The Government has confirmed that mandatory ethnicity pay gap reporting will not be introduced - at least not yet.

On 17 March 2022, the Government published its response to the report of the Commission on Race and Ethnic Disparities (the “Commission”), published last year. The Commission’s recommendation was that all employers choosing to publish their ethnicity pay figures should also publish a diagnostic action plan setting out the strategic rationale for measures to improve any disparities.

The endorsement of the Commission’s approach is a shift from the Government’s previous stance, with the 2018 consultation stating that “it is time to move to mandatory ethnicity pay reporting”. Reasons cited by the Government for its latest decision include that ethnicity pay gap reporting may not be a well-suited tool for some employers seeking to achieve fairness. Additionally, the Government has noted its intention to “avoid imposing new reporting burdens on businesses as they recover from the pandemic”.

What does this mean?

There are no immediate changes. Essentially, employers have the choice whether to adopt (or maintain) ethnicity pay gap reporting. Employers can now await guidance from the Department for Business, Energy and Industrial Strategy this summer. For employers who opt to voluntarily report on their ethnicity pay gap, the guidance will include case studies of companies already reporting, tools to understand and tackle pay gaps, and tools to build trust with employees.

The Government’s intention is for the guidance to “set a benchmark for what a good action plan might most effectively cover”. Going forwards then, employers should be able to rely on the Government’s guidance to bolster their ethnicity pay gap reporting and follow-up practices.

What happens next? 

A decision on mandatory ethnicity pay gap reporting had been highly anticipated given the Government’s statements in its 2018 consultation. Some employers may have started the groundwork for ethnicity pay gap reporting on that basis. Disappointment at the Government’s choice not to mandate ethnicity pay gap reporting has been expressed across the spectrum of business-led, political and trade union spheres. There are now vociferous calls for the Government to include mandatory ethnicity pay gap reporting within the long-awaited Employment Bill. Whether the Government will yield to this pressure remains to be seen. With the debate undoubtedly set to continue, it is clear that on ethnicity pay employers will need to continue to mind the gap for future developments.