Ethnicity and disability pay gap reporting

Why should I read this?

The government has today launched its consultation on mandatory ethnicity and disability pay gap reporting.

This consultation signifies the beginning of the government's efforts towards fulfilling its commitment to "create a more equal society and support a growing economy”. Together with an anticipated call for evidence on extended equal pay protections for ethnic minority and disabled people, the consultation will inform the Draft Equality (Race and Disability) Bill, which will establish the legal framework for the new pay gap reporting requirements and the extended equal pay protections.

In this briefing, we examine the issues that the consultation seeks to address and outline the steps that employers can take now to prepare for the forthcoming changes.

What do I need to know?

Since 2017, employers with 250 or more employees have been required to report on their gender pay gaps. To date, this has been limited to gender, with the publication of information on ethnicity and disability pay gaps being on a voluntary basis only. This is set to change, with new mandatory ethnicity and disability reporting requirements.

Moreover, the legal right to equal pay for equal work has also to date been confined to sex, with employees who experience pay disparities due to ethnicity or disability having to instead seek redress through direct discrimination claims. The forthcoming legislation will provide the express right to equal pay for ethnic minorities and disabled individuals, offering a new legal pathway which will, arguably, make it evidentially more straightforward for employees to bring successful claims.

Collecting and analysing ethnicity and disability data presents unique challenges. The diversity within ethnic groups and the nuanced nature of disability identification complicate data collection. Some employees may not identify with standard ethnic group categories or may identify with multiple categories, and there is often reluctance to disclose disabilities.

Such challenges extend to the reporting of the data too. Gender pay gap reporting is binary in nature, and whilst applying a similar binary approach to ethnicity and disability pay gap reporting has the advantage of mirroring the now familiar gender pay gap methodology, this approach may overlook critical differences within groups to enable employers to target efforts to address pay gaps.

The consultation, which will run for 12 weeks until 10 June 2025, seeks to address the challenges and mechanics of how these new requirements will work in practice, including:

• Whether employers should report against the same measures for ethnicity and disability pay gap reporting as currently apply for gender pay gap reporting?
• Whether it should be a requirement for employers to produce an action plan to explain what they are doing to improve workplace equality for ethnic minority and disabled employees?
• Whether ethnicity and disability pay gap reporting should have the same method of online reporting and reporting dates as gender pay gap reporting? This would mean a ‘snapshot date’ of 5 April for large employers in the private and voluntary sectors in Great Britain and a reporting deadline of 4 April the following year, and a snapshot date of 31 March for public bodies in England and a reporting deadline of 30 March the following year.
• Whether employers should collect ethnicity data using the Government Statistical Service harmonised standards for ethnicity that was used for the 2021 Census? This would mean applying the detailed classifications set out in the standards for the various ethnic groups across England, Wales, Northern Ireland, and Scotland (which, depending on where the data is collected, consist of 5 or 6 categories broken down into subcategories).
• How to calculate and report on ethnicity pay gaps, including the use of a binary comparison to protect the privacy of employees where there are a limited number of employees in each ethnic group (although encouraging employers to report based on more detailed ethnic groups where possible).
• How to calculate and report on disability pay gaps, including whether to use a ‘binary’ approach (comparing the pay of disabled and non-disabled employees) or an approach that measures the difference in pay between employees with different impairment types and non-disabled employees, and whether the Equality Act 2010 definition of ‘disability’ should be used for reporting purposes?

What should I do next?

The Equality (Race and Disability) Act is anticipated to come into force in 2026 and there is likely to be a transition period to allow employers to get ready for the change. However, employers should not wait to take steps until the law forces them to do so.

Employers with 250 or more employees should be taking action now to ensure that they have the infrastructure in place to be able to report on:

• the gender, ethnicity and disability pay gap figures for relevant employees, calculated using both the mean and median average hourly pay
• the proportion of men, women, ethnic minorities and disabled people in each of four pay bands, based on the employer's overall pay range
• information on the employer's gender, ethnicity, and disability bonus gaps
• the proportion of employees who received a bonus in the same 12-month period calculated based on gender, ethnicity and disability

Regardless of workforce numbers, all employers committed to achieving effective diversity and inclusion within workplaces should be taking steps to properly understand their pay practices and identify any pay differentials, including establishing the causes of any significant pay differences, assessing justification and establishing a plan to address any differences that cannot be justified on non-discriminatory grounds.

Allowing enough time to plan and implement plans and being agile to revise, assess and embed actions through workforce engagement as the details of the new requirements are confirmed, will be key to minimising risk.

Further reading/resources

A copy of the consultation document and associated annexes and documents can be found on the government website.

Our interactive tracker sets out the government’s employment policy commitments. Our tracker provides a horizon scanning feature to help employers keep ahead of the curve, and reviews each policy proposal describing practical implications for employers and progress to date.

Our interactive global pay site tracks pay transparency developments in the EU, as well as providing access to essential FAQs, timelines and briefings. If you would like further information about how to access the site, please contact your usual Eversheds Sutherland contact or katiebrownhill@evershedssutherland.com.

How we can help

Our team of specialist lawyers has been at the forefront of equal pay and pay transparency developments for many years and have the experience and track record to help organisations navigate through this complex and reputationally sensitive area. The advice and practical support of our specialist team can help with comprehensive risk assessments, practical action plans, supporting narratives for pay gap reports and assistance with shaping wider diversity and inclusion strategies.

With the added benefit of our Diversidata product, our teams are ideally placed to help companies transform their diversity and inclusion strategies, whether in the UK, EU or beyond.

Originally published: March 18, 2025