Firms struggle to act on ethnicity and gender pay gaps

As they struggle to make major progress on gender and ethnicity pay gaps, employers are worried about the situation on talent attraction and retention. Many companies are deploying new reporting models to help them improve their narrowing of pay gaps.

For many UK employers pay gap reporting remains a key priority but little progress has been made on reducing gender and ethnicity pay gaps. According to Mercer’s new UK Gender and Ethnicity Pay Gap trends report, 74% of respondents reported their numbers to show a continued commitment for inclusion, but the progress they have made closing their pay gaps has been minimal.

For example, 49% of survey respondents told Mercer they had seen little or no progress year-on-year, while a meagre 1% were able to significantly reduce their gender pay gap by more than 10%. Overall, just three in every 10 employers noted they had managed to definitively improve their pay gap at all. For comparison, two in every 10 employers actually saw this number increase.

Businesses believe that re-instating government measures aimed at giving greater transparency on pay gaps may help. A 75% majority of respondents disagreed with the government’s decision to suspend gender pay gap reporting in 2020 – with reporting having only been brought back in from October 2021.

Michelle Sequeira, Diversity, Equity and Inclusion Consulting Leader, Mercer UK said, “Our research reveals employers are struggling to narrow their pay gaps… There are employers who have also shown a willingness to change and they are encouraged to conduct deeper analysis to get to the root of the problem and put action plans in place.”

To that end, employers also place a heavy importance on metrics when it comes to addressing the ethnicity pay gap. Nearly two-thirds (65%) supported legislation enabling ethnicity pay gaps to be reported on and addressed and almost half (45%) of respondents claimed they felt under pressure to conduct ethnicity pay gap analysis. Even though ethnicity pay gap reporting is not yet a legal requirement in the UK, a majority of employers have collected data or are planning to do a dry run on such work in future.

As to what is motivating this burst of energy, while legal requirements on reporting have been relaxed in the pandemic, employee expectations have risen. Amid the continued ‘great resignation,’ many companies are finding it difficult to source new talent – while in a seller’s market, workers have found that they are in a position to demand more from their bosses in the way of workplace equality, pay balance and career opportunities.

When it comes to their gender pay gap, 45% of companies are worried about internal perception – which may make it harder to retain talent. Meanwhile 28% (up from 21% in 2019) are concerned they may be unable to attract new hires if their pay gap is deemed too wide.

Addressing steps employers can make to address this quickly, Sequeira concluded, “Most important of all is creating a genuinely inclusive workforce that allows people to be themselves and thrive both in and outside of work. It is ineffective to offer working parents career development opportunities and salaries if they are expected to extend their working days in ways that negatively impact their family lives. It is futile to hire and train up diverse colleagues if they join a non-inclusive culture or are repeatedly overlooked for promotion. Understanding your current state and engaging and upskilling senior leaders is so key to help them realise where they are going wrong.”