Kloe Halls The Diversity Faculty Blog

Mandatory ethnicity and disability pay gap reporting

On 18 March 2025, the UK government launched a consultation on introducing mandatory ethnicity and disability pay reporting for employers with 250 or more employees. The consultation follows a commitment made by the government last year to extending mandatory pay gap reporting beyond gender. The new rules are set to be introduced in due course as part of the Equality (Race and Disability) Bill. 
 
We set out below the key points from the consultation on the proposed framework.
 
Aligning with gender pay gap reporting 
Since 2017, employers with 250 or more employees have been required to report annually on their gender pay gap. With many organisations now familiar with the framework and process, the government proposes to use the same reporting framework for ethnicity and disability in terms of:
 
  • geographical scope
  • pay gap measures (mean and median differences in average hourly pay, pay quarters, mean and median differences in bonus pay, and the percentage of employees receiving bonus pay for the relevant protected characteristic)
  • snapshot dates and reporting deadlines 
  • reporting online
  • enforcement
In line with similar proposals under the Employment Rights Bill to require employers to produce action plans for closing their gender pay gaps, the consultation seeks views on whether action plans should be introduced to ethnicity and disability pay gap reporting too. 
 
But there are some differences … 
Recognising that context is likely to be helpful in interpreting the pay gap calculations, the government is consulting on two additional reporting requirements for employers: providing information on (i) the overall breakdown of their workforce by ethnicity and disability, and (ii) the percentage of employees who did not disclose their ethnicity and disability. 
 
This will help to explain a larger pay gap if, for example, an employer has made an effort to increase their representation of ethnically diverse or disabled employees at a junior level to diversify their pipeline. 
 
Ethnicity pay gap reporting
This is not the first time the UK government has consulted on mandating ethnicity pay gap reporting. The former government consulted on it in 2018 before deciding that it would remain voluntary, citing the difficulties in designing a methodology that produces accurate figures that allow for interpretation. 
 
Taking some of the issues identified into account (see our blog here), the new consultation proposes the following methodology: 
 
  • Employers should collate data using the detailed ethnicity classifications used for the 2021 census.
  • Employees would report their own ethnicity but could opt out if they wish.
  • As a minimum, a binary comparison should be used. However, employers would be encouraged to try to show pay gap measures for as many ethnic groups as possible.
  • There should be a minimum of 10 employees in any ethnic group that is being compared to protect privacy. If ethnic groups need to be combined to meet this threshold, employers should follow the guidance on ethnicity data from the Office for National Statistics. 
Disability pay gap reporting 
Previous discussions on disability reporting have been limited to whether employers should be required to publish the percentage of their workforce identifying as disabled (see the Disability Unit’s 2021 consultation). 
 
The consultation on disability pay gap reporting has been informed by the outcome of that work and proposes the following methodology:
 
  • The definition of disabled would be the same as that under the Equality Act 2010. An employee will therefore be disabled if they have a physical or a mental condition that has a substantial and long-term impact on their ability to do normal day-to-day activities.
  • Employees would not be obliged to disclose or identify their disabilities.
  • A binary comparison (the difference in pay between disabled and non-disabled employees) should be used. 
  • There should be a minimum of 10 employees in each group being compared to protect privacy. 
While the UK government is expected to maintain its position on mandating these additional forms of reporting, there will likely be a reasonable transition period for employers before they are introduced, in a similar way to when gender pay gap reporting came into force.
 
The consultation closes on 10 June 2025 and the draft Equality (Race and Disability) Bill is awaited. 
 
Find out more in our publication here.