Background
NHS England's first Equality, Diversity and Inclusion (EDI) Improvement Plan was published in June 2023. It contains six intersectional high impact actions (HIAs) for NHS organisations to enact and then sustain achievement against the plan's initial five-year lifecycle.
HIA 3 calls for NHS organisations to develop and implement an improvement plan to eliminate total pay gaps across gender (by 2024), ethnicity (by 2024) and disability (by 2025), followed by other protected characteristics (by 2026). Implementation plans should be underpinned by robust data.
Since 2017, annual gender pay gap reporting has been mandatory for public, private and voluntary sector organisations (CIPD, 2024) with 250 or more employees in the UK. The King's Speech (NHS Providers, 2024a) announced the Equality (Race and Disability) Bill which, when implemented, will introduce mandatory ethnicity and disability pay gap reporting for organisations over 250 employees.
Pay gap reporting is different to equal pay, which looks at sex-based pay differences between individuals or groups carrying out similar or equal work. The ethnicity pay gap, as defined by the Equality and Human Rights Commission (EHRC, August 2017a), is the difference between the average (mean and median) hourly pay of ethnic minority and white British people.
As such, when ethnic minority staff are paid less, overall, than white British staff, this constitutes a 'pay gap' – the inverse is a 'pay advantage' which is instead the difference between the average (mean and median) hourly pay of ethnic minority and white British people.
Pay gaps are complex and find their roots in multiple, interconnected factors including systemic racism and inequalities in recruitment, entry and progression – these are important to understand with the help of robust data.
What you will learn
This guide aims to support trust board members to understand their organisation's ethnicity pay gap and the steps that can be taken to narrow and eliminate it. It outlines:
- The legal framework and risk.
- How to understand your data, calculate your ethnicity pay gap and apply an intersectional lens.
- Strategies for minimising and closing the ethnicity pay gap.
- The role of the board in driving improvement.
Good practice
This guide is built on insights from organisations, both inside and outside the NHS, that demonstrate what good looks like. These organisations have begun the process of better understanding their data to calculate their ethnicity pay gap. Their boards have begun to implement strategies and interventions to address those pay gaps. These include:
- Creating a 'future very senior manager (VSM) programme' for staff currently working at Agenda for change (AfC) bands 8 and 9, for which 50% of the cohort must be from an ethnic minority.
- Developing a flagship 'unity against racism' and anti-racism taskforce.
- Designing a talent management framework to explore staff aspirations, ensure succession planning, deliver career development workshops and offer career mentoring.
- Creating a 'communities, social mobility and inclusion committee' to act as an external reference group to assess internal decisions.
In learning about what good looks like, we also highlight some of the challenges that organisations experience when seeking to address their ethnicity pay gap. This includes the quality of data and the lack of capacity and expertise to generate analysis and insight to understand the causes of pay gap disparities. Secondly, working with limited resourcing for EDI initiatives, which makes it difficult to foster engagement and deliver consistent messaging across a large workforce. Thirdly, working as part of a large and complex group model, where hospitals have different workforce profiles, organisational cultures and opportunities.
Legal framework and risk
The legal framework for ethnicity pay gap reporting is evolving in the UK. At present, reporting is not mandated, but the King's Speech 2024 included a Bill that will bring in mandatory reporting for larger organisations. It's important to keep in mind the legal requirements set out in the Equality Act 2010 and the Public Sector Equality Duty (PSED), introduced under this Act.
Where diversity – across the whole workforce – is underpinned by inclusion, staff engagement, retention, innovation and productivity improve. Inclusive environments create psychological safety and release the benefits of diversity – for individuals and teams, and in turn efficient, productive and safe patient care.
Alongside the benefits, there are a number of risks associated with not identifying and addressing your organisation's ethnicity pay gap, in addition to the obvious moral duty to tackle inequality. These include:
- Risks to employers: workforce challenges related to recruitment and retention, reputational risk, reduced organisational performance due to lower morale and financial implications as a result of legal claims.
- Risks to staff: an impact on their health and wellbeing, an economic impact, a lack of career development and progression opportunities and a negative workplace experience.
- Risks to patients: a lack of culturally competent care, the risk of organisational culture negatively affecting patient care and an exacerbation of health inequalities.
Understanding your data
Key to understanding your data is plentiful, accurate and disaggregated data. Staff ethnicity is collected in the Electronic Staff Record (ESR) and high declaration rates, alongside the ability to disaggregate data outside of broad categories like 'ethnic minority' and 'white', will significantly help in your organisation's understanding of your workforce.
Organisations should:
- Drive improvements in the quality and disaggregation of data.
- Calculate their mean and median ethnicity pay gaps, the median is often more reliable as it is not adversely affected by outliers.
- Undertake pay quartile analysis, as this will identify how employees are distributed across pay levels.
- Apply an intersectional lens to their pay gap reporting, which is vital, as analysis in silos of certain protected characteristics can mask how the intersectional identities of staff can compound disadvantage – for example, among women from an ethnic minority.
In the context of the NHS, it is also important to understand variation across multi-disciplinary teams (MDTs), particularly as the majority of staff will be paid via the AfC terms and conditions, while doctors and VSMs are paid under different terms and conditions.
Strategies for minimising and closing the ethnicity pay gap
Best practice highlights the following areas as critical to tackling ethnicity pay gap disparities:
- Transparent and regular reporting, with high quality data.
- Diverse leadership and improving leadership accountability to drive the ethnicity pay gap agenda.
- Inclusive recruitment practices and robust policies regarding pay and promotion.
- Supporting staff career development as part of a wider talent management approach.
- An inclusive workplace culture.
- Community and sector engagement which enables trust leaders to understand the specific needs of those impacted by the disparities and learn from evidence-based practice of what works.
The role of the board
The success of reducing and ultimately eliminating the ethnicity pay gap relies heavily on the board's central role in ensuring long-term accountability and progress evaluation. Board members should:
- Maintain both short- and long-term strategic oversight of priorities.
- Oversee the creation, implementation, and review of equitable policies and procedures.
- Ensure accountability through robust governance systems and processes, and implement HIAs from the NHS EDI Improvement Plan with specific, measurable actions for all board members.
As part of this guide, we've created nine questions designed to help board members oversee and understand their organisation's efforts to narrow and eliminate the ethnicity pay gap.