Government's consultation on mandatory ethnicity and disability pay gap reporting

The UK Government has recently launched a consultation on mandatory ethnicity and disability pay gap reporting, a significant step towards promoting equality in the workplace. This consultation seeks views on how to implement these measures for large employers (with 250 or more employees) in England, Wales and Scotland with the aim of shaping proposals for the upcoming Equality (Race and Disability) Bill. The stated aim of the Bill is to “create a more equal society in which people can thrive whatever their background.” The consultation document highlights that most minoritised ethnic groups earn on average less than their white British peers and that disabled people have, on average, lower incomes than non-disabled people.

Consultation objectives

The consultation was launched by the Office for Equality and Opportunity, the Race Equality Unit and the Disability Unit, and it will run from 18 March 2025 to 10 June 2025. The consultation is designed to gather feedback on how mandatory ethnicity and disability pay gap reporting could work in practice. The Government is particularly interested in hearing from employers, public sector bodies, trade unions, race and disability stakeholders, people from ethnic minority groups, disabled people and disabled people’s organisations. Many employers have voluntarily disclosed disability and ethnic pay gaps (using non mandatory frameworks). However, the aim of mandatory reporting is to allow for greater transparency for both employers and employees. 

The consultation document outlines several key proposals, including:

1. Reporting framework: the Government proposes using a similar reporting framework for ethnicity and disability pay gaps as that already in place for gender pay gap reporting. This includes reporting the same set of pay gap measures, ie reporting on mean and median differences in average hourly pay and bonus pay, the percentage of employees receiving bonus pay for the relevant protected characteristic and pay quarters (the percentage of employees in four equally sized groups, ranked from highest to lowest hourly pay). In addition, the Government proposes to use the same two sets of dates as used for gender pay gap reporting (ie the “snapshot date” of 5 April each year and the “reporting deadline” of 4 April the following year). For public bodies, the snapshot date is 31 March and the reporting deadline is 30 March the following year.
2. Transparency: employers would be required to report on the overall breakdown of their workforce by ethnicity and disability, as well as the percentage of employees who did not disclose their personal data on these characteristics. It is suggested that employers should collect data using the detailed ethnicity classifications in the Government Statistical Service (GSS) harmonised standard used for the 2021 Census.

Ethnicity

 The consultation document states that “Ethnicity pay gap reporting is most powerful when it captures dynamics across different ethnic groups … This is because some ethnic groups may be earning much more than others. Breaking down the different categories will give a much richer picture and better inform action plans.” However, for data protection purposes and to protect the anonymity of employees, a minimum of 10 employees in any ethnic group that is being analysed is proposed. Employers might therefore have to join some ethnic groups together to meet this threshold and they are advised to follow guidance on ethnicity data from the Office for National Statistics to ensure that groupings are as coherent and comparable as possible between employers and for an individual employer over time.

Disability

In relation to disability, the Government proposes to take a binary approach to calculating disability pay gap, comparing the pay of disabled employees with non-disabled employees. The Government intends to use the Equality Act 2010 definition of disability, to ensure a consistent definition is used across equality-related measures. There will be no legal obligation on employees to identify or disclose their disability to their employers when disability pay gap reporting is introduced. As with ethnicity, a minimum of 10 employees in each group is being proposed.

1. Public bodies: additional reporting requirements for public bodies are proposed, such as reporting pay differences by grade or salary bands and data on recruitment, retention, and progression by ethnicity. The Government has asked for views on whether these additional reporting requirements should be extended to disability.
2. Action plans: The consultation seeks views on whether employers should be required to produce action plans for addressing ethnicity and disability pay gaps. These would help to identify why there is a pay gap and how it could be closed. Currently, employers are encouraged to produce an action plan in relation to a gender pay gap, but there is no requirement to do so.
3. Enforcement: The Government proposes that enforcement be carried out by the Equality and Human Rights Commission, as it currently does for gender pay gap reporting.

The feedback from this consultation will help shape the proposals for the Equality (Race and Disability) Bill, which was announced in the King’s Speech in July 2024.

Considerations for Employers

The consultation closes on 10 June 2025. Employers will need to prepare for these changes by reviewing their current pay gap reporting processes and systems, identifying any gaps and ensuring they can accommodate the new requirements for ethnicity and disability pay gap reporting for when they come into force, possibly in 2026. Some employers will already be voluntarily disclosing ethnicity pay gaps; however, they may need to review and revise the way in which they currently classify ethnicity and disability data to ensure that they are aligned with the proposed regimes.

One of the key steps for employers will be engaging with and building trust with employees around the sharing of sensitive personal data on ethnicity and disability. Employers will need to ensure that their data collection processes are transparent and secure, and that employees feel confident in disclosing their personal information. A strong communications plan could help to achieve this and increase response rates.

The Government's consultation on mandatory ethnicity and disability pay gap reporting represents a significant step towards promoting equality in the workplace. By gathering feedback from a wide range of stakeholders, the Government aims to develop effective and practical measures to address pay gaps and promote fairness for all employees.