Navigating the evolving landscape: the UK government's response to mandatory ethnicity and disability pay gap reporting

The UK government has published its response to its consultation on mandatory ethnicity and disability pay gap reporting for large employers, as well as releasing draft primary legislation on the topic. This marks a significant step towards enhancing transparency and accountability in workplace equality.

This blog post provides an overview of the government's intended policy approach and key decisions.

Outcomes of the consultation

The government received nearly 900 responses to its consultation, and the consultation response notes that a significant majority of respondents agreed with the proposed approach set out in the consultation and the importance of large employers reporting on their ethnicity and disability pay gaps. 

The UK government's key decisions

Following the conclusion of the consultation, the key outcome is that the government will introduce mandatory ethnicity and disability pay gap reporting for large employers with 250 or more employees, building on the framework established by gender pay gap reporting. This decision aligns with strong support from consultation respondents, with 87% agreeing that large employers should report both ethnicity and disability pay gaps.

Key aspects of the government's approach include the following:

• Consistent scope: The geographical scope will mirror gender pay gap reporting, covering private and voluntary sector employers in Great Britain, public sector bodies in England, and certain public authorities across Great Britain for non-devolved functions.
• Standardised calculations: The same six measures currently used for gender pay gap reporting will be mandated for ethnicity and disability pay gap reporting. These include mean and median differences in average hourly pay and bonus pay, quartile pay data, and the percentage receiving bonus pay.
• Workforce composition: Large employers must report on the ethnic and disability breakdown of their workforce. This is intended to provide crucial context to pay gap figures and deter potential negative behaviours.
• Declaration rates: Reporting on the percentage of employees who did not state their ethnicity or disability status will be required, with the hope that this will provide insight into data reliability and workplace culture.
• Action plans: Large employers will be required to produce action plans to address and reduce ethnicity and disability pay gaps.  These will be harmonised with gender pay gap action plan arrangements, which large employers are encouraged to publish voluntarily alongside gender pay gap data from April 2026, and which then will become mandatory in 2027.
• Reporting timelines and platform: The reporting dates and online service will be consistent with gender pay gap reporting, aiming to minimise administrative burden.
• Enforcement: Enforcement will mirror the policy for gender pay gap reporting, with the Equality and Human Rights Commission (EHRC) responsible for enforcement.

Public bodies and additional reporting

While the initial proposals included additional mandatory reporting requirements for public bodies (such as pay differences by grade/salary bands, and data on recruitment, retention, and progression), the government has decided not to mandate these at this time. This is because of the potential complexities and additional administrative burdens on public bodies. However, public bodies will be encouraged to publish this additional information.

Next steps and guidance

The government has published draft primary legislation (which can be found here), and will also be developing regulations to set out the more detailed reporting requirements for employers. We can also expect fulsome guidance and practical tools to support employers. This will cover data collection, calculation methodologies, strategies for improving employee declaration rates, and advice on effective actions to address pay. 

The introduction of mandatory ethnicity and disability pay gap reporting underscores the government's focus on this area and its aim of fostering more inclusive workplaces across the UK. 

The new mandatory regime's start date is currently unspecified in the consultation response, as it is tied to the legislative journey of the Equality (Race and Disability) Bill. Despite the clear political will evidenced by the draft primary legislation, employers should not expect immediate implementation. Mandatory reporting is realistically not anticipated before 2027, and potentially later, due to the parliamentary timetable. In the meantime, employers could start to plan how to track the data needed to make these disclosures and how they will integrate the disclosure process with their existing gender pay gap reporting processes. 

For further information, please do reach out to your usual Freshfields contact.