Government consultation on mandatory pay gap reporting for ethnicity and disability

Mandatory ethnicity and disability pay gap reporting is due to be included as part of the upcoming Equality (Race and Disability) Bill. The government has published a consultation document, to seek views on how legislation should be drafted and implemented.

The consultation can be found here and the key points are summarised below.

Mandatory reporting will only apply to large employers and large public bodies, which are those with 250 or more employees.

The proposals are mostly a reproduction of those relating to gender pay gap data, which have been in place since 2017 and are said to have led to greater transparency to address inequalities. The government wishes for the same transparency and impetus for positive change to be introduced for ethnicity and disability.

As such, mandatory reporting will include:

• mean and median differences in average hourly pay
• pay quarters – the percentage of employees in 4 equally-sized groups, ranked from highest to lowest hourly pay
• mean and median differences in bonus pay
• the percentage of employees receiving bonus pay for the relevant protected characteristic

Some additional measures are proposed, including:

• the overall breakdown of workforce by ethnicity and disability. This recognises that some employers may have recently increased the number of ethnic minority or disabled employees, which might mean that they are generally in more junior positions.
• the percentage of employees who did not disclose their personal data on their ethnicity and disability. This was not necessary for gender pay gap reporting as the data is already available.

Employers will also be asked to produce action plans to identify why they have a pay gap and how they intend to close it.

The date for reporting is proposed to be the same as for gender pay gaps, to ensure consistency.

Employers are encouraged to differentiate as many ethnic groups as they can. This is to inform effective action plans in situations where some ethnic groups may be earning much more than others. However, to protect confidentiality, there should be a minimum of 10 employees in any ethnic group being analysed. To meet this threshold, employers might have to add some ethnic groups together. At the very minimum, employers should use the ‘binary classification’ by comparing White British employees with ethnic minorities.

On the contrary, when it comes to disability pay gap reporting, a binary approach is proposed. The rationale is to reduce the risk of individuals being identified and reduce complexity where some individuals have multiple impairments. However, it will risk missing fundamental data on particular groups (such as invisible disabilities), and particular impairments. Again, it is proposed that there should be a minimum of 10 employees in each group being compared.

The consultation runs until 10 June 2025. Readers can submit responses here and are encouraged to look out for the draft Equality (Race and Disability) Bill when it becomes available. Well-prepared employers may want to start reviewing their data collection policies now and consider how they might start addressing ethnicity and disability-related pay gaps in advance of legislative changes.