Sunak urged to introduce mandatory ethnic pay-gap reporting

Business group calls for government to introduce legislation for employers with more than 250 staff

The view of the City of London financial district from Waterloo Bridge. Reuters

Prime Minister Rishi Sunak is being urged to “not waste any more time” in making it mandatory for big companies to report their pay gaps for staff of different ethnicities.

Letters from Business in the Community to Mr Sunak and Labour leader Keir Starmer ask them to work together to introduce new legislation for employers with more than 250 staff.

It is a “matter of urgency” for the government, the group said.

Only 3 per cent of the UK workforce is employed by companies that publish their ethnic pay gap, the group said.

Yet predictions using census data show that by 2051 nearly a third of working-age adults in England and Wales will be from ethnic minority backgrounds.

And if this diverse ethnic workforce is properly employed, it could boost the economy by £36 billion ($43.47 billion) by 2051, the group predicted, using data from the McGregor-Smith Review in 2017 on race in the workplace.

“The government needs to bring forward mandatory ethnicity pay gap reporting as a matter of urgency," said Sandra Kerr, the group's race director.

“Employers back it, evidence shows that reporting works, so I’m not sure what the government is waiting for.

“Legislating for companies to publish this data is only the first step. Closing the pay gap is when the real work will begin.

“By continuing to ignore the inevitable, the government is just wasting time when we could all be working together to address the problem.”

The group found that without government action, it would take until 2075 for companies collating ethnicity data to publish it.

Reports in recent years have exposed divergences between ethnic minorities and white workers.

The Trades Union Congress found last year that the unemployment rate for black and minority ethnic employees was more than double that of whites, a gap that widened after the pandemic.

A separate report from race equality think tank Runneymede Trust in 2020 found that black and minority ethnic young adults were 47 per cent more likely to be employed on a zero-hour contract than white young adults.

Responsible investment groups have piled pressure on UK businesses to disclose their ethnicity pay gap data to help address racial inequality across workforces.

ShareAction, a charity that works with investors to drive social change, has been focusing on financial services companies in the FTSE 100 since July last year.

It has questioned 17 big companies at their annual general meetings and secured commitments from the likes of NatWest, Standard Chartered and Abrdn to publish dat or break it down to compare data across different ethnic groups.

British banking giants such as Barclays and HSBC said they wanted to improve representation of ethnic minority employees in more senior roles, after reporting significant pay gaps between black and white staff.

“It has been six years since I published my review into race in UK workplaces and since then, there has been no tangible action taken by the government to address pay disparities for diverse ethnic groups," said Baroness Ruby McGregor-Smith, a businesswoman and politician.

“It’s clear that mandatory reporting is the only way to address the ethnicity pay gap. It’s too late for voluntary guidance.”