As part of its “Our Plan to Change Britain” manifesto, the government pledged to introduce mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees (“Large Employers”), with a draft Equality (Race and Disability) Bill announced in the King's Speech on 17 July 2024. 

A consultation on how to introduce mandatory ethnicity and disability pay gap reporting for Large Employers ran from 18 March to 10 June 2025. 

The government recently published its response to the consultation (the “Response”), in which it committed to introducing mandatory ethnicity and disability pay gap reporting for Large Employers.

Response to the consultation – what has the government committed to introduce? 

The Response highlights that 87% of respondents to the consultation agreed that Large Employers should report their ethnicity and disability pay gaps to increase transparency and help tackle barriers in the workplace. The government has therefore affirmed its commitment to introducing this requirement. The Response contains draft legislation demonstrating how the reporting requirements are intended to work in practice. 

While ethnicity and disability pay gap reporting will be mandatory for Large Employers, employers with less than 250 employees will not be required to report this data. However, the Response confirms that such employers are encouraged to report voluntarily where possible. 

What data will Large Employers be required to collect and report?

Large Employers will be required to collect data on and report: (i) a binary comparison of their employees – white (including white other) and all other ethnic groups combined; and (ii) comparisons on the below five ethnic groups, where minimum thresholds are met:

• White.
• Asian or Asian British.
• Black, Black British, Caribbean or African.
• Mixed or multiple ethnic groups.
• Other ethnic groups.

Similarly, in relation to disability data, Large Employers will be required to collect data on and report a binary comparison of their employees - disabled and non-disabled employees, using the definition of disability set out in section 6 of the Equality Act 2010, where minimum thresholds are met. 

The Response identified that there will be a threshold number of employees for reporting both the binary comparisons and the comparisons of the five ethnic groups, to protect employee anonymity. 73% of respondents agreed the threshold should be a minimum of 10 employees across all pay gap calculations. Practically speaking, this would mean that an employer would not be required to report a binary comparison if it had less than 10 employees in either the ‘white (including white other)’ group or ‘all other ethnic groups combined’ group. However, the government has stated it will consider this further, and work with the Information Commissioner's Office to explore the appropriate threshold.

Large Employers will also be able to report on the overall breakdown of their workforce by ethnicity and disability, as well as the percentage of employees not disclosing their personal data for these characteristics.

Ethnicity and disability pay gap calculations

Large Employers will be required to report the same six calculations currently used for gender pay gap reporting for ethnicity and disability:

• Mean differences in average hourly pay.
• Median differences in average hourly pay.
• Pay quarters (the percentage of employees in four equally sized groups, ranked from highest to lowest hourly pay).
• Mean differences in bonus pay.
• Median differences in bonus pay.
• Percentage of employees receiving bonus pay for the relevant protected characteristic.

Additionally, the geographical scope of ethnicity and disability pay gap reporting will mirror that of gender pay gap reporting, to ensure consistency and avoid unnecessary complexity and burdens on business. 

Action plans for Large Employers

The Response also confirms that Large Employers will be required to produce an action plan setting out the steps they are taking to improve workplace equality for ethnic minority and disabled employees.

Enforcement 

As with gender pay gap reporting, mandatory ethnicity and disability pay gap reporting will be enforced by the Equality and Human Rights Commission. 

Next steps 

The Response does not provide a timetable for the implementation of ethnicity and disability pay gap reporting. The government has committed to developing the legislation (assumed to be the Equality (Race and Disability) Bill) to introduce mandatory ethnicity and disability pay gap reporting for Large Employers, and the supporting regulations that will set out the more detailed reporting requirements for employers.

The government also intends to develop tools and guidance to support employers with the new reporting requirements, including detailed step-by-step guidance on collecting ethnicity and disability data and calculating pay gaps, and advice on actions to address ethnicity and disability pay gaps. 

So what for employers?

While there is no indication of when the mandatory reporting framework will be implemented, prudent employers may wish to consider their existing data collection practice. 

In particular, employers who are collecting ethnicity data using different classification categories than the five ethnic groups stated in the Response and disability data in a manner which does not  reference the definition of disability under the Equality Act 2010 will need to collect new data, and liaise with their IT and HR teams to ensure that this can be stored effectively.