Ethnicity pay gap: what you need to know
For Black History Month 2021, we’re exploring how the profession can better support ethnic minority lawyers to progress diversity and inclusion. Here, we look at ethnicity pay reporting, what contributes to the ethnicity pay gap and how to start reporting at your organisation.
In 2020, we saw several businesses, including law firms, in the UK call for mandatory ethnicity pay gap reporting in a letter to the government.
Richard Iferenta, vice-chair and partner at KPMG, and chair of Business in the Community's race equality leadership team’s, said in a statement accompanying the letter:
“The collective voice of these business leaders should not be ignored. A mandatory duty to report on ethnicity pay gaps would mean that businesses would have a consistent, clear framework which they could use to tackle discrimination.”
What is the ethnicity pay gap?
At its most simple, the ethnicity pay gap shows the difference in the average pay between all Black, Asian and minority ethnic staff in a workforce and all White staff.
For example, where there is a gap of 15%, this means that the pay of staff from Black, Asian and minority ethnic backgrounds is on average 15% lower than the pay of their White counterparts.
As highlighted in our Race for Inclusion research report, Black, Asian and minority ethnic solicitors are earning less overall and occupy fewer senior positions.
This is contributing to an ethnicity pay gap of 25% when comparing hourly pay, which equates to a difference of £9.12 an hour.
Comparing average annual salaries for full-time solicitors, this adds up to a difference of more than £20,000 per year.
The issues surrounding the ethnicity pay gap are not limited to the legal profession.
Pay gap data reported by the Office for National Statistics in 2018 indicates that there are some considerable disparities in the kinds of employment and earnings received.
Black employees earn on average 9.2% less, whilst employees of Bangladeshi or Pakistani heritage earn 16.9% and 20.2% less than White employees.
At present, ethnicity pay gap reporting is voluntary.
However, with the data indicating such a large gap, the case for compulsory reporting is more than convincing.
An increasing number of firms are reporting on their ethnicity pay gaps and acknowledging how it contributes to better equality among employees.
Pay gap reporting can:
- focus attention on diversity and inclusion
- increase understanding of issues faced by Black, Asian and minority ethnic employees
- mark your commitment to taking action to address ongoing discrimination and inequalities in the workplace
What contributes to the ethnicity pay gap?
The factors contributing to ethnicity pay gaps in organisations vary.
Discrimination could be a possibility, especially if there is no transparency in the criteria and decision-making for setting pay.
The Equality Act 2010 makes it unlawful to discriminate (both directly and indirectly) against employees (and people seeking work) because of their race or ethnicity.
People from a Black, Asian and minority ethnic backgrounds are, by law, entitled to equal pay in the workplace.
Another major factor which may explain the gap, especially in large law firms, is the lower levels of retention and progression for Black, Asian and minority ethnic solicitors compared to their White peers.
Our Race for Inclusion research highlights the 'stay' and progression gaps and the reasons behind them, including:
- unfair work allocation
- a lack of sponsorship opportunities
- the absence of an inclusive culture
Additionally, Black, Asian and minority ethnic solicitors are more likely to work in smaller firms or less well remunerated areas of law.
Black, Asian and minority ethnic solicitors are poorly represented at larger firms, City firms and sectors like corporate that tend to be higher paid.
Introducing pay gap reporting in your practice
When your organisation is exploring how to begin ethnicity pay reporting, here are some useful things to consider:
Analyse your data
Analysing diversity data and being transparent about inclusion in your workforce is an important step towards knowing the challenges your organisation faces and creating real change.
To do this, you need to make sure that you're collecting data from your employees.
Many organisations have experienced low disclosure rates from staff. To counter this, employees need to feel comfortable disclosing ethnicity information.
Employers should appreciate that building trust will take time and that they'll need to play a role in creating it.
The best way to do this is to use targeted communications and to be transparent about:
- why you're collecting data
- what you plan to do with the data
- why accurate data is needed to support targeted work that advances diversity and inclusion
Plan your methodology
How do you plan to calculate the gap?
Do you have sufficient data to go beyond analysing Black, Asian and ethnic minority employees as a whole to look more closely at individual ethnic groups?
Looking at individual groups will give a more accurate view of the challenges internally and the disparities which exist by ethnicity group.
However, if you do not have sufficient data on ethnicity, you may wish to begin by looking at ethnicity pay gap as a whole to preserve the anonymity of your staff.
As well as how you plan to calculate the gap, you must agree on how you plan to communicate any pay gap you identify.
At this stage, it's important to work with key stakeholders such as internal staff networks.
These networks may also be able to provide further insight into what's driving the pay gap at your organisation.
Analyse the impact
According to research by PWC, it's important to complete analysis to understand the key drivers of the gap and work to build communications on this basis.
This should include analysis of intersectionality and other data points that will influence your data (for example, office location) to help you understand the key causes of gaps.
As highlighted in our research, Black, Asian and minority ethnic solicitors see slower career development up to and including partner status, again impacting on retention rates.
Around half of female Black, Asian and minority ethnic solicitors have moved firm or sector from 2015 to 2020.
Take action to close the gap
Once the gap is identified, work with relevant stakeholders to build a plan on how the organisation can take action to close the gap.
Pay gap reporting is a tool that encourages employers to take action by building accountability for addressing inequalities and creating true inclusion.
It's vital that reporting must go beyond describing a problem and lead to real action to address it.