Ethnicity and disability pay gap reporting coming soon

Why should I read this?

The government has published its consultation response on mandatory ethnicity and disability pay gap reporting, confirming that it will be introducing such reporting for large employers.

This consultation response is part of the government's efforts towards fulfilling its commitment to "create a more equal society and support a growing economy”. Together with the call for evidence on extended equal pay protections for ethnic minority and disabled people that closed in June 2025, the outcomes will inform the Draft Equality (Race and Disability) Bill, which will establish the legal framework for the new pay gap reporting requirements, as well as extended equal pay protections.

In this briefing, we examine the consultation response 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 that are intended to significantly increase transparency and comparability of employer pay practices.

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 or indirect discrimination claims, which typically involve higher evidential burdens and greater scope for employer justification arguments. Under current proposals, there will be an express right to equal pay for ethnic minorities and disabled individuals, offering a new legal pathway which will, arguably, make it more straightforward for employees to bring successful claims.

Much of the detail in relation to the new reporting requirement will come in supporting regulations, but will mirror the existing gender pay gap reporting requirements in a number of respects. No timescale is yet confirmed for those supporting regulations.

In summary:

• the requirement will apply to employers with 250 or more employees
• in scope employers will be required to publish:
  • the same 6 key pay gap metrics that are currently used for gender pay gap reporting
  • the overall composition of their workforce by ethnicity and disability
  • the declaration rates of ethnicity or disability status
• the reporting dates will be the same as for gender pay gap reporting
• in scope employers will also be required to produce ethnicity and disability action plans
• ethnicity data should be:
  • requested to be shared voluntarily with a ‘prefer not to say’ option
  • collected using the ethnicity classifications set out in the GSS’s harmonised ethnicity standard and aggregated in line with guidance from ONS
  • reported with the minimum of a binary comparison
• disability data should be:
  • requested to be shared voluntarily with a ‘prefer not to say’ option
  • collected based on the Equality Act 2010 definition of disability
  • reported on a binary basis

Preparing for ethnicity and disability pay reporting

The government has not committed to a specific commencement date for the new equality legislation to make race and disability pay reporting a requirement, but there is likely to be a transition period to allow employers to get ready for the change. It is currently anticipated (but unconfirmed) that the first mandatory reporting could be based on data from 2027.

However, employers should not wait to take steps until the law forces them to do so. Early scenario planning and data testing by in‑scope employers will be key to ensuring that they have the necessary infrastructure in place to be able to report fully and accurately and that there is sufficient time to address any structural or unexplained pay gaps before reporting becomes mandatory. For many employers, this may require improvements to data integration across payroll, HR, equity and benefits systems, as well as consistency in job architecture and grading.

Employers that do not already collect employees’ ethnicity and/or disability data will also need to put in place mechanisms to do so. The effectiveness of such mechanisms is rarely immediate, as disclosure rates are often low initially, so they will need time to embed. Employers will also need a carefully planned communication strategy to support disclosures.

Ethnicity and disability pay gap reporting will mirror the same geographical scope as for gender pay gap reporting, meaning that the following organisations will be in scope if they have 250 or more employees:

• private and voluntary sector employers in Great Britain
• public sector bodies in England
• certain public authorities operating across Great Britain in relation to non-devolved functions

The reporting dates will be the same as currently apply to gender pay gap reporting, namely a ‘snapshot date’ of 5 April each year to collect the pay data and then 12 months to report the data (i.e. by 4 April the following year). Large public bodies in England have a different snapshot date (31 March) and a reporting deadline of 30 March the following year.

In-scope employers will be required to report on the 6 key pay gap metrics that are currently used for gender pay gap reporting. These metrics are:

1. mean differences in average hourly pay
2. median differences in average hourly pay
3. pay quarters – the percentage of employees in 4 equally-sized groups, ranked from highest to lowest hourly pay
4. mean differences in bonus pay
5. median differences in bonus pay
6. the percentage of employees receiving bonus pay

In addition, employers will be required to report on:

• the breakdown of their workforce by ethnicity and disability. This requirement, referred to as ‘workforce reporting’, seeks to provide context to pay gap figures, allowing employers to better understand and more effectively address their pay gaps, but is also likely to highlight structural under‑representation at senior and higher‑paid levels.
• ethnicity and disability declaration rates. Since many employers do not hold such data for their entire workforces, this requirement will be included to again enable employers to contextualise their pay gap data, indicating how reliable the figures and analysis are.

In-scope employers will also have to produce an action plan on what they are doing to improve workplace equality for ethnic minority and disabled employees. This mirrors the requirement that is expected to come into force in April 2027 for larger employers to publish gender equality action plans, signalling a shift from narrative explanations to measurable actions.

Supporting regulations will set out the detailed reporting requirements in due course. In addition, the government has committed to developing guidance and practical tools to support employers with the new reporting requirements, including on how to improve employee declaration rates, detailed step-by-step guidance on how to make the calculations, and advice on actions to address ethnicity and disability pay gaps.

Although the new requirements will apply only to employers with 250 or more employees, 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, particularly as employee relations, procurement and investor expectations increasingly extend beyond statutory minimums. This should include 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.

Ethnicity data collection and calculations

Employers should ask their employees to share their ethnicity data voluntarily. In asking for this data, employers should provide a ‘prefer not to say’ option for employees, as this is personal data which an employee can choose not to disclose. They should further clearly explain purpose, confidentiality and use, as trust directly affects declaration rates.

Collecting ethnicity data is complex because ethnicity is a self‑identified and multi‑dimensional characteristic, shaped by personal, cultural and societal context, and capable of changing over time. Such factors have implications for consistency, comparability and data interpretation.

To seek to ensure consistency and comparability of data, the government has decided that employers should collect ethnicity data using the detailed ethnicity classifications in the Government Statistical Service (GSS) ethnicity harmonised standard. The ethnicity questions and response options differ slightly across England, Northern Ireland, Wales and Scotland, with 18 or 19 categories of ethnicity in England and Wales. The government has committed to providing guidance on managing these differences, which will be particularly relevant for employers operating across multiple nations.

Ethnicity pay gap reporting will require all in-scope employers to report a binary comparison at minimum (i.e. a comparison of White (including White Other) with all other ethnic groups combined).

Employers will also be required to aggregate data into 5 ethnic groups in line with guidance from the Office for National Statistics. This approach reflects an attempt to balance transparency with data protection and statistical reliability. In practice, this means that individual ethnic groups would be aggregated into one of 5 broader ethnic groups: White; Asian or Asian British; Black, Black British, Caribbean or African; Mixed or multiple ethnic groups; and Other ethnic groups. Where there is at least a minimum threshold within the aggregated group (that threshold yet to be determined), employers will be required to report comparisons between the 5 broad ethnic groups. The government does not intend to require more granular comparisons.

Disability data collection and calculations

Employers should invite disability data to be disclosed voluntarily, with a ‘prefer not to say’ option and carefully considered communications, recognising the sensitivity of disability data and the potential barriers to disclosure.

Reporting will be required on a binary basis, comparing disabled employees with non-disabled employees, using the current definition contained in the Equality Act 2010 (i.e. a physical or a mental condition that has a substantial and long-term impact on their ability to do normal day to day activities). This creates a clear opportunity for employers to audit existing disability data, refresh internal guidance and ensure that data collection practices are aligned with the statutory framework.

There will be a threshold for employees within the disabled and non-disabled employees groupings, to protect anonymity. Further work is ongoing to determine the most appropriate threshold in this respect.

Further reading/resources

Monitor the latest developments with our interactive tracker, including an outline of the reforms, timelines and FAQs, plus access to the latest events and expert briefings all in one place.

We participated in the government’s consultation, including facilitating a discussion on 6 May 2025 with a groups of our clients on the proposals and what they could mean in practice. See our summary here of the discussions.

A copy of the consultation response document and associated annexes and documents can be found on the government website. See also the Government Statistical Service (GSS) ethnicity harmonised standard; and the ONS guidance on how to aggregate different ethnic groups.

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.