The UK government has launched a consultation on introducing mandatory ethnicity and disability pay gap reporting for certain employers. The consultation closes on 30 June 2025. This consultation applies to ‘large employers’ and ‘large public bodies’ who are defined are those with 250 or more employees. The responses to this consultation will be used to inform the government’s drafting of the proposed Equality (Race and Disability) Bill and ensure that the legislation gives employers a clear framework on what is required of them.

Key proposals

Large employers have been required to report their gender pay gap data since 2017 which the Government says has led to greater transparency for employers and employees. The Government plans to use a similar reporting framework for ethnicity and disability pay gap reporting, meaning that all employers with 250 or more employees will need to report any ethnicity and disability pay gaps amongst their workforces. 

Employers will be required to use data from a ‘snapshot date’ of 5 April each year and report their gaps within 12 months i.e., by 4 April the following year. Employers will report their data online, in a similar way to how gender pay gaps are reported. The Equality and Human Rights Commission, which currently enforces gender pay gap reporting, be empowered to enforce ethnicity and disability pay gap reporting, too. 

Employers will report ethnicity and disability pay gaps on the same measures used for gender pay gap reporting:

1. mean differences in average hourly pay;
2. median differences in average hourly pay;
3. pay quarters – the percentage of employees in four equally-sized groups, ranked from highest to lowest hourly pay;
4. mean differences in bonus pay;
5. median differences in bonus pay; and
6. the percentage of employees receiving bonus pay.

In addition to the above, the Government will also require employers to report on the overall breakdown of their workforce by ethnicity and disability and the percentage of employees who did not disclose their personal data on their ethnicity and disability.

The Government is also seeking views on whether employers should have to produce “action plans” for ethnicity and disability pay gaps (a similar proposal for gender pay gap “action plans” is currently included in the Employment Rights Bill). This would provide employers with an opportunity to explain the reasons for any pay gaps and the steps they are taking to address them. 

Ethnicity Pay Gap Reporting

In relation to ethnicity pay gap reporting specifically, the Government has proposed employees self-report their ethnicity (with an option to opt out of answering; employees will not be legally required to disclose this information). Those who do wish to disclose their ethnicity should select their ethnicity from the 18 classifications used in the Government Statistical Service ethnicity harmonised standard that was used for the 2021 Census.

In order to report on ethnic pay gaps, the government has proposed that the minimum threshold should be 10 employees in any ethnic group being analysed in terms of pay. If there are fewer than 10 employees in any of the classifications, employers should combine ethnic groups together, following the guidance on ethnicity data from the Office for National Statistics to ensure groupings are as comparable as possible. Where there are smaller numbers of employees in different ethnic groups, the Government has advised that employers report a “binary classification”, for example, reporting the comparison between the largest ethnic group in the organisation and all other groups combined.

The Government is also seeking views on whether large public bodies such as universities should report on ethnicity pay difference by grade or salary bands and data relating to recruitment, retention, and progression by ethnicity.

Disability Pay Gap Reporting 

The government proposes using the Equality Act 2010 definition of ‘disability’ as the basis of identifying disabled employees. The Government also proposes to make employers responsible for collecting data on disability in accordance with that definition, however, as with ethnicity pay gap reporting, employees will self-report (or can opt out of reporting) their disability status.

The Government has also proposed a binary approach to disability pay gap calculations. All disabled employees will be grouped together regardless of their disability and employers will be required to compare disabled employees with non-disabled employees. Employers will not be required to collect and publish data about different impairment types.

There should be a minimum of 10 employees in each group being compared. If there are less than 10 employees with disabilities, it is presumed that the employer will still be required to file a report explaining that they cannot publish a disability pay gap to reduce the risk of individuals becoming identifiable. 

Practical implications

The introduction of mandatory ethnicity and disability pay gap reporting will be a major change for UK employers as many will not have been collecting and analysing such data to date.

The consultation does not specify when these reporting requirements will be introduced, although the Government has stated it will be publishing the draft Equality (Race and Disability) Bill this parliamentary session. The earliest the reporting requirements will be introduced is 2026 with the first reports due in 2027.

The collection of ethnicity and disability data will likely be a challenging task for employers who will need to ensure that they approach their obligations in a way that does not compromise employee privacy data protection law. Calculating the average pay of a dataset as small as 10 employees may result in individual identification being possible and its usefulness is questionable as there may be significant fluctuations if employees join or leave.

Employers may also be concerned about the potential triggering liabilities and responsibilities if employees come forward and disclose that they consider themselves to be disabled when they have not previously done so. 

The full consultation document can be found here.

*Maya Sterrie, trainee in the Employment Litigation practice, contributed to this article.