Extending mandatory pay gap reporting to cover protected characteristics like ethnicity and disability could help increase awareness about pay discrimination, help determine its prevalence and encourage firms to take meaningful action to increase diversity and reduce inequality.

But significant challenges need to be overcome –  in particular determining exactly what and who to measure and which firms to include.

There is currently no requirement for employers in the UK to report ethnic or disability pay gaps. The partial exception to this are the Public Sector Equality Duty regulations in Scotland and Wales.

In Scotland, there is a specific duty to report on occupational segregation by race, gender and disability, while in Wales, there is a requirement to have ‘due regard’ to pay differences between workers with protected characteristics and those without.

Regulations on equality pay gap reporting would need to combine flexibility with concrete action and meaningful enforcement. Three specific proposals that Prospect believes could help meet this goal are:

Extend the Public Sector Equality Duty to the private sector

The PSED imposes general and specific duties on public sector bodies to act to reduce, and ultimately eliminate, discriminatory practices against people with protected characteristics.

However, it provides flexibility about what targets organisations set, what actions they take and what types of data they collect and publish.

It nevertheless imposes a requirement to make a transparent, public commitment to increasing equality and to regularly report on progress in achieving this.

Develop sectoral equality strategies

Companies operating in key sectors of the economy could be required to work together to develop strategies to tackle inequality and increase diversity in their specific sector.

For example, specific targets for increasing participation from people with protected characteristics or encouraging firms to collaborate on training and awareness-raising on equalities issues. This could be under the auspices of relevant trade associations for example, and in conjunction with workforce representatives.

Restore EHRC funding and improve enforcement

The Equality and Human Rights Commission has been hit with heavy budget cuts over the past decade and is poorly placed to enforce equalities legislation. Non-compliance is likely to be high and the regulations ineffective without robust monitoring and enforcement.

At a minimum, EHRC funding should be restored to its 2007 level and the Commission should be given greater powers to monitor and enforce good equalities outcomes.

Other solutions

Firms could be required to:

Provide detailed breakdowns of pay gaps by pay grade and job role. This would help identify instances where disabled and non-disabled workers were not being paid equally for the same work or work of equal value.

Publish concrete action plans for closing pay gaps and report on how those plans are progressing each year.

Smaller firms could report on the composition of their workforce relative to the region of the country they operate in, while full pay gap reporting could be restricted to larger firms.

Advantages

One of the main advantages of extending mandatory equal pay reporting for disability and ethnicity pay gaps would be to focus attention on potential discrimination against BAME and disabled workers.

It would also be an opportunity to correct some of the problems with the gender pay gap regulations. In particular, reporting requirements could be expanded to include a more comprehensive breakdown of data, for example by pay grade, job role and part time v full time staff.

For the ethnicity pay gap, reporting by work location (in cases where the employer has multiple offices/sites) would also be useful, since BAME workers are more likely to be based in London where pay is typically higher.