with many struggling to make ends meet during the current cost-of-living crisis.

The evidence shows that there is a huge pay difference between ethnic minorities and White British workers – with the former being more likely to be both paid below the real Living Wage and be subject to insecure work, like zero-hour contracts. These communities are therefore disproportionally grappling to keep up with the increasing cost of basic necessities.

This is not just unfair and unethical, but also makes no economic sense

As well as being completely morally unjust, an independent Governmental review published in 2017 found that if Black and minority ethnic talent is fully utilised, the economy could receive a £24 billion boost’ each year. Another study, by McKinsey, found that companies with the most ethnically and culturally diverse executive teams are 36% more likely to financially outperform organisations that are of average diversity in their industry.

Companies being transparent about the ethnicity pay gap is the answer

Since 2017, companies with over 250 employees have -by law- had to complete a gender pay gap report each year. This means they can identify any wage discrepancies between genders and therefore begin to address them, creating a more equal and inclusive workplace.

However, despite the existing and evidenced ethnicity pay gap, there is no mandatory reporting in this area for companies of any size. At present, only 18 out of the FTSE 100 companies carry these reports out – less than 20% of the UK’s leading publicly listed companies.

Back in 2018, the Government had actually acknowledged that ethnicity pay gap reporting should be mandatory for all organisations with more than 250 employees - a similar requirement to what already exists for reporting any gender pay gap. However, five years later, they’ve made a U-turn and announced that this reporting is to be carried out on a voluntary basis only.

What are ShareAction doing about this?

ShareAction and the Runnymede Trust are calling for the Government to stick to their original commitment as a critical first step in addressing the racial disparities and structural racism in companies. Today, we have set out recommendations to the Government, which includes asking them to:

  • Create a law that says any workplace with 250+ employees must carry out ethnicity pay gap reporting
  • Introduce new laws that requires these employers to publish an action plan to address any issues they find
  • Carry out a two-year review to track the progress made by these organisations

The briefing also untangles any perceived barriers to introducing this in law, such as concerns over reputational risk and a lack of self-disclosed data from their employees to work with.

As leaders in responsible investment, ShareAction will also be working with a coalition of investors to ensure that the companies they hold shares in have procedures in place for robust ethnicity pay gap reporting. Earlier this year, we produced an investor toolkit to help them understand how they can do this – the more we can encourage voluntary reporting, the more pressure we can put on the Government to make it mandatory.

The UK was proud to be one of the first countries to introduce gender pay gap reporting, it’s time to do that with ethnicity pay gap reporting, too.

If you'd like to learn more about ShareAction's work in this area and others, as well as how you can play your part in building a fair financial system, sign up to our emails today.

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