30 March and 4 April are the annual reporting deadlines by which large employers have to report their gender pay gap information. As we move out of this year's reporting season, the UK Government has launched a consultation on introducing mandatory ethnicity and disability pay gap reporting.
The consultation suggests that most ethnic minority groups earn on average less than their white British peers, and although employment rates among disabled people have increased, their average income remains lower than that of non-disabled people. The objective of mandatory pay gap reporting is to increase transparency and be an impetus for change.
The Government's Proposal
In a similar way to gender pay reporting, employers and public sector bodies with 250 employees or more will be required to calculate their ethnicity and disability pay gaps, report the information to the Government, and publish it on their website.
- Private and voluntary sector employers will be required to use pay data from a snapshot date of 5 April, and to report the pay gap information by the following 4 April.
- Public sector employers have a different snapshot date of 31 March, and they must report the pay gap information by the following 30 March.
Where there is an ethnicity and/or disability pay gap, the employer will be required to publish an action plan setting out how it is going to close the gap. They will also be required to provide an overall breakdown of their workforce by ethnicity and disability.
Where employees choose not to disclose their ethnicity or disability status (see below), employers will also be required to report what percentage of their workforce chose not to disclose the information.
Ethnicity Pay Reporting
The consultation states that ethnicity pay gap reporting is at its most 'powerful when it captures dynamics across different ethnic groups'. To capture the data, employers will need to ask their employees to confirm their ethnicity. Answering the question should not be mandatory, and employees need to be given a 'prefer not to say' option.
The emphasis in the consultation is on showing the pay data for different ethnicities. The Government proposes:
- Where 10 or more employees in an ethnic group, their pay data should be analysed and included in the calculation and reported on.
- If there are fewer than 10 employees in an ethnic category, employers might need to add some ethnic groups together into order to meet the '10 employee' reporting threshold.
- As an absolute minimum, if an employee has lots of small numbers of employees in different ethnic groups, they can report the binary classification of White British and ethnic minority employees.
Disability Pay Reporting
Disability pay gap reporting will be based on the definition of a disability in the Equality Act 2010, with employers again needing to ask employees to confirm their disability status, and employees again need to be given the 'prefer not to say' option. Where an employee confirms they have a disability, they will not be legally required to disclose what that disability is.
Whilst ethnicity pay gap reporting will look at pay data from different ethnic groups, the Government is proposing a binary approach to disability pay gap reporting. It will not look at pay data across different types of disability, rather it will focus only on disabled vs. non-disabled pay data.
Additional Reporting Requirements for Public Bodies
Additionally, the Government intends to require large public sector bodies to report ethnicity pay differences by grade or salary band. They would also be expected to publish data on recruitment, retention, and progression by ethnicity. These additional requirements would apply to public bodies such as local authorities, Government departments, and NHS organisations.
Comment
Given the Government's position that white British and non-disabled people earn more on average, nobody would question the objective the Government is trying to achieve. However, their proposals have wider implications for businesses that don't seem to be being considered.
Ethnicity pay – The Government is very clear that it wants white British to be the comparison group, meaning that white people from other countries would fall outside this category which will distort the data. If the issue is that white British people are paid more on average, diluting the average pay data down into different ethnic groups of 10 employees or more could undermine the conclusion that the reader should take from the data.
Disability pay - Asking employees to 'self-identify' whether they class themselves as disabled poses a problem. It is difficult enough for lawyers to agree whether a medical condition is a disability under the Equality Act 2010 - particularly where the condition exists on a spectrum, like mental health conditions or autism - let alone employees having to decide for themselves without any legal training. It seems inevitable that some employees are going to classify themselves as disabled when in reality they aren't, or classify themselves as disabled based on conditions they think they have despite not having an official diagnosis
The wider point is that once an employee classifies themselves as having a disability, this will trigger all sorts of additional responsibilities for the employer like occupational health referrals and considering reasonable adjustments. Equally, in disability discrimination claims, one of the key points a Tribunal will look at is whether the employer had (or ought to have had) knowledge of the disability, and claimants will likely use their disability pay classification as evidence that their employer knew they were disabled.
Whilst the finer details still need to be ironed out, it is almost certain that ethnicity and disability pay reporting is going to come into force in some form. It was part of the Government's election manifesto and the King's Speech in July 2024, and America is very publicly rowing back on its DEI initiatives so the Government might want to show a positive UK equality message.
The Government's consultation closes on 10 June 2025, and anyone wanting to respond can do so on the Government's website.
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