Ethnicity and disability pay gap reporting: What employers need to know

Gender pay gap reporting for large employers was introduced in 2017. The Government’s view is that this has improved transparency and provided employers with important information about how to address inequalities.

It intends to introduce mandatory ethnicity and disability pay gap reporting and is now consulting on how to do this.

The consultation period ends on 10 June 2025.

The aim is to adopt a similar reporting framework used for gender pay. Accordingly, many proposals will be familiar to large employers, that is, those with 250 or more employees. However, it is accepted that ethnicity and disability pay gap reporting will be more complex. This is because of the large number of ethnicities in the workforce and the fact that many organisations do not have much information about employee ethnicity.

Most ethnic minority groups earn, on average, less than their white British peers, and disabled people have, on average, lower incomes than non-disabled people. Introducing mandatory ethnicity and disability pay gap reporting will expose any pay gaps and enable organisations to consider why such pay gaps exist and how to tackle them.

What does the consultation paper cover?

Pay gap calculations

As with gender pay gap reporting, it is proposed that employers would report on mean and median differences in average hourly pay and bonus pay, the percentage of employees receiving bonus pay and the percentage of employees in four equally-sized groups, ranked from highest to lowest hourly pay. Significantly, the Government also proposes to make it mandatory for employers to report on:

The overall breakdown of their workforce by ethnicity and disability.
The percentage of employees who did not disclose their personal data on their ethnicity and disability.

Additional reporting requirements for public bodies

The Government has asked whether employers should report ethnicity pay differences by grade or salary bands and recruitment, retention and progression data by ethnicity. It has also asked whether these requirements should extend to disability.

Ethnicity data collection and calculations

These are complex issues for the reasons mentioned above. Asking employees to report their own ethnicity is the best way to collect data, but the Government suggests there should be an option to “opt-out” of answering. Because some ethnic groups may be earning more than others, the Government is keen that employers show pay gap measures for as many ethnic groups as possible.

However, there are data protection implications. To protect employees’ privacy, a minimum of 10 employees in any ethnic group is proposed, and employers might have to add some ethnic groups together to meet this threshold. A “binary classification” of two groups is proposed if an employer has smaller numbers of employees in different ethnic groups, for example, comparing white British employees with ethnic minority employees.

Disability data collection and calculations

The Government proposes taking a “binary approach” to measuring the disability pay gap by comparing the pay of disabled employees with that of non-disabled employees. The Equality Act 2010 definition of disability is likely to be used. Employees will not be required to identify or disclose their disability to their employers when disability pay gap reporting is introduced. As with ethnicity, a minimum of 10 employees in each group being compared is proposed for data protection purposes and to protect employees’ privacy.

Dates and deadlines

The same two sets of dates as used for gender pay gap reporting are proposed: the “snapshot date” of 5 April each year for the private and voluntary sector and the “reporting date” by 4 April the following year. Public bodies’ dates are 31 March and 30 March the following year. Employers will probably have to report their ethnicity and disability pay gap data online, similar to the gender pay gap service.

Other parts of the consultation paper consider the geographical scope of mandatory reporting and whether employers should produce action plans to help identify why there is a pay gap and how it can be closed. It is proposed that the Equality and Human Rights Commission will be responsible for enforcement.

Conclusion

Many organisations are already analysing ethnicity pay gaps voluntarily. In April 2023, the previous Government published comprehensive guidance for employers on how to voluntarily measure, report and address any ethnicity pay difference within the workforce.

However, many employers may not have enough employee data to produce a meaningful ethnicity pay gap report, so the starting point is to focus on collecting this data and encourage employees to participate in workforce surveys.