Consultation on disability and ethnicity pay gap reporting

The Government has launched a consultation on measures to mandate ethnicity and disability pay gap reporting for larger employers. This is part of the design process for the Equality (Race and Disability) Bill, which was announced in the King’s speech last year, but has not been published yet.

The consultation closes on 10 June.

Overview

As widely expected, the Government plans to use the current legislation on gender pay gap reporting as a template. That means that the same set of employers will be within scope – essentially public and private sector employers with 250 plus employees.

The data to be published will also track the gender pay gap legislation, but with the addition of an overall breakdown of the workforce by ethnicity and disability, plus the percentage of the workforce who declined to share their personal data on these characteristics. The snapshot dates and reporting deadlines will also align.

Ethnicity

The Government suggests that there should be a minimum of 10 employees in any ethnic group before it is reported on, for data protection reasons. This may involve aggregating employees in different ethnic groups, or in some cases adopting a binary classification – eg comparing the pay of white British with ethnic minority staff.

The consultation document proposes that employers in England and Wales should collect ethnicity data using the detailed ethnicity classification that was used for the 2021 census.

This approach is broadly in line with the previous Government’s guidance on voluntary ethnicity pay reporting published in 2023.

The consultation also includes question on whether public sector bodies within scope should also report on ethnicity pay differences by grade or salary bands and provide data relating to recruitment, retention and progression by ethnicity.

Disability

For disability reporting, the Government proposes taking a binary approach in all circumstances. This would involve comparing the pay of disabled employees with employees who aren’t disabled. 

The Government advocates using the Equality Act 2010 definition of disability to identify disabled employees. This would ensure a consistent definition of disability is used across all equality-related measures.

Action plans

The Government also seeking views on whether employers should be required to produce action plans in conjunction with ethnicity and disability pay gap reporting.

The Government has already decided to introduce a requirement for employers subject to gender pay gap reporting to publish gender equality action plans. The power to make the necessary regulations has been included in the Employment Rights Bill.

Call for evidence

The proposals for pay gap reporting should be seen in the context of the Government’s wider plans to promote pay equality. As the Government points out, current pay reporting requirements are quite limited, and fall short of the kind of pay transparency which would make direct pay comparisons possible for equal pay purposes.

As part of its call for evidence on equality policy, published a few weeks after the consultation, the Government is exploring whether “additional pay transparency measures would be proportionate and effective in improving pay equality”.

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