Mandatory ethnicity and pay gap reporting: Government consults on proposals

The Government has opened a consultation setting out its proposals for requiring large employers to report on their ethnicity and disability pay gaps. It plans to introduce mandatory ethnicity and disability pay gap reporting through its Equality (Race and Disability) Bill, alongside other equality measures.

What is the Government proposing?

The Government proposes that large employers employing 250 or more employees should be required to report on their ethnicity and disability pay gaps. This means that only those employers who are currently required to publish gender pay gap information will be subject to the new reporting obligations.

Large employers will be required to report on the same pay gap measures, using data from a ‘snapshot date’ of 5 April each year and reporting their pay gaps online by 4 April the following year. This means they will have to report on:

• mean and media differences in average hourly pay;
• pay quarters – the percentage of employees in four equally-sized groups, ranked from highest to lowest hourly pay;
• mean and median differences in bonus pay; and
• the percentage of employees receiving bonus pay.

The Government also plans to require large employers to report on:

• the overall breakdown of their workforce by ethnicity and disability; and
• the percentage of employees who did not disclose their ethnicity and disability.

The Government is seeking views on whether employers should also have to produce action plans for closing their ethnicity and disability pay gaps, something which is set to become mandatory for gender pay gaps under proposals in the Employment Rights Bill.

Collecting ethnicity information

The Government proposes that employees should self-report their ethnicity using ethnicity data classifications from the Government Statistical Service (GSS) ethnicity harmonised standard (as used for the 2021 Census). Employees will also be able to choose not to disclose their ethnicity through a “prefer not to say” option.

The Government would like to see employers reporting pay gap information for as many ethnic groups as they can. However, in line with data protection considerations (so individuals cannot be identified) and in order to ensure the data is statistically robust, the Government proposes that any ethnic group being analysed should comprise at least 10 employees. Ethnic groups may need to be aggregated (where they comprise fewer than 10 employees) and employers should follow the guidance on ethnicity data from the Office for National Statistics when doing so.

As a minimum, employers should report a binary pay gap - either “White British v other” or “White v other” or a comparison between the largest ethnic group in the organisation and all other groups combined.

Collecting disability information

Again, the Government proposes that employees should self-report on their disability status, using the Equality Act 2010 definition of disability. However, employees will not be obliged to report their disability status.

The Government proposes to take a binary approach, with employers reporting differences between disabled and non-disabled employees, rather than by type of impairment. Again, the Government proposes that there should be a minimum of 10 employees in each group.

When will the new obligations be in force?

The Government has not given any indication of when it expects ethnicity and disability pay gap reporting to become law. The consultation closes on 10 June and it has said it will publish the Equality (Race and Disability) Bill in the current Parliamentary session, which suggests it could be published by July this year. However, as with the Employment Rights Bill, the legislation is likely only to provide the basic framework, with the detail being fleshed out in accompanying regulations later down the line. The Equality (Race and Disability) Bill also covers other equality measures which will be subject to consultation so it seems unlikely that the legislation will be in force before 2026. Ethnicity and disability pay gap reports would not therefore be due before 2027.

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If you would like help preparing for the new reporting obligations or support with any other employment law matters, please contact a member of our Employment team or submit an enquiry form, below.