UK government consults on mandatory ethnicity and disability pay gap reporting

The proposals to implement mandatory ethnicity and disability pay gap reporting for larger employers with at least 250 employees are set out in the Equality (Race and Disability) Bill. This legislative proposal, which was announced in July 2024 during the King’s Speech, is separate from the Employment Rights Bill.

According to a consultation paper published by the government, companies with at least 250 employees will be required to disclose ethnicity and disability pay gaps. Until now many employers have voluntarily disclosed disability and ethnic pay gaps using non-mandatory frameworks such as the CIPD’s guidance on disability workforce reporting and guidance issued by the previous government on ethnicity workforce reporting.

The government said that the introduction of mandatory gender pay gap reporting in 2017 has led to greater transparency for employers and employees. Having identified continuing pay gaps for disabled and ethnic minority employees, it intends to adopt a similar reporting framework for ethnicity and disability to which is currently in place for gender pay gap.

The proposed framework will use the same six pay gap measures which include mean and median differences in average hourly pay, while the annual reporting dates would also mirror the gender pay gap reporting dates, which are 30 March for public bodies and 4 April for private sector employers. The Equality and Human Rights Commission (EHRC) will enforce the new pay gap reporting frameworks as it currently does for gender pay gap reporting.

Workplace diversity and inclusion expert Kieron O'Reilly of Pinsent Masons said: “The disability and ethnicity pay gaps in the UK have remained significant and largely unchanged for over ten years. Median pay for both disabled and ethnic minority employees is substantially lower than for their non-disabled and white counterparts. Utilising detailed data, such as the ethnicity classifications from the 2021 Census, allows for more precise identification of the challenges and solutions needed to close this gap.”

“Addressing these pay gaps will benefit those unfairly affected, enhancing staff engagement, productivity, and job satisfaction. The current government's consideration of mandatory pay gap reporting is a promising step towards achieving greater transparency and equality in the workplace,” he said.

While similar to the requirements for gender pay gap reporting, the proposed reporting framework will account for some distinct considerations related to ethnicity and disability, particularly in the processes of data collection and analysis.

For example, there is a proposal to introduce mandatory reporting on the overall breakdown of workforces by ethnicity and disability and on the percentage of employees who did not disclose their personal data on ethnicity and disability. This is to add context and may help to build a clearer picture about an employer’s overall commitment to inclusiveness.

Employers would collect ethnicity data using the detailed ethnicity classifications in the Government Statistical Service (GSS) ethnicity harmonised standard that was used for the 2021 Census. They will be encouraged to show pay gap measures for all employed ethnic groups if each ethnic group is populated by a minimum of ten employees, to protect employee privacy. This is to add greater depth to the data as some ethnic groups may earn more than others. If the numbers of employees in different ethnic groups do not meet the threshold of ten, employers can report their figures for two groups only – for example, comparing white British employees with ethnic minority employees. 

The definition of disabled in the Equality Act will be used for disability pay gap reporting and the gap to be reported on will be restricted to comparing the pay of disabled employees with non-disabled employees. This is instead of measuring the difference in pay between employees with different impairment types and non-disabled employees. There must also be a minimum of ten employees in each grouping of disabled and non-disabled employees to protect individuals’ privacy. Employees will not be required to disclose disability to their employers to facilitate reporting.

“The government’s initiatives to tackle pay gaps can support broader equality goals they are considering. However, a central challenge remains in the trust between employees and employers regarding the sharing of personal data on ethnicity and disability. To build this trust, employers need to be transparent about the challenges they face and work collaboratively with disabled and ethnic minority groups to develop solutions. This transparency and cooperation are essential for collecting meaningful data that can drive effective decisions and actions to close the pay gaps,” said equality law expert Susannah Donaldson of Pinsent Masons.

In the Employment Rights Bill, the government is introducing mandatory publication of an equality action plan showing steps the employer is taking to address the gender pay gap and support employees through the menopause. In the consultation process for the Equality (Race and Disability) Bill, the government is not seeking views on whether employers should have to produce action plans for ethnicity and disability pay gap reporting.

The consultation is open until 10 June. A draft Equality (Race and Disability) Bill will follow and there will be a further call for evidence on “making the right to make equal pay effective for ethnic minority and disabled people and other areas of equality law”, the government said.