Labour vows to introduce Ethnicity Pay Gap reporting

The Labour Party has said it will require all large businesses to publish an Ethnicity Pay Gap report, if it wins the UK general election on July 4.

Party leader, Sir Keir Starmer unveiled the new pledges as part of the Labour Party’s official manifesto, titled Change, in Greater Manchester earlier today.

Similar to gender pay gap reporting, the legislation would make it mandatory for firms to report on the pay disparity between Black, Asian and Minority Ethnic (BAME) staff in a workforce.

Racial Inequality Act

The principle that all workers, regardless of gender, race, sexuality, or disability, are entitled to equal pay for equal work was first set out in the Equal Pay Act.

However, the existing legislation does not currently require businesses to divulge the difference in pay for ethnicity. That could soon change if the Labour Party, which is currently winning in UK polls, comes into power.

In his speech, Starmer confirmed plans to introduce a new Racial Inequality Act. According to Labour’s manifesto, this would “enshrine in law the full right to equal pay for Black, Asian, and other ethnic minority people.”

Similar to the Equality Act 2010 (Gender Pay Gap Information), the new laws would require some firms to publish specific ethnicity payroll data to reveal any wage disparities.

Exact details on how the reporting process would work have not yet been revealed. Based on the current rules for gender pay gap reporting, only organisations with more than 250 employees (classed as large businesses in the UK) would need to publish the data.

When comparing average hourly pay for minority ethnic versus white employees, data from the Office for National Statistics shows a mean pay gap of 25.8%.

Disability pay gap

As well as asking large businesses to report on the difference in pay between ethnic minority employees, Labour has also vowed to support more disabled employees in the UK, by requiring companies to publish data on the Disability Pay Gap.

Disabled employees are often unable to work full-time, or are forced to go on long-term sickness absence, due to their disability, resulting in lower average wages overall. They also might face barriers and discrimination in employment.

In November 2023, TUC analysis of data from the Department for Work and Pensions (DWP) found that the difference in average earnings between disabled and non-disabled workers is now 14.6%. This is 5.5% greater than the gender pay gap between men and women.

Starmer also said the party would seek to make disability hate crime an “aggravated offence” and “tackle the Access to Work backlog”.

DWP figures show that the number of disabled people waiting for a decision on their Access to Work claim reached 25,063 by December 2023.

Awareness grows of UK pay inequality

Labour has not signalled if it would extend the pledge to cover sexual orientation. On average, LGBTQ+ workers in the UK earn £6,700 less than their straight counterparts, contributing to a LGBTQ+ Pay Gap.

Similarly, it has given no word on the Class Pay Gap, which refers to the difference in pay among workers from different social backgrounds, and few UK employers report on.

Still, the decision to introduce mandatory ethnicity and disability pay gap data has been welcomed by experts. Melissa Blissett, Pay Gap Analytics Lead at Barnett Waddingham, said it sent “a clear message of fair pay, fair progression, and reward for the workplace.”

However, Blissett also cautioned that “lessons also need to be learnt from gender pay gap reporting”, opining that “reporting itself is not enough to change the dial.”

“Going beyond the reporting figures and analysing the underlying data to monitor trends, progress, potential blockers and drivers of the pay gap will be important,” she added.