The UK Government has announced plans to introduce mandatory ethnicity and disability pay gap reporting, expanding on the gender pay gap reporting framework that has been in place since 2017. A consultation on the proposal is now underway and will run until 10 June 2025.
According to the Government, gender pay gap reporting has improved transparency and provided employers with key data to address inequalities. The new reporting requirements aim to achieve similar benefits but will involve greater complexity due to the variety of ethnic backgrounds in the workforce and limited existing data on employee ethnicity.
Addressing Pay Disparities
Research indicates that most ethnic minority groups earn, on average, less than their white British counterparts, while disabled employees also tend to have lower incomes compared to non-disabled workers. By introducing mandatory pay gap reporting, the Government aims to highlight disparities and encourage businesses to explore solutions to address them.
Proposed Reporting Framework
The proposed framework mirrors the approach taken for gender pay gap reporting. Employers with 250 or more employees would be required to disclose mean and median differences in hourly pay and bonus pay, the proportion of employees receiving bonuses, and the distribution of employees across four pay quartiles.
Additionally, employers would need to report on:
- The overall breakdown of their workforce by ethnicity and disability.
- The percentage of employees who chose not to disclose their ethnicity or disability status.
For public sector organisations, additional reporting on ethnicity and disability pay differences by grade or salary bands, as well as recruitment, retention, and progression data, is under consideration.
Challenges in Data Collection
Gathering data on employee ethnicity poses challenges, as many organisations lack comprehensive records. To address this, employees will be asked to voluntarily disclose their ethnicity, with an option to opt out. The Government is also considering requiring employers to present pay gap data for as many ethnic groups as possible, while ensuring privacy by setting a minimum threshold of 10 employees per group. If this threshold is not met, employers may be required to aggregate smaller groups.
Similarly, the disability pay gap will be measured by comparing the earnings of disabled and non-disabled employees. The Equality Act 2010 definition of disability is expected to be used, though employees will not be obligated to disclose their disability status.
Implementation Timeline
The reporting timeline is expected to align with gender pay gap reporting. Private and voluntary sector employers would use a snapshot date of 5 April each year and report by 4 April the following year. Public sector employers would follow a 31 March snapshot date with a 30 March reporting deadline. Employers will likely be required to publish their data online, similar to the existing gender pay gap service.
Next Steps
The consultation will also explore whether employers should be required to develop action plans to address pay disparities and how enforcement will be handled by the Equality and Human Rights Commission.
While some organisations already voluntarily track ethnicity pay gaps, many lack sufficient employee data to produce meaningful reports. The Government encourages businesses to prioritise data collection and engage employees in workforce surveys to ensure accurate reporting when the new rules take effect.
