Ethnicity and disability pay gap reporting – what to expect and how to prepare

Last month, the Government opened a consultation on mandatory pay gap reporting on ethnicity and disability. This is ahead of the publication of the draft Equality (Race and Disability) Bill which is likely to introduce this mandatory reporting.

What will employers need to report on? 

Employers with at least 250 employees are already required to report on their gender pay gap. It is envisaged that the same framework will be used for ethnicity and disability, with employers required to report on:

• Differences in average hourly pay (mean and median)
• Pay quarters – this is the percentage of employees in four equally sized groups, ranked from highest to lowest hourly pay
• Differences in bonus pay (mean and median)
• Percentage of employees receiving bonus pay

In addition, the Government plans include the requirement to report on:

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

How will ethnicity and disability be classified?

Ethnicity: The Government proposes that employees will be able to self-identify their ethnicity from those used in the Government Statistic Service (GSS) ethnicity harmonised standard. Employees will not be required to provide their ethnicity, with a “prefer not to say” option.

Disability: It is proposed that the definition in the Equality Act 2010 be used. The Government proposes that employees will be able to self-report but not be required to disclose their disability status, again with a “prefer not to say” option.

What will the reporting be based on? 

Disability: Disability pay gap reporting will be a comparison between disabled employees and non-disabled employees.

Ethnic Groups: It is proposed that there will be a threshold of a minimum of 10 employees in each ethnic category to protect privacy. If this is not met, ethnic groups will be grouped together. The minimum reporting requirements will be: White British and all the ethnic minority groups combined, or White and employees in other groups combined, or the largest ethnic group in that organisation and all other groups combined.

Action plans 

The Government is also looking at whether employers should be required to produce actions plans to identify whether there is a pay gap and how the employer will close it. This may end up being quite a task for employers, particularly those that do not already have robust diversity, equality and inclusion policies in place.

What can employers do now? 

Although there is no indication as to when this will be introduced, employers may wish to start ensuring they have appropriate processes set up to collect the relevant information from employees and how data can be reviewed in a way that allow reports to be easily compiled.

Employers should be looking at ways to make their workforce more diverse and close the gap.

Employers may also wish to respond to the consultation, which closes on 10^th June 2025.

Should you wish to discuss this further, please contact a member of the Gordons Employment Team.