Consultation paper published on ethnicity and disability pay gap reporting

Posted: 08/04/2025

Diversity, equity and inclusion is still very much on the UK's legislative agenda. Delivering on its 'Plan to Make Work Pay' commitments, the government launched a consultation on 18 March 2025 to extend compulsory pay gap reporting to include ethnicity and disability under the proposed Equality (Race and Disability) Bill. 

To date, reporting on the ethnicity and disability pay gap has been voluntary for employers. As a result, the numbers publishing their ethnicity pay gap figures have been low and the number of those publishing their disability pay gap measures negligible. The government consultation document makes it clear that both pay gaps are significant - most ethnic minority groups are paid on average lower than their white British peers, and disabled people earn less than the non-disabled. The intended aim of the bill is therefore to shine a light on these disparities and ensure that employers take steps to address inequalities in their workplaces.

Who will it apply to?

Under the proposals, employers with 250 or more employees in England, Wales and Scotland and large public bodies in England would be required to report their ethnicity and disability pay gaps each year.

Taking a similar approach to gender pay gap reporting, the government is proposing that private employers would  be required to collect data from a snapshot date of 5 April each year and report their gaps online within 12 months of that date.

Calculating the pay gaps

Employers will be required to report on the same six pay calculations that they use for gender pay gap reporting being:

• mean difference in average hourly pay;
• median difference in hourly pay;
• pay quarters (the percentage of employees in four equal sized groups ranked from highest to lowest hourly pay);
• mean difference in bonus pay;
• median difference in bonus pay; and
• percentage of employees receiving a bonus.

Workforce breakdown

However, to provide context on the data, employers will also be required to report on the overall breakdown of ethnicity and disability in their workforce as well as the percentage of employees who declined to provide any information on their ethnicity and disability.

Action plans

Alongside similar proposals for gender pay in the Employment Rights Bill, the government is also consulting on whether employers should be required to produce action plans (analysing the reason for any pay gaps) and, importantly, setting out the steps that they will take to close those gaps.

Ethnicity reporting

Under the proposals, employees will be required to self-report their own ethnicity in line with the ethnic groups used for the Office for National Statistics (ONS) 2021 census. Employees will also have the option to decline to self-identify by ticking a 'prefer not to say' option.

Employers are encouraged to show the pay gap for as many ethnic groups as they can. However, for privacy reasons, the government is proposing that there should be a minimum of 10 employees in any ethnic group if it is to be reported. Where there are fewer than 10, employers would be required to aggregate ethnic groups (using ONS guidance to ensure that the groupings are as comparable as possible) to meet this threshold. Where they cannot meet the threshold for different ethnic groups, employers would need to report a binary gap - so either White British v Other or White v Other.

Disability pay gap reporting

The government is also proposing that employees self-report for disability using the definition of disability under the Equality Act 2010 (ie that they have 'a physical or mental impairment which has a substantial and long term impact on their ability to carry out normal day to day activities'), again with the ability to opt out if they would prefer not to say. The government has chosen a binary approach for reporting on the disability pay gap - disabled v non disabled gap data. As with ethnicity, there must be a minimum of 10 employees in each group (disabled or not disabled) for the data to be reported.

What steps should employers take now?

The consultation closes on 10 June 2025 so employers who want to respond to the proposals should submit their responses before this date (see Equality (Race and Disability) Bill: mandatory ethnicity and disability pay gap reporting - GOV.UK)  and keep an eye out for the government's response. Employers who already collect data on ethnicity and disability should review what adjustments would need to be made to their existing processes to comply with the current proposals, as well as developing guidance for employees to encourage and inform disclosures.

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