On 25 March, the government published its response to the consultation on mandatory ethnicity and disability pay gap reporting, confirming its intention to proceed with a new reporting regime for large employers. Reporting will apply to organisations with 250 or more employees, aligning with the existing gender pay gap framework and avoiding additional regulatory burden on smaller employers, who will instead be encouraged to report voluntarily with the support of guidance.
Mirroring the gender pay gap regime
The scope is expected to mirror the gender pay gap regime, including in relation to geographical scope with further clarification promised on how overseas and remote workers should be treated. Employers will therefore be required to publish the same six calculations currently used for gender pay gap reporting (the mean pay gap, median pay gap, mean bonus gap, median bonus gap, proportion of those receiving a bonus and the pay quartile distribution. The government has rejected proposals for additional prescribed metrics at this stage..
It is also proposed that employers should cover the same snapshot dates for data collection and reporting – 5 April each year, with the report to be made by 4 April the following year. Detailed guidance will be produced covering both calculation methodology and good practice on data collection and analysis.
Action plans addressing any identified ethnicity or disability pay gaps will be mandatory for large employers and aligned with requirements to produce gender pay gap and menopause action plans, enabling a single, consolidated equality action plan.
Additional reporting required
The new regime will require employers to publish workforce composition data alongside pay gap figures to provide meaningful context, including regional demographics and labour market factors that may influence diversity and pay outcomes.
In addition, declaration rates for ethnicity and disability will also have to be reported, reflecting the reality that employers rarely hold complete datasets and enabling readers to assess the reliability of reported figures and the extent to which employees feel able to disclose personal information.
Ethnicity data
Employers will be expected to collect information voluntarily using the GSS harmonised ethnicity questions, including a ‘prefer not to say’ option. Ethnicity data will be aggregated into five broad ethnic groups, with a mandatory binary comparison between White (including White Other) employees and all other groups combined, subject to minimum thresholds to protect confidentiality. Where workforce numbers permit, employers will also be required to report comparisons between the five broad ethnic groups. More granular reporting beyond this will not be mandatory but employers will be encouraged to undertake deeper analysis where robust data exists. It is expected that the threshold for comparison will be a minimum of 10 employees in each group for a comparison to be reported.
Disability pay gap
Disability pay gap reporting will adopt a binary comparison between disabled and non-disabled employees, based on the Equality Act 2010 definition of disability. The government has decided against mandatory disaggregation by impairment type due to concerns around data quality, declaration rates and anonymity, although it will consider how employers with sufficient data may be supported to report more detail voluntarily. Again minimum reporting thresholds for disability will apply with a minimum of 10 employees in each group will be required before a comparison must be reported.
Timescale
Regulations will be required before reporting obligations take effect, and the timing of the first reporting deadline has not yet been confirmed. It is anticipated that mandatory reporting is unlikely to be required before 2027 at the earliest. However, employers should be taking steps now to prepare for the collection of data and to encourage workforce participation in order to achieve meaningful declaration rates.