The government has taken a significant step towards introducing mandatory ethnicity and disability pay gap reporting for large employers in Great Britain. A consultation is now open, closing on 10th June 2025, on proposals that mirror the familiar gender pay gap reporting system but with critical new complexities.
Who will be affected?
The new requirements will apply to private and voluntary sector employers with 250 or more employees and large English public sector bodies. If you already report on your gender pay gap, you are likely to be in scope for these new duties too.
What will you need to report?
The core reporting obligations will closely follow gender pay gap reporting:
- Mean and median hourly pay gaps.
- Mean and median bonus gaps.
- Proportion of employees receiving bonuses.
- Distribution of employees between pay quartiles.
In addition, employers must also publish:
- A breakdown of their workforce by ethnicity and disability.
- The percentage of employees who declined to disclose their status.
An action plan to close any identified gaps will likely also become mandatory.
How will you collect data?
Employees will self-identify their ethnicity and disability status. Employees must be given a ‘prefer not to say’ option.
For ethnicity, employers are encouraged to use the 18 categories from the Government Statistical Service (based on the 2021 Census). Disability reporting will use the Equality Act 2010 definition, focusing on a binary ‘disabled vs non-disabled’ approach.
If your organisation lacks enough employees in a single category (fewer than 10), you must combine groups sensibly to maintain anonymity and statistical validity.
What are the business challenges?
Data collection and disclosure rates
Employees may be reluctant to share personal information. High non-disclosure rates could affect your figures and reputation.
Classification systems
If your HR systems use different ethnicity categories, update them to align with government standards.
Interpreting small data sets
Small groups (minimum threshold of 10 employees) can lead to volatile results, making year-on-year comparisons tricky.
New legal risks
Collecting disability data may create additional obligations if previously undisclosed disabilities come to light.
Action plans
Producing credible, specific action plans for ethnicity and disability could require significant investment and sensitivity.
What should you do now?
Audit
Check what ethnicity and disability data you currently hold and how complete it is.
Update
Ensure your HR software captures the 18 standard ethnicity categories and disability information.
Communicate
Design a campaign to encourage employees to disclose this information, explaining how and why the data will be used.
Run a dry-run analysis
Use existing data to simulate potential pay gaps. Understand where gaps might arise and start planning possible actions.
Get involved in the consultation
Consider submitting your views before 10th June 2025 to help shape the final rules.
Review policies and training
Train your managers to understand issues around disability disclosure and support.
When will this come into force?
The Government aims to introduce legislation via the Equality (Race and Disability) Bill, likely later in 2025. The first reporting deadline could be as early as April 2027, using data from April 2026.
Get help
Mandatory ethnicity and disability pay gap reporting will represent a significant shift for many employers. Forward-thinking organisations should act now to prepare, not just for compliance, but to drive greater inclusivity and fairness in the workplace. Please contact us for advice on preparing for the new requirements, including strategies for improving employee disclosure rates.
