UK: consultation on disability and ethnicity pay gap reporting

The Government has today published for consultation until 10 June 2025 its proposals for mandatory ethnicity and disability pay gap reporting for large employers (those with 250 or more employees), to help shape provisions in the upcoming Equality (Race and Disability) Bill announced in its Next Steps document back in October 2024.  A separate call for evidence will be launched seeking views on making the right to equal pay effective for ethnic minority and disabled people and other areas of equality law.  

The proposal is to implement a similar reporting framework to that already in place for gender pay gap reporting, as well as reflecting much of the 2023 voluntary ethnicity pay gap reporting guidance (see here).  It proposes:

• the same reporting dates, online reporting requirements and EHRC enforcement regime as for gender pay gap reports;
• using the same set of six pay gap measures, but with additional requirements to report on the overall breakdown of the workforce by ethnicity and disability and the percentage of employees who did not disclose their personal data on their ethnicity and disability;  there is also a suggestion that large public bodies could be required to make additional reports on (i) pay differences by grade/salary bands, and (ii) data relating to recruitment, retention and progression, by ethnicity and possibly also disability;
• potentially requiring employers to publish action plans (as is proposed in relation to the gender pay gap pursuant to the Employment Rights Bill currently progressing through Parliament).

One area where the regime will inevitably be more complex is in relation to the classifications of ethnicity and disability to be used, given concerns to protect the privacy of employees and ensure data is statistically robust.  The Government proposes that:

• employers use the detailed ethnicity classifications in the Government Statistical Service (GSS) ethnicity harmonised standard used for the 2021 Census, which involves 20 categories of ethnicity including a "'prefer not to say" option (this was also recommended in the voluntary guidance);
• there should be a minimum of 10 employees in any ethnic group being analysed (notably smaller than the voluntary guidance's suggested threshold of 50 for external reports).  This may require employers to aggregate some ethnic groups and in doing so they should follow the ONS guidance on ethnicity data to ensure that groupings are as coherent and comparable as possible between employers and for an individual employer over time.  In order to provide a consistent point of comparison over time, it is suggested that employers will also be required to produce a binary comparison of pay data for employees who are (in order of preference) White British/White/the largest ethnic group, compared with employees in all other groups combined.  The Government notes that a binary comparison may be the only option for employers with few ethnic minority employees (in order to avoid disclosing individuals' personal data) but, if so, employers should keep this under review and aim to report on more ethnic groups in the future;
• a binary approach is to be used for disability pay gap reporting, measuring the difference in pay between disabled employees (using the Equality Act definition) and non-disabled employees;  employers will rely on employee self-identification as disabled and employees will not be compelled to identify or disclose disability;  again there will need to be a minimum of 10 employees in each group being compared.

The Business Disability Forum has today published a report setting out concerns that disability pay gap reporting requirements could have unintended consequences for disabled employees, in terms of inclusion and experience in the workplace.  Employers with these or other concerns may wish to respond to the consultation to try and shape the draft legislation. 

It seems likely that a draft Bill could be produced in Autumn 2025 with new rights coming into force sometime in 2026.  Employers wishing to be on the front foot may want to audit and potentially improve their current data capture now, and start considering what initiatives might be taken to address potential pay differentials.  If you would like to discuss this issue further, please do get in touch with your usual HSF contact.