UK Government Confirms Commitment to Introduce Mandatory Ethnicity and Disability Pay Gap Reporting for Large Employers

As part of its “Plan to Make Work Pay,” the UK Government pledged to introduce mandatory ethnicity and disability pay gap reporting for large employers via a draft Equality (Race and Disability) Bill. A public consultation ran from March to June 2025 on the proposals (see our article at the time).

On March 25, 2026, the Government confirmed its commitment to introduce mandatory ethnicity and disability pay gap reporting for large employers (with 250 or more employees). The announcement was accompanied by publication of the Government’s response to its consultation along with draft legislation.

The timeline for implementation has not been set, but this response shows a clear commitment from the Government – which would make the UK one of the first countries in the world to require reporting of this kind.

This article breaks down what these changes will mean for employers.

Background

Currently, mandatory pay gap reporting rules apply to certain employers in respect of gender pay gaps only. Large employers (with 250 or more employees) are required to publicly report specific gender pay gap information annually.

As part of the Employment Rights Act 2025 (ERA 2025) reforms, from 2027 the Government will also be requiring large employers to publish an equality action plan alongside their gender pay gap reports (see our article and Reform Hub for more).

The consultation in 2025 proposed introducing mandatory ethnicity and disability pay gap reporting for large employers, using a similar framework to that already in place for gender pay gap reporting (but with distinct considerations for ethnicity and disability, particularly with regards to data collection and analysis).

Mandatory Ethnicity and Disability Reporting Framework

The Government’s consultation response says that its decision to introduce mandatory ethnicity and disability pay gap reporting will “help increase transparency of pay disparities in the workforce, allow inequalities to be exposed, and encourage actions to break down barriers in recruitment, retention and progression of ethnic minority and disabled employees.”

While the Government recognised employers’ concerns about the additional burden these new requirements may impose, it explains it is seeking to reduce this impact by aligning, wherever possible, the ethnicity and disability pay gap reporting with the existing mandatory gender pay gap reporting framework. For example:

• Using the same geographic scope – this means that private and voluntary sector employers in Great Britain (England, Wales and Scotland), public sector bodies in England, and certain public authorities operating across Great Britain in relation to non-devolved functions, will be in scope – provided they have 250 or more employees.
• Requiring the same six calculations – which include both the mean and median differences in average hourly pay, pay quarters (the percentage of employees in four equally-sized groups, ranked from highest to lowest hourly pay), both the mean and median differences in bonus pay and the percentage of employees receiving bonus pay.
• Using the same “snapshot” dates for collecting pay information and statutory reporting dates and the same online reporting service – for large employers in the private and voluntary sectors this means using a snapshot date of April 5 and for large public bodies in England, March 31. The reporting deadlines would be April 4 and March 30, respectively. The response also confirms the intention to require use of the same reporting service.
• Using the same enforcement mechanisms – the Equality and Human Rights Commission (EHRC) will be responsible for enforcing reporting annually, however, comments were made in responses that there should be “further accountability” placed on employers (including monitoring of how employers work to decrease pay gaps and implement their action plans). In response to this, the Government has said it will work further with the EHRC.
• Introducing mandatory action plans – as noted above, the Government is introducing via the ERA 2025 and associated regulations and guidance, the requirement to publish equality action plans for gender pay gap reporting. The Government has confirmed that large employers will also need to publish action plans to tackle ethnicity and disability pay gaps as part of mandatory ethnicity and disability pay gap reporting. However, the approach will be harmonised so that employers can produce a single equality action plan on the same service covering sex, race (including ethnicity) and disability when all the reporting requirements are in force.

Workforce Reporting and Declaration Rates

Of course, there are some key differences with ethnicity and disability reporting due to the complexity of the data that needs to be collected and analysed. It is for this reason that the Government has also said that it will include the following requirements to provide additional context to the figures:

• Workforce reporting – i.e., reporting the overall breakdown of their workforce ethnicity and disability pay.
• Reporting declaration rates – i.e., including details of employees who did not disclose their ethnicity and/or disability, on the basis that employers do not generally hold ethnicity and disability data about their employees.

Ethnicity Data Collection and Calculations

The Government’s proposed approach for ethnicity data collection and calculations for mandatory ethnicity pay gap reporting is as follows:

• Employees’ ethnicity data must be collected voluntarily with a “prefer not to say” option, using the questions set out in the GSS harmonised ethnicity standard (noting guidance will be needed as there are slightly different questions across England, Wales and Scotland).
• Employers should report a binary comparison as a minimum, provided they have the minimum threshold of employees to make the comparison without compromising confidentiality/data privacy. The binary comparison will be between White (including White Other) with all other ethnic groups combined. Where possible and the minimum employee thresholds in each group are met, employers will also be required to report comparisons between five broad ethnic groups (White, Asian or Asian British, Black/Black British/Caribbean or African, Mixed or multiple ethnic groups, Other ethnic groups). The White ethnic group would be the main “comparator” against which the other four groups would be compared. Employers are encouraged to conduct a more detailed analysis where possible.
• A de minimis threshold for reporting will be applied for employees in each ethnic group for data privacy and identification reasons. A threshold of 10 employees was suggested, however the Government is considering this further in conjunction with the Information Commissioner’s Office (ICO).

Disability Data Collection and Calculations

The Government’s proposed approach for disability data collection and calculations for mandatory disability pay gap reporting is as follows:

• Employees’ disability data must be collected voluntarily with a “prefer not to say” option.
• Disability will be defined in line with the Equality Act 2010 definition as the basis for identification – although the Government has said it will use “careful consideration” of the language used to collect disability data to help respondents ensure a consistent understanding of how this definition is applied.
• Employers should report on disability using a binary approach, reporting on differences in pay between disabled employees and non-disabled employees.
• A de minimis threshold for reporting will be applied for employees in each category for data privacy and identification reasons. As for ethnicity, a threshold of 10 employees was suggested, however the Government is considering this further in conjunction with the ICO.

Impacts

This proposal represents a ground-breaking piece of pay transparency legislation, which is largely unprecedented worldwide. Further guidance is awaited, however there are a few areas in particular that raise potential complexities for employers:

• Data privacy – a minimum dataset of 10 is being considered by the Government as a way to safeguard the personal data of respondents, however this remains under review. The input of the ICO in this respect will be welcomed to help employers understand how to balance their data privacy obligations against the requirement to report statistics for potentially small groupings of employees.
• Data security – employers will need to collect and process large volumes of special category personal data in a way they have not done in the past. It will therefore be critical for employers to ensure that appropriate technical and organisational safeguards are in place to manage this data.
• Response rate – it remains to be seen to what extent employees will be willing to disclose their ethnicity and health data to employers for the purposes of reporting these statistics. Unlike gender data, which employers are required to collect in any event, this data will need to be collected on a voluntary basis. The Government has said it will not impose a minimum declaration threshold, but intends to produce specific guidance for employers on how they can improve declaration rates.
• Communications strategy – employers will need to consider their communications strategy when it comes to reporting their statistics and action plans. These statistics and the public discussions surrounding them are likely to draw high media interest and scrutiny by internal and external stakeholders.
• Pay transparency – with the upcoming implementation of the EU’s Pay Transparency Directive, and global drives towards greater gender pay reporting and transparency, multinational employers are increasingly needing to have a well prepared and thorough strategy on how they approach pay structures, job architecture and pay reporting. These new reporting requirements will add an additional layer of complexity for which organisations will need to consider preparing sooner rather than later.

Next Steps

No specific time frame for the changes has been provided. For the Government to introduce mandatory ethnicity and disability pay gap reporting for large employers, it will need to make primary legislation and regulations. The consultation response sets out draft clauses, but these are high-level regulation-making powers and so the details are not provided. The Government has also confirmed that it will provide guidance and practical tools, including how to improve employee declaration rates, step-by-step guidance on how to make calculations and advice on how to address ethnicity and disability pay gaps.

These reforms had been promised in the King’s Speech in July 2024 as part of the broader Equality (Race and Disability) Bill. This Bill may also include equal pay and pay transparency laws for race and disability following a call for evidence in April 2025 (see our articles here and here). It is unclear whether the Government still plans on bringing in legislation to cover all of these changes together and therefore when these changes will come into force.

However, the commitment from the Government is clear – this change is coming.