Manchester, England – Under the government’s plans to introduce mandatory ethnicity and disability pay gap reporting, employers with 250 or more employees will be required to report on ethnicity and disability pay gaps, mirroring the requirements for gender pay gap reporting. Organisations will need to calculate and disclose six measures, including mean and median pay gaps, bonus pay gaps, and the proportion of employees in pay quartiles.
Employers will also have to report workforce breakdowns by ethnicity and disability status and include data on employees who did not declare their status to contextualise the findings.
They will also be required to develop action plans to address identified pay gaps. These plans will align with new requirements set to be introduced under the Employment Rights Act 2025 for gender pay gap action plans and menopause action plans. Approaches will be harmonised so that employers can produce a single equality action plan covering sex, race (including ethnicity) and disability.
Employers will need to establish robust systems for collecting ethnicity and disability data while ensuring privacy and compliance with data protection laws. Another area to consider will be making sure that their data collection processes encourage employee participation by offering clear explanations of how the data will be used and maintaining confidentiality.
Kate Palmer, COO at Peninsula, says,
“Although large employers will already have processes in place to comply with current gender pay gap reporting obligations, these new requirements will bring additional responsibilities for them to get to grips with, including data collection, reporting, and action plan development. Employers who have been producing voluntary reports, may need to adjust their practices to meet the new mandatory requirements. They may also need to invest in training and resources to ensure accurate reporting and to address the findings effectively.
“Disability pay gap reporting will require employers to report a comparison of disabled employees with non-disabled employees, using the Equality Act 2010 definition of disability. The use of this definition could cause issues for employers as it is a decision for a tribunal to decide if a person meets the definition of disability in discrimination cases.
“Mandatory reporting is likely to increase transparency, potentially improving an organisation’s reputation for diversity and inclusion if pay gaps are proactively addressed. However, non-compliance could lead to reputational damage and enforcement actions, in line with the penalties for failing to comply with gender pay gap reporting.
“Addressing pay gaps can lead to a more inclusive workplace, improving employee morale, attracting top talent, and enhancing overall organisational performance. Diverse and inclusive organisations are often more innovative and profitable, which could provide a competitive edge in the marketplace.
“Although the legislation is still in draft form and subject to the usual parliamentary process before becoming law, employers should begin preparing by reviewing their data collection processes, identifying potential pay gaps, and developing strategies to address inequalities.”
