The UK employment law framework on ethnicity pay gap reporting is an evolving area that reflects a growing recognition of the need to address pay disparities among different ethnic groups.
The Equality Act 2010 provides the primary legislative framework for addressing discrimination in the workplace, including discrimination based on race and ethnicity. It prohibits direct and indirect discrimination, harassment, and victimisation on the basis of protected characteristics, including race.
Under the Public Sector Equality Duty (PSED), which was introduced under the Equality Act, public bodies are required to have due regard to the need to eliminate unlawful discrimination, advance equality of opportunity, and foster good relations between people from different groups. This duty encourages transparency and the monitoring of diversity in the workforce, which can include voluntary ethnicity pay gap reporting.
However, and in contrast to gender pay gap reporting, there is currently no legal requirement for employers to report on their ethnicity pay gap. In April 2023, the UK government encouraged voluntary reporting and published a framework (Badenoch, April 2023) to help employers do this. Despite the absence of a legal requirement to do so, many organisations voluntarily report their ethnicity pay gaps in order to increase transparency and drive change.
The legislating of ethnicity pay gap reporting remains subject to ongoing discussion and debate. Various organisations and groups have called for legislation, including the Chartered Institute of Personnel and Development (CIPD), the #EthnicityPayGap Campaign and the House of Commons Women and Equalities Committee. The new Labour government tabled mandatory ethnicity and disability pay reporting for organisations of over 250 people as part of the King's Speech in July 2024.
Understanding the risk
The ethnicity pay gap in the NHS has far-reaching implications that extend beyond individual employees to affect the organisation as a whole and the quality of patient care. Addressing this issue is not just a matter of fairness, but also of organisational effectiveness and public health outcomes. NHS employers must consider these implications as they work towards creating a more equitable compensation structure. Research by the #EthnicityPayGap Campaign (Baker & Greyson, 2022), also noted that the mental health of some of their participants deteriorated due to the lack of redress on this issue.
As an employer
- Workforce challenges. Persistent disparity may result in ethnic minority staff seeking employment elsewhere, leading to higher turnover rates and associated costs. Loss or reduction in diversity within teams could potentially limit the range of perspectives and innovation in decision-making processes.
- Reputation and trust. As public sector organisations, NHS trusts with significant pay gaps may face reputational damage, affecting public trust. They may also lead to recruitment challenges as a known pay gap may deter qualified ethnic minority candidates from applying, exacerbating existing workforce challenges and limiting future talent pools. There are also risks to stakeholder relationships, especially those representing ethnic minority communities, if pay gaps persist.
- Organisational performance. Pay disparities can lead to reduced motivation and engagement among affected staff, potentially impacting overall organisational productivity.
- Financial implications. Failure to address pay disparities could lead to discrimination claims, resulting in legal fees and potential settlements.
For your NHS staff
- Impact on employee health and wellbeing. The psychological impact of being undervalued can lead to increased stress and potential mental ill health. In addition, lower pay may necessitate longer hours or multiple jobs, impacting the work-life balance of your employees.
- Economic impact. Lower pay can lead to increased financial stress, potentially affecting job performance and personal wellbeing. Additionally, as anchor institutions where employees are part of the population we serve, the compounding effect of lower pay can significantly reduce lifetime earnings and pension contributions for ethnic minority staff. There is significant research that has proven that 80% of health outcomes are determined by non-health related factors (The Health Foundation, 2024) such as education, employment, income, housing and access to green space (NHS England, 2024a).
- Limiting access to career development and progression. Pay disparities often correlate with fewer development and promotion opportunities, limiting career advancement for ethnic minority staff.
- Negative workplace experience. Ethnic minority staff may experience lower job satisfaction due to perceived unfairness in renumeration.
For patient care
- Quality of care. A diverse workforce is crucial for providing culturally competent care. Poor workplace experiences that lead to increased staff turnover can result in a loss of talented and experienced professionals, and can potential impact on patient experience and care. The National Guardian's Office identified that psychological safety is created by prioritising the development of diverse and inclusive culture, where staff are treated fairly (The National Guardian's Office, 2024). The resulting impact means staff feel able to speak up without fear of retribution. Speaking up is a critical behaviour in achieving safe, high-quality care.
- Exacerbation of existing health inequalities. Visible pay disparities could erode trust in the NHS among ethnic minority communities, potentially affecting healthcare-seeking behaviours and exacerbation of existing inequalities. The NHS Race and Health Observatory found "that some ethnic minority people delayed or avoided seeking help for health problems due to past experiences of racist treatment by healthcare professionals or due to similar experiences of their friends and family. Improving ethnic minority people's trust in NHS services will, subsequently, improve health outcomes through increased access to these services". (Bécares et al, 20222022).