The number of companies calculating their ethnicity pay gap has grown significantly in the past two years, a study by PwC suggests. A survey of more than 100 businesses that collectively employ more than one million UK employees also shows significant increases in the number of companies collecting ethnicity data and publicly reporting their pay gaps.

The study found:

• The percentage of companies now collecting ethnicity data on their people is up to 67% from 53% in 2018 .
• The percentage of companies calculating their ethnicity pay gap in 2020 has risen from 5% in 2018 to 23% in 2020.
• 40% of the organisations that have calculated their gap have already published it voluntarily.
• Almost half of businesses are planning to disclose their ethnicity pay gap in the next three years. An additional 10% have already done so – up from 3% in 2018.

For the majority of companies not yet calculating their ethnicity pay gap, the most common reason for not doing so is a lack of ethnicity data. Most of those not collecting data put this down to GDPR restrictions, while others expressed concerns around low response rates, HR systems capabilities or unease about how to ask questions around race and ethnicity.

Katy Bennett, Director of PwC’s HR consulting practice, said:

“It’s very encouraging to see so many more companies taking action to collect, analyse and publish their ethnicity pay gap data. Doing this is a critical first step towards identifying the actions that will drive real and sustainable change. At a time when issues surrounding race and ethnicity in the workplace are in sharp focus, it’s positive to see more companies looking to demonstrate a commitment to improving ethnic diversity.

“Collecting, analysing and reporting ethnicity pay gaps is an important first step for an organisation, but reporting on its own will not drive change. Ultimately, the key is the insight that this data provides into where change is most needed. By measuring inclusion as well as diversity, organisations can gain a holistic understanding of where improvements can best be made.”

Around seven in ten companies say they are planning new initiatives to encourage more staff to voluntarily share their ethnicity data. More than a third (39%) are now providing career sponsorship and advice to employees from an ethnic minority background. Two years ago, no employers were taking such action.

Other actions and activities that continue to be used by businesses include ensuring recruitment processes are open and attractive to all via use of new tools to reduce unintended bias (77%), setting a clear strategy on the action they will take to address ethnic diversity (70%), and taking steps to provide fair access to the best work opportunities (63%).

Jason Buwanabala, HR consulting actuary and data scientist at PwC, said:

“In order to address inequalities caused by systemic and structural biases, organisations should be looking across the entire employee experience to ensure fairness in areas such as recruitment, progression and attrition – and data is critical here.

“There are undoubtedly challenges when it comes to collecting and analysing information on ethnicity in the workplace and the companies we’ve spoken to reflect some of these in their concerns – data protection, technological capacity and low response rates are big ones. Improving data quality should be a priority for organisations but this shouldn’t prevent them from starting the process by using the data they already have.”

Laura Hinton, Chief People Officer and member of the executive board at PwC UK, added:

“At PwC, we’re entering our fourth year of voluntarily reporting our ethnicity pay gap, and we were one of the first companies to do so. It’s not been straightforward and the results are often stark reading – but that’s the point. Ultimately, our pay gap is improving year on year but we still have work to do.

“The data we collect helps us identify issues and take targeted action within our business to reach new people, nurture their development and take steps every day to ensure our culture is inclusive and provides equal opportunities for all. Communicating clearly and honestly with our people about why we’re asking for this information, and the positive steps we’re taking as a result, helps build trust and reinforce the message that it’s on all of us to continue challenging the status quo.”