A Compliance Exercise, or Understanding and Insight?

The chipped Formica of the canteen table felt cold beneath Amelia’s elbows. She’d been staring at the spreadsheet for an hour, the numbers blurring into a frustrating, opaque mass. As Head of HR for ‘Bloom’, a national retail chain with over 15,000 employees, she was tasked with preparing Bloom’s first Ethnicity Pay Gap report.

The legal requirement, mandated in 2024, felt less like a step towards equity and more like a logistical nightmare. She knew, intellectually, that disparities existed... Anecdotally, she’d heard whispers of colleagues from ethnic minority backgrounds feeling overlooked for promotion, or consistently assigned to less lucrative roles. But translating those whispers into quantifiable data, understanding the why behind the numbers, and formulating a meaningful action plan felt insurmountable.

The Gender Pay Gap reporting, introduced in 2017, had yielded some improvements, but even that felt…superficial. A compliance exercise, rather than a genuine commitment to change. Amelia suspected the Ethnicity Pay Gap reporting would be much the same, unless she could find a way to move beyond simple averages and delve into the nuanced realities within Bloom.

Amelia’s predicament is increasingly common. While the Gender Pay Gap reporting legislation has been in effect for several years, its impact has been…complex. Initial optimism surrounding its potential to drive substantive change has tempered, with critics pointing to a focus on reporting rather than remediation (Devereux & Eikhof, 2021). The legislation has increased transparency, forcing organisations to publicly acknowledge pay discrepancies, but it hasn’t necessarily translated into equitable outcomes. The focus on a single demographic – gender – also obscured the complex interplay of factors influencing pay, and the potential for compounded disadvantage experienced by individuals with multiple protected characteristics.

The extension of reporting requirements to include ethnicity, while a welcome step, risks repeating these shortcomings if not approached with a more sophisticated methodology. Simply publishing an average pay gap figure, while legally compliant, provides little actionable insight. Understanding where disparities exist within the organisation, why they exist, and how to address them requires a deeper dive into the data, facilitated by tools designed for granular analysis. This is where platforms like Divrsity come into play.

The Landscape of the Ethnicity Pay Gap: Drivers and Impacts

The ethnicity pay gap, unlike the gender pay gap, is not legally defined as discrimination. It represents the difference between the average earnings of employees from ethnic minority backgrounds and their white British counterparts. The latest data, prior to the mandatory reporting, consistently demonstrates a significant disparity. The Resolution Foundation (2023) found that in 2022, the median ethnicity pay gap stood at 16.4%, meaning that ethnic minority employees earned, on average, 16.4% less than their white British colleagues.

The drivers of this gap are multifaceted and deeply rooted in systemic inequalities. Historical and ongoing discrimination in education, housing, and the labour market play a significant role. Access to networks and opportunities is often unevenly distributed, disadvantaging individuals from ethnic minority backgrounds. Bias in recruitment and promotion processes, both conscious and unconscious, can limit career progression. Furthermore, the concentration of ethnic minority employees in lower-paying sectors and roles contributes to the overall gap.

The impact of the ethnicity pay gap extends far beyond individual financial hardship. It perpetuates cycles of poverty and inequality, hindering social mobility and undermining economic growth. It also has a detrimental effect on employee morale, engagement, and productivity. A lack of representation at senior levels can create a hostile work environment and discourage talented individuals from joining or remaining within the organisation.

Divrsity: A Platform for Granular Analysis and Actionable Insight

Divrsity is designed to move beyond simple averages and provide organisations with the tools to understand the why behind the ethnicity pay gap. The platform achieves this through a two-pronged approach: demographic questions and ‘Lenses’.

Demographic Questions: Divrsity’s demographic questions are carefully crafted to capture an individual’s background, characteristics, beliefs and values, including ethnicity. These questions are designed to be inclusive and respectful, adhering to best practices in data collection. Crucially, participation is entirely voluntary and anonymised, ensuring employee privacy and encouraging honest responses.

Lenses: These are questions relating to the workplace experience, covering a wide range of factors such as salary, performance ratings, promotion history, training opportunities, and perceptions of fairness and inclusion. By combining demographic data with Lens data, Divrsity enables organisations to slice and dice the data in meaningful ways.

For Amelia at Bloom, this means she can move beyond simply calculating the overall ethnicity pay gap and start to identify specific areas of disparity.

For example, she can analyse whether ethnic minority employees are less likely to receive promotions, even when controlling for performance and experience. She can also investigate whether they are disproportionately represented in lower-paying roles, or whether they report lower levels of satisfaction with their career development opportunities.

The built-in analytics automatically highlight disparities between demographic groups, drawing attention to areas that require further investigation. This eliminates the need for manual data manipulation and reduces the risk of overlooking important trends. The platform also generates a data-driven Diversity and Inclusion Action Plan, outlining specific steps that Bloom can take to address the identified disparities.

Beyond Compliance: Leveraging Data for Meaningful Change

The Runnymede Trust (2023) has been vocal in its critique of the potential for ethnicity pay gap reporting to become a mere compliance exercise. They argue that organisations must go beyond simply publishing the numbers and actively address the underlying drivers of inequality. This requires a commitment to data-driven decision-making, coupled with a willingness to challenge existing norms and practices.

Divrsity facilitates this process by providing organisations with the insights they need to develop targeted interventions. For example, if the analysis reveals that ethnic minority employees are less likely to receive training opportunities, Bloom can invest in targeted training programs designed to address this gap. If the analysis reveals that they are disproportionately represented in lower-paying roles, Bloom can review its recruitment and promotion processes to ensure fairness and equity.

Furthermore, Divrsity’s platform can be used to track the impact of these interventions over time, allowing Bloom to measure progress and adjust its strategy as needed. This iterative approach ensures that the organisation remains accountable and committed to achieving meaningful change.

Beyond Gender & Ethnicity: Uncovering Total Pay Equity with Granular Data

While we welcome the regulatory pressure to provide pay gap reporting on gender and ethnicity, this still creates a fragmented view of equity within organisations.

While these remain critical areas of focus, a truly equitable workplace demands a far more holistic approach. The reality is pay disparities can manifest across all dimensions of diversity, impacting individuals based on neurodiversity, socio-economic background, disability, sexual orientation, and even caring responsibilities. Ignoring these nuances not only perpetuates systemic inequalities but also limits an organisation’s ability to attract and retain top talent.

Divrsity is uniquely positioned to facilitate comprehensive pay gap analysis across all protected characteristics and self-declared demographics. Our platform moves beyond simple averages by enabling organisations to segment data with unprecedented granularity. For instance, are individuals who identify as neurodivergent experiencing a pay disparity compared to their neurotypical colleagues with similar roles and experience? Is there a demonstrable ‘social mobility pay gap’ – a difference in earnings between individuals from lower socio-economic backgrounds and those from more privileged backgrounds, even when controlling for qualifications and experience? Similarly, are LGBTQ+ employees facing financial disadvantages compared to their heterosexual counterparts?

By examining each characteristic in isolation, organisations can pinpoint specific challenges faced by different groups and develop tailored strategies to address them.

This granular approach moves beyond broad-stroke initiatives, enabling a more focused and effective approach to pay equity. While acknowledging the complexity of lived experience, Divrsity empowers organisations to take concrete, data-driven steps towards a fairer and more equitable workplace for all employees, fulfilling not just legal obligations but also demonstrating a genuine commitment to inclusivity.