Pay Gap Reporting

Policy

The Government has said it wants to tackle equal pay and sees gender pay gap reporting as a way of achieving this. The Employment Rights Bill includes some measures in respect of gender pay gap reporting, with the remainder to be included in the Equality (Race and Disability) Bill.

The Employment Rights Bill makes amendments to the Equality Act 2010 (both of which will be subject to regulations) to:

• Require large employers (those with 250 or more employees) to develop and publish equality action plans showing the steps they are taking in relation to their employees with regard to prescribed matters related to gender equality, which includes addressing the gender pay gap and supporting employees going through the menopause. 
• Introduce the ability to make regulations on the information about outsourced workers that needs to be included in gender pay gap reporting, including, “among other things”, the identity of the providers of contract workers with whom the employer engages.

Additional reforms to pay gap reporting, anticipated in the Equality (Race and Disability) Bill, include extending pay gap reporting (applicable to large employers with 250 or more employees) to include mandatory ethnicity and disability pay gap reporting. The Government opened a consultation on 18 March 2025 and has said responses to the consultation will shape the legislation. 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 in 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’.
• That covered 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.
• To introduce certain additional reporting requirements for public bodies, including in relation to recruitment, retention and progression.
• To apply a de minimis threshold for reporting on 10 employees in each ethnic group for ethnicity reporting and in each group being compared (e.g. disabled/non-disabled) for disability reporting for data privacy and identification reasons.
• Whether employers should report on ethnicity as a minimum, on a binary classification basis using one of three proposed methods, (e.g. comparing White British employees with all other ethnic minority groups combined).
• Whether employers should report on disability, using 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.
• Whether equality action plans should also be produced by employers about what they are doing to improve workplace equality for ethnic minority employees and for disabled employees.

Reporting on ethnicity and disability poses inherent challenges. People are often reluctant to disclose that they are disabled or do not accurately report their status because they do not to understand the legal definition of disability. Also, there is a tension between balancing the risk of being able to identify individuals, and reporting meaningful data, particularly where there are smaller data groups.

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Timing and developments

Equality action plans for gender equality

Included in the Employment Rights Bill. Further regulations will be required as to the detail of the action plans (including the form and manner and how frequently they should be produced) and what information is required in relation to outsourced workers.

It is unclear whether this is one of the targeted areas on which the Government plans to consult in 2025.

Implementation currently anticipated for no earlier than 2026, though firm details on timing have not yet been provided.

Extending pay gap reporting to ethnicity and disability

Not included in the Employment Rights Bill.

Consultation opened on 18 March 2025 and closes on 10 June 2025. The consultation will inform the provisions to be included in the Equality (Race and Disability) Bill.

Await developments.