Guidance

Understanding and reporting your data

Updated 26 May 2023

This was published under the 2022 to 2024 Sunak Conservative government

1. Understanding your pay calculation results

Before seeking to tackle any identified disparities, you should diagnose the cause of these. This will help you understand your figures and assess whether there are reasonable explanations for any disparities or if there are any areas of concern. This will, in turn, help you to determine whether you need to take action and if so, identify targeted and effective actions that will have a real impact on any ethnic disparities in pay in your organisation.

The cause of pay disparities can vary greatly, even between employers in the same sector.

The Government Equalities Office, in partnership with the Behavioural Insights Team (BIT), published evidence-based, best practice guidance on understanding your gender pay gap, and the actions employers can include in their plans to reduce the gender pay gap. Some of these actions could be relevant to understanding and addressing ethnicity pay disparities.

However, employers should be aware that ethnicity pay disparities do not necessarily arise from the same reasons as gender pay disparities, so it is up to each employer to carefully examine any gaps and develop tailored actions.

Here are some of the questions you can consider in seeking to understand the cause of your pay gap:

• Are some ethnic groups more likely to be recruited into lower paid roles in your organisation?
• Is there an imbalance in individuals from different ethnicities applying for and achieving promotions?
• Do people from certain ethnic groups get ‘stuck’ at certain levels within your organisation?
• Are some ethnic groups more likely to work in specific roles than other ethnic groups in your organisation, and is this reflected in pay?
• Are some ethnic groups more likely to work in particular locations, and does this have an impact on pay?
• Do employees from different ethnic groups leave your organisation at different rates?
• Do particular aspects of pay (such as starting salaries and bonuses) differ by ethnicity?

Similarly, here are some possible reasons why an ethnic group might be underrepresented in your organisation. Some of these may be internal (resulting from company practices) and some of them external (relating to wider contexts outside the company’s control). However, even if external factors are impacting recruitment, you can examine if there are actions you could still take to mitigate their impact. It could be that a mix of these reasons explains what you find in your data.

1.1 External

Certain ethnic groups may be underrepresented in your organisation because:

• your company has multiple locations with different local representations of ethnic groups
• the qualifications needed for roles in your organisation are more prevalent among certain ethnic groups

1.2 Internal

Certain ethnic groups may be underrepresented in your organisation because they are:

• less likely to be aware of vacancies in your organisation
• aware of vacancies but are less likely to apply than other ethnic groups
• only applying for certain job functions or job levels within the organisation
• applying for the jobs but are not being selected for interviews
• selected for interviews but are not being appointed to roles
• appointed to roles but end up leaving sooner than individuals from other ethnic groups
• not being given the same performance rating, promotion opportunities or support to progress as other ethnic groups

Employers are encouraged to undertake further research or analysis to understand the underlying reasons behind any ethnicity pay or representation gaps.

It is important to note that there may be broader external issues impacting on ethnicity pay calculations including geographical differences in where different ethnic groups live in the UK, differences in education levels and training, and different cultural patterns or interest in certain roles or sectors.

To understand whether location may have an impact on pay differences, it is recommended that employers consider whether:

• the company is in multiple locations
• pay differs based on location
• the representation of ethnic groups differs by location

This can provide useful insight on why there may be variations.

It is also helpful to compare workforce data against local ethnicity population data, which is available from the 2021 Census for England and Wales published by ONS. This can be more insightful than comparing against national averages. Local comparisons can help employers work out if the makeup of their workforce is similar to their local area or whether there are other factors driving differences in pay.

For example, an employer with offices in Bradford and Cumbria is likely to have a higher proportion of ethnic minority staff in the former location compared to the latter, based on the average population figures for those areas. This may help them understand the reasons behind any differences – for example, if the Cumbria office is larger or has more senior positions.

Understanding why a disparity may exist is vital to determine whether action is needed, and if so, choose the most appropriate and effective actions.

1.3 Do you see the same or different patterns in different parts of your organisation?

A useful next step could be to run further calculations by ethnic categories for different parts of your organisation. This is to see if you arrive at the same patterns in each part.

However, it is important to consider the size of any particular ethnic group when undertaking any further breakdown of your pay statistics if you are intending to publish the results. It is recommended that each ethnic group in your analysis have a minimum of 50 employees, if you are publishing these findings, to ensure statistical robustness and avoid possible identification of individual employees. If a group falls below this number, the group should be aggregated with another or not be published. This data will still be useful for your internal analysis even if you decide to aggregate into larger groups before publishing. Details on how to aggregate groups are given in the section on Making your calculations.

Some of the categories you might consider investigating are below:

• job role – for example, for an airline, the split might be pilots, cabin crew, ground staff and office staff
• locations, sites or divisions – different geographic sites may show different patterns when ethnic pay is calculated
• permanent or temporary – splitting by permanent and temporary roles would make sense in industries like hospitality or agriculture which rely heavily on a casual or seasonal workforce
• full time or part time – retailers are known for having a large workforce of part time workers in their stores and depots, and this might be an appropriate categorisation for them to use
• pay bands – a number of employers disclose gender breakdowns by pay bands in their reports and they could choose to repeat this using ethnic categories as well
• length of service – this may help identify any issues around retention

2. Reporting your ethnicity pay calculations

Employers are not required to report their ethnicity pay calculations but many choose to do so to improve transparency. However, due to the complexity of these calculations, care should be taken in explaining the results. Any report should aim to help employers and employees understand why a pay disparity might be present and what has been – or will be – done to analyse and improve it.

Rather than relying on any single calculation for their ethnicity pay reporting, we recommend that employers present and consider a range of calculations as set out in this guidance, broken down by ethnicity categories. This is provided that privacy of individuals is ensured.

The calculations include:

• pay quarters that measure the representation of employees in different ethnic groups at different levels of pay in an organisation
• representation of ethnic groups across the organisation as a whole
• mean and median pay gaps that measure the difference between average earnings and bonuses in an organisation for different groups
• proportion of employees that did not disclose their ethnicity when asked by their employer – this is one measure of the level of engagement of employees

The complexity of ethnicity pay gap reporting means that using just one overarching measure (for example, the mean pay of white British employees compared to the mean of ethnic minority groups combined) is not as useful as considering all the recommended calculations, and producing analysis for individual ethnic minority groups.

Instead employers should present all of their calculations, including the representation of ethnic groups in your organisation and the percentage of employees who have responded ‘prefer not to say’ or not disclosed their ethnicity.

Employers should also consider a supporting narrative that includes:

• explanations for each of your pay figures in your report
• a summary of why you believe any pay disparities exist, based on close analysis of your data and broader factors – employers should avoid making definitive assertions about why pay gaps might exist without robust analysis as reasons for any pay gaps are likely to be complex and multi-dimensional
• wider workforce statistics, so you can provide a wider and more clear picture of why any pay differences that exist
• the efforts your organisation has already taken to understand and address any pay disparities
• producing ethnicity pay calculations every year in a consistent way is also an important step to see how any disparities in the organisation are changing

3. Adding an employer action plan

You may want to consider publishing an action plan that explains how you intend to address unfair pay gaps in your ethnicity pay figures. A good action plan should name clear, measurable targets that you commit to achieving within a chosen time frame. These can relate to actions aimed at better understanding your pay statistics and addressing any unfair disparities.

The government is launching an Inclusion at Work panel in spring 2023 which will develop and disseminate advice on evidence-based actions employers can take to improve inclusion and fairness in the workplace. The panel’s work will inform a new voluntary Inclusion Confident Scheme which employers will be able to sign up to demonstrate their commitment to adopting the most effective diversity and inclusion measures in the workplace. Updates on this will be available on GOV.UK’s Inclusive Britain updates pages.

When developing an action plan, it is important to be realistic and aim for ambitious but achievable outcomes. Employers should avoid setting a target for a zero percentage gap as this fails to appreciate the complexity of why pay gaps arise. Instead of setting arbitrary targets for reducing any pay gaps, employers should instead commit to addressing specific issues identified as likely causes of unfair pay gaps.

Improving the diversity of the talent pipeline in your organisation is an important issue to consider when thinking about possible actions, as this can have a significant effect on future ambitions to reduce disparity in your workforce. Employers should carefully consider the legalities of hiring policies and practices which are targeted to employing people from certain ethnicities. Employers should consult the government’s positive action guidance.

3.1 Benefits of publishing an action plan

If you publish an action plan with targets and clear actions:

• you will be sending a strong signal about your commitment to understanding and addressing any unfair ethnic disparities in your workplace
• you may attract a wider pool of potential recruits for vacancies if prospective candidates see you are committed to monitoring and assessing ethnicity pay gaps
• it could have a positive impact on the overall culture of your organisation
• it can foster a sense of fairness and inclusivity among your workforce

In considering whether you need to take action in your organisation, you should take into account the underlying causes that you have identified through your analysis. Pay disparities can be due to a variety of reasons and any action you take should be tailored to address the specific concerns you have identified.

We recommend considering actions that will improve the evidence base, including encouraging your employees to disclose their ethnicity data. This could be through a communication plan, which should highlight the importance of providing this information, how the information will be used, and how your organisation will ensure privacy. This action can be measured by setting overall targets for self-declaration rates and recording progress against these targets.

You should also consider gathering data on ethnicity relating to recruitment and progression to understand if there are particular areas where candidates or employees are facing significant barriers. This could include data for people from different ethnic groups on the following:

• the proportion of candidates who are: applying, shortlisted and successful for vacancies in comparison to the whole candidate pool
• the proportion of employees who are: applying, shortlisted and successful for promotion opportunities
• the proportion of employees who receive bonuses or high performance markings
• monitoring the outcome of salary negotiations and data on starting salaries
• holding exit interviews with all employees who leave the organisation