For the past couple of months, an Equality Bill consultation has been underway seeking views on how to introduce mandatory ethnicity and disability pay reporting for large employers (those with 250 or more employees). Responses will help shape proposals to be included in the forthcoming Equality (Race and Disability) Bill, which was announced in the King’s Speech in July 2024.
The consultation ended at 23:59 on 10th June 2025, and Innecto consultant Cathryn Edmondson takes a close look at some of the proposed measures.
Similarities to Gender Pay Gap (GPG) Reporting
The proposal will use the same six key measures used in Gender Pay Gap Reporting:
- median and mean pay gap
- median and mean bonus pay gap
- quartile distribution and bonus proportions
- the same snapshot date deadline
- same employee number threshold
- enforced by the Equality and Human Rights Commission
Innecto’s expert opinion: While we would like to see the analysis widened to make for more meaningful action, and the threshold lowered, we recognise that aligning with Gender Pay initially makes sense as organisations are now familiar with the framework. However, using the same deadline for snapshot (and reporting) will increase workload significantly. Given most organisations report at the last minute, they may well need to start the whole process earlier.
How it differs from GPG Reporting
- Action Plans
Actions Plans are not currently included in the Gender Pay Gap legislation, but the need for them is included within the Employment Rights bill going through parliament. So, if this bill is passed it will add weight to the argument for Action Plans also being included within Ethnicity and Disability Pay Gap Reporting. Gender Pay Gap reporting didn’t include Action Plans from the outset, so the government may decide to phase the legislation.
Innecto’s expert opinion: Despite Gender Pay Gap Reporting being in place since 2017, the gender pay gap has not closed as quickly as hoped, so including Action Plans for Ethnicity and Disability Pay Gap Reporting from the outset would be a positive step towards holding businesses accountable for driving tangible change. However, the proposed six measures to be reported on (above) are not granular enough to really understand what is driving the gap, so Action Plans may not carry the detail they need. For Action Plans to be targeted and meaningful, businesses will need to dive deeper into pay gap analysis.
- Additional reporting for public bodies
To improve transparency and accountability, the question is being asked whether public bodies should also report:
- Ethnicity / disability pay differences by grade or salary band
- Data relating to recruitment, retention and progression by ethnicity / disability
Innecto’s expert opinion: The proposed reporting measures only allow limited insight into pay gap drivers, so including pay differences by grade or salary band would be a step towards better insight and greater accountability. We would advocate for all organisations reporting on this, but the practicalities are difficult. Many businesses have the kind of pay and grading structures necessary, but they are not mandatory. If this kind of reporting were made optional, and enough organisations did it voluntarily, it might create pressure for others to follow suit.
- Include overall breakdown of workforce by ethnicity and disability and data relating to recruitment, retention and progression by ethnicity / disability
Innecto’s expert opinion: Reporting on ethnicity and disability distribution, and on data relating to recruitment, retention and progression, is another way to hold organisations to account regarding diversity. It also enables businesses to show a greater range of diversity than pay gap reporting, or to paint a fuller more nuanced picture. For example, while increased diversity at junior levels might show unfavourably in pay gap reporting, it can impact more positively in the long term if these employees progress through the organisation. Note also that low disclosure rates can skew pay gap analysis. As above, this could be included as an optional reporting element for organisations that are not public bodies.
- Ethnicity and Disability categorisation
The proposal encourages reporting against multiple categories for ethnicity but recognises that this adds complexity. Therefore, the bill proposes that while only binary reporting (white / ethnic minorities, disabled / non-disabled) will be mandatory, more granular categorisation will be encouraged.
Categories will need 10 employees to enable reporting without compromising anonymity. This means categories are likely to be combined. Following guidance from the ONS, there are three options for binary categorisation:
- White British employees and all other ethnic minority groups combined
- White employees and all other ethnic minority groups combined (if less than 10 White British employees)
- Largest ethnic groups and all other ethnic minority groups combined (if less than 10 White employees)
Innecto’s expert opinion: This is a fine balance, and potentially a delicate one to manage. Grouping minorities together is often needed because there aren’t enough people in each category to make analysis meaningful, but binary reporting does diminish the purpose of the reporting, loses nuance and makes the end product less insightful. It may be necessary while businesses get to grips with the new legislation, but it also carries with it some obvious sensitivities when it comes to how different people identify, and the complex way organisations would need to manage that. The same goes with disability reporting – it only tells us what people have categorised themselves as, not how they might be defined objectively, so any reporting should only act as an entry point for further analysis and conversation around pay. Finally, consider data collection - it’s possible that companies will not have collected data in line with these categories, so more work would be needed to gather this information.
Get proactive: Steps businesses can take now
While the consultation is only just closing, it does seem likely that Ethnicity and Disability Pay Gap reporting will be introduced, so there is work businesses can do to be prepared. Do not underestimate how much time it will take to gather data and communicate correctly around it. Before employees feel comfortable sharing their data, businesses may need to build trust around what that data will be used for. Consider too that certain employees might fall under the definition of ‘disabled’ while never having considering it a possibility.
We can also help businesses run this kind of analysis ahead of any new legislation. This brings a crucial opportunity to understand any existing ethnicity and disability pay gaps: what is driving them and how we can take steps to narrow them.
