Consultation on Ethnicity and Disability Pay Gap Reporting

As noted on our Reform Hub, the much-discussed Employment Rights Bill is only considered ‘phase one’ of the Government’s ‘Plan to Make Work Pay’, with other reforms anticipated alongside. One such additional reform is the Government’s commitment to extend the current gender pay gap reporting regime to ethnicity and disability pay gap reporting.

In this article, we set out the latest developments on the Government’s proposals.

Background

The ‘Plan to Make Work Pay’ promised to make ethnicity and disability pay gap reporting mandatory for large employers to mirror gender pay gap reporting.  The King’s Speech last July also confirmed that legislation would be published in a draft Equality (Race and Disability) Bill (‘Equality Bill’) to “enshrine in law the full right to equal pay for ethnic minorities and disabled people and to introduce mandatory ethnicity and disability pay reporting.”

The Government’s aim for introducing such reporting is to drive greater transparency for employers and employees, and provide the impetus for positive change for people from different ethnic groups and people with disabilities by giving employers important data to inform their actions to address inequalities.

By way of reminder, mandatory pay gap reporting rules currently apply to certain employers in respect of gender pay gaps only. The mandatory gender pay gap reporting regime in England and Wales requires large employers (with 250 or more employees) to report specific gender pay gap information annually. This includes the mean and median gender pay gaps based on hourly pay, the mean and median gender bonus gaps, the proportions of male and female employees receiving bonuses and the distribution of male and female employees across pay quartiles.

Private and public sector employers must publish this information by 4 April and 30 March respectively each year in respect of the previous year’s information data. The information must be published on the employer’s website and uploaded to a government website, and, for private sector employers, is accompanied by a signed statement confirming its accuracy.

Recent developments

On 18 March 2025 the Government published a Consultation on mandatory ethnicity and disability pay gap  (the ‘Consultation’) reporting.  The Consultation is open until 10 June 2025 and the Government has said that responses will help shape the Equality Bill.

The Consultation commits to introduce mandatory ethnicity and disability pay gap reporting for large employers, using a similar framework already in place for gender pay gap reporting but with distinct considerations for ethnicity and disability, particularly with regards to data collection and analysis.

The Government is currently proposing:

• To apply key aspects of the gender pay gap reporting rules to ethnicity and disability pay gap reporting, including using the same set of pay gap measures, using the same reporting dates, and applying the same enforcement policies.
• That data collection for race and disability would be best achieved by voluntary reporting, with employees able to choose ‘prefer not to say’.
• Employers should also have to report on the overall ethnic breakdown of their workforce, the breakdown of their workforce by disability status and the percentage of employees who did not disclose their personal data on ethnicity and disability (which the Government says will help contextualise pay gap information).
• To introduce certain additional reporting requirements for public bodies, including in relation to recruitment, retention and progression.
• With regards to the ethnicity pay gap, that:
  • As a minimum, employers should report on ethnicity pay gaps using a binary classification basis, using one of three proposed methods (given in order of preference):
    • Comparing White British employees with all other ethnic minority groups combined; or
    • If an employer is not collecting information on employees in the specific White British category (or there are fewer than 10 employees in this category), comparing all White employees with all other groups combined; or
    • if an employer has fewer than 10 White British employees or White employees, comparing the largest population group within the employer against all other groups combined).
  • In addition, and in the Government’s preferred scenario, employers should go further and show pay gaps for “as many ethnic groups as they can”, subject to a de minimis threshold for reporting on 10 employees in each ethnic group for data privacy and identification reasons.
• With regards to the disability pay gap:
  • to adopt a binary approach reporting on differences in pay between disabled employees and non-disabled employees, rather than requiring reporting on the difference in pay between employees with different impairment types and non-disabled employees (due to what the Government describes as ‘significant risks’ with comparing impairment types against one another).
  • That the definition of disability as provided under the Equality Act 2010 should be used for pay gap reporting.
  • To apply a de minimis threshold for reporting so that there is at least 10 employees in each group being compared (e.g. disabled/non-disabled) for data privacy and identification reasons.

Impacts

Reporting on ethnicity and disability data presents unique challenges compared to gender data. For one, individuals may be hesitant to disclose their ethnicity or disability status due to concerns about privacy, potential discrimination or stigma, which can lead to incomplete or inaccurate data.

In addition, people may not fully understand or know their ethnicity or disability status, making it difficult for them to accurately self-identify. For example, an individual may not recognise themselves as ‘disabled’ because they do not know or understand the legal definition of disability or may not be aware of their own condition.  

Furthermore, due to the increased potential categorisation (e.g, by ethnic group or type of impairment) there are greater privacy concerns – particularly where there are smaller data groups, as the risk of individuals being identifiable becomes more of a possibility.

The Government’s consultation tries to acknowledge some of these difficulties, for example by proposing to include a de minimis threshold for reporting, proposing that employers need to report on the percentage of employees who did not disclose their data and by requiring certain harmonised data standards.

However, it is a difficult job for legislation to achieve the balance between managing these concerns whilst also trying to ensure that data published is both meaningful and representative to meet the Government’s aim of driving progress.

Next steps

The Government has stated that the Consultation is just “the beginning of the process” and that it will be “engaging further”, including by issuing a call for evidence to inform other parts of the Equality Bill, which we anticipate will include a proposal to make the right to equal pay effective for ethnic minority and disabled people.

The Next Steps to Make Work Pay document indicated that the Government would begin consulting on the Equality Bill, with a draft bill to be published during this 2024/25 parliamentary session for pre-legislative scrutiny. However, there is not much time left in this parliamentary session for those steps to conclude – we wait to see how quickly the Government progresses this.

In any event, once the Equality Bill has been published, it would also need to make its way through the usual legislative process and the Government has indicated that consultation will also take place prior to the making of secondary legislation implementing the reforms.

Accordingly, timings for implementation are still very uncertain, but we anticipate that these reforms are more likely to be introduced later, for example into 2026/27.

Keep up to date with developments via our Reform Hub.

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