The government has confirmed its intention to introduce a mandatory ethnicity and disability pay gap reporting regime for large employers (those with 250 or more employees). The proposals would significantly expand the existing gender pay gap framework and increase pressure on employers not only to report disparities, but also to explain the underlying causes and demonstrate credible action to address them.
Key proposals
The reporting regime will mirror the existing gender pay gap reporting system closely:
- Reporting of ethnicity and disability pay gaps will be mandatory for large employers.
- Employers will report on the same six pay gap metrics currently required for gender (mean/median pay and bonus gaps, proportion of employees receiving bonus pay and pay quartiles).
- Annual reports will be due on existing snapshot dates and published via a central online service.
- The Equality and Human Rights Commission will oversee the same enforcement approach.
In addition to headline pay gap figures, employers must publish:
- workforce composition data (ethnicity and disability breakdown);
- declaration rates, showing the proportion of employees who have disclosed their ethnicity or disability status; and
- an action plan, setting out steps to address identified disparities.
The requirement to publish action plans aligns with developments in gender pay gap reporting, where reports will become mandatory in 2027. This signals a shift from transparency alone to accountability and measurable progress. We wrote about the guidance on producing an equality action plan in our recent blog (available here).
As with gender pay gap reporting, employers are likely to face scrutiny not only from regulators, but also from employees, trade unions, investors and the media. In practice, the accompanying narrative and action plan may attract as much attention as the headline figures themselves.
Approach to data and methodology
The government proposes that ethnicity pay gap reporting will use the Government Statistical Service ethnicity categories. At a minimum, employers will need to report a binary comparison between white employees and all other ethnic groups combined. Where possible, employers must also report across five broader ethnic categories:
- White;
- Asian or Asian British;
- Black, Black British, Caribbean or African;
- mixed or multiple ethnic groups; and
- other ethnic groups.
The government does not intend to require more detailed reporting, although employers may choose to undertake additional analysis voluntarily.
For disability pay gap reporting, employers will report on a binary basis comparing disabled and non-disabled employees, using the Equality Act 2010 definition of disability. The government has acknowledged concerns around employee willingness to disclose disability information, meaning employers will need to consider carefully how they collect, store and explain the use of this data. Building employee trust and confidence is likely to be critical to achieving meaningful disclosure rates and reliable reporting outcomes.
Practical considerations and challenges
While there was strong support for the proposals in the consultation (generally above 80% agreement), respondents highlighted several practical challenges:
- data collection and disclosure – ethnicity and disability data is voluntary, raising concerns about completeness and reliability;
- confidentiality risks, particularly for smaller population groups within organisations; and
- administrative burden, especially for employers with limited HR infrastructure.
The government plans to publish detailed guidance and tools to support implementation, including improving declaration rates and interpreting data.
Many employers may also choose to align this work with wider diversity, equity and inclusion strategies and ESG reporting commitments. Organisations that already monitor workforce demographics internally are likely to be better placed to respond once the reporting obligations come into force.
Although initially proposed, at this stage the government does not plan to impose additional reporting requirements for public bodies (such as detailed data on recruitment, retention and progression) due to concerns about complexity and cost. Instead, it will encourage additional reporting through non-binding guidance.
Next steps for employers
Although the legislation is still being developed, employers may wish to start preparing now. Practical steps could include reviewing what ethnicity and disability data you are already collecting, identifying gaps in disclosure rates and assessing whether existing HR systems can support the proposed reporting requirements.
You may also wish to consider how to build employee confidence around sharing personal data. For many organisations, the main challenge is likely to be encouraging employees to feel comfortable disclosing sensitive personal information, rather than carrying out the calculations. Start by reviewing privacy notices and employee communications to ensure they clearly explain why you are collecting this sensitive personal data, how you will use it and how you will protect confidentiality.
Finally, begin thinking about how you will analyse and explain pay gap data and support it with a meaningful action plan. You will need to consider how to explain pay gap data internally and externally, particularly where the figures reveal significant disparities or limited workforce representation in senior roles.
Conclusion
Overall, the proposals would significantly expand pay gap reporting obligations in the UK and reinforce the wider shift towards transparency, accountability and measurable workplace equality outcomes. Beginning to review workforce data and disclosure practices now is likely put employers in a stronger position once the government finalises the legislation and accompanying guidance.
