Is mandatory ethnicity and disability pay gap reporting on its way for large employers?

As part of its radical package of employment reforms, the government published on 18 March 2025 a consultation paper on introducing mandatory ethnicity and disability pay gap reporting for large employers (those with 250 or more employees) which will be included in the proposed Equality (Race and Disability) Bill.

What's the current position on pay gap reporting?

Large employers are familiar with mandatory gender pay gap reporting and it is intended to extend this to include mandatory ethnicity and disability pay gap reporting. A similar reporting framework will be applied but there are particular considerations in relation to data collection and analysis which will apply for ethnicity and disability.

What's in the consultation paper?

The government is seeking views on 33 questions which will help draft the legislation. Key areas relate to:

• pay gap calculations.  It is proposed that the same set of pay gap measures (and reporting dates) that exist for gender pay gap reporting will be used.
  
  It is also suggested that it will be mandatory for employers 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.  This additional data will give context to the pay gap figures.
• producing action plans for ethnicity and disability pay gap reporting. Such plans could give details for any pay gaps and set out actions to improve equality in the workplace.
• additional reporting requirements for public bodies. This could include reporting on data relating to recruitment, retention and progression by ethnicity.
• enforcement. The Equality and Human Rights Commission's enforcement policy relating to gender pay gap reporting will be used for ethnicity and disability pay gap reporting.
• ethnicity data collection and calculations. The proposed method of data collection is self-disclosure, but with the opportunity to opt-out. It is suggested that employers should collect data according to the Government Statistical Service (GSS) harmonised standard used for the 2021 Census.
  
  To protect anonymity, there should be a minimum of 10 employees in any ethnic group being analysed which may mean adding together ethnic groups following the guidance on ethnicity data from the Office for National Statistics. Where an employer has smaller groups of employees in different ethnic groups their figures for 2 groups can be reported such as comparing White British employees with ethnic minority employees.  This is called a binary classification and the paper sets out 3 options to achieve this.
• disability data collection and calculations. For disability reporting, the government is not proposing reporting by type of disability, but instead there should be a binary approach measuring the disability pay gap by comparing the pay of disabled employees with non-disabled employees, using the Equality Act 2010 definition of disability.  The same minimum of 10 employees will apply.

What's next?

The consultation closes on 10 June 2025 so there is plenty of time for employers to consider and  possibly respond on the complexity of some of the proposals . Assuming that these proposals are adopted, employers may want to start reviewing their processes especially around data collection and calculation so that they are ready for when the requirements come into force, possibly in 2026.