The government has confirmed that it will proceed with mandatory ethnicity and disability pay gap reporting for large employers, following strong support in a public consultation which concluded in June 2025. The response sets out a framework closely aligned with existing gender pay gap reporting. Employers should ensure that preparatory work begins well in advance of legislation coming into force.
Background
In July 2024, the government committed to introducing mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees, building on the existing gender pay gap reporting regime. The consultation, which we reported on here, ran from 18 March to 10 June 2025, attracting 857 responses from employers, trade unions, public bodies and individuals.
The government’s stated objective is to improve transparency around pay disparities affecting ethnic minority and disabled workers, and to use reporting to drive action on equal progression. The response emphasises that voluntary reporting has delivered benefits for some employers, but mandatory reporting is required to scale those benefits.
Who will be in scope
The government confirms that all employers with 250 or more employees will be required to report on their ethnicity and disability pay gaps. This threshold mirrors gender pay gap reporting requirements and is intended to minimise burdens on smaller organisations. Employers below the threshold will not be required to report, but will be encouraged to do so voluntarily.
The geographical scope will also mirror gender pay gap reporting. Private and voluntary sector employers in Great Britain (England, Wales and Scotland), public sector bodies in England, and certain public authorities exercising non‑devolved functions across Great Britain, will all be required to report. Employers in Northern Ireland will be excluded, as equality law is a transferred matter.
Pay gap calculations and reporting mechanics
Large employers will be required to publish the same six pay gap measures currently used for gender pay gap reporting:
- Mean differences in average hourly pay
- Median differences in average hourly pay
- Pay quartiles (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
The government has aligned the measures with gender pay gap reporting in response to concerns that reporting is an administrative burden for businesses. Detailed step‑by‑step guidance will be published to help employers perform the relevant calculations. We expect this will be similar to the existing guidance on gender pay gap reporting.
Ethnicity reporting: classifications and thresholds
Ethnicity data will need to be collected using the Government Statistical Service's (GSS) harmonised ethnicity standard, which is currently subject to review. Employers will be required, as a minimum, to publish a binary comparison between White (including White Other, as opposed to White British only) employees and all other ethnic groups combined. This is because it is believed that high earners in the White Other group could "skew the pay gap figures for all other ethnic groups combined".
Where numbers permit, employers will also be required to report comparisons across the five broad aggregated ethnic groups used by the Office for National Statistics:
- White
- Asian or Asian British
- Black, Black British, Caribbean or African
- Mixed or multiple ethnic groups
- Other ethnic groups
The government will provide guidance for employers on how to aggregate different ethnic groups in accordance with the above categories. To protect confidentiality, a minimum employee threshold will apply to each reported group, although the final threshold (provisionally 10 employees) is still under development.
Disclosure of ethnicity will be voluntary for employees in any diversity questionnaires and employers must provide a ‘prefer not to say’ option. Low disclosure rates may limit the extent to which employers are able to report.
Disability reporting
Disability pay gap reporting will adopt a binary approach, comparing disabled and non-disabled employees, using the definition of disability set out in section 6 of the Equality Act 2010. A person is disabled for the purposes of section 6 if they suffer from a long-term physical or mental impairment that has a substantial, adverse effect on their ability to carry out day-to-day activities. (An impairment is considered long-term if it has lasted, or is likely to last, for at least 12 months.) As with ethnicity, disclosure will be voluntary for employees in any diversity questionnaires and employers must provide a ‘prefer not to say’ option.
A minimum employee threshold will also apply to disability comparisons, again to safeguard anonymity. The government has indicated that more granular reporting (for example by impairment type) may be encouraged on a voluntary basis in future, but will not be mandatory at this stage.
Workforce composition and declaration rates
In addition to pay gap figures, employers will be required to report the overall composition of their workforce by ethnicity and disability, as well as declaration rates showing the proportion of employees who did not disclose their ethnicity or disability status.
The government views this contextual data as essential to interpreting pay gaps accurately and to discouraging perverse incentives, such as avoiding recruitment of under‑represented groups. Specific guidance will be issued on improving declaration rates and building employee trust.
Mandatory action plans
Large employers will be required to publish action plans setting out the steps they are taking to address any identified ethnicity or disability pay gaps. These plans are intended to ensure reporting leads to change, rather than being a purely statistical exercise.
The government intends to harmonise action plans across gender, ethnicity and disability, enabling employers to produce a single equality action plan where appropriate. Further detail on monitoring and accountability will be provided in due course.
Reporting dates, publication and enforcement
Ethnicity and disability pay gap reporting will use the same snapshot dates, reporting deadlines and online reporting service as gender pay gap reporting. Enforcement will mirror that applicable to the existing gender pay gap reporting regime and will sit with the Equality and Human Rights Commission.
What does this mean for employers?
Although legislation is still in development, the government's consultation response provides a clear indication of the direction of travel. Employers should begin preparing by reviewing HR and payroll systems to assess their ability to collect the relevant data, considering how ethnicity and disability data is currently requested and stored, planning internal communications to support the voluntary disclosure of the data, and anticipating the need for evidence‑based action plans. Early preparation should help to reduce compliance risk and reputational exposure once mandatory reporting comes into force.
Consultation on mandatory ethnicity and disability pay gap reporting: government response
