UK: Ethnicity and Disability Pay Gap Reporting

Authors: Robert Hill, Corinna Harris, Sophie Jackson, & Charlotte Stern

The UK government has confirmed it plans to introduce mandatory ethnicity and disability pay gap reporting obligations for large employers, although the timeline for implementation is not yet clear.

Ethnicity and disability pay gap reporting measures differences in average pay between ethnic groups and between disabled and non-disabled employees. Employees will self-report their ethnicity and disability status, but there must be “prefer not to say option” for employees who choose not to.

In its response to last year’s consultation, the government has indicated that employers with 250 or more employees will be required to publish their ethnicity and disability pay gap data by reference broadly to the same six measures as they currently use for gender pay gap reporting. Those six measures are pay quarters, the mean and median differences in average hourly pay, the mean and median differences in bonus pay, and the percentage of employees receiving bonus pay. Employers will also be required to publish workforce breakdowns by ethnicity and disability, non-disclosure rates and action plans to tackle any pay gaps.

Employers would be required to use data from a ‘snapshot date’ of 5 April each year and report their gaps within 12 months – by 4 April the following year. Employers below the threshold will be encouraged to report voluntarily. Ethnicity reporting will require both binary and broader group comparisons. Disability reporting will be based on a binary comparison only (ie disabled v non-disabled gap data). The Equality Act 2010 definition of “disability” will be used as the basis of identifying disabled employees. This means that a person is disabled if they have a physical or a mental condition that has a substantial and long-term impact on their ability to do normal day to day activities, with certain medical conditions deemed automatically to be disabilities.

We are expecting further details of the new obligations on employers and details of the timing for implementation to be included in a draft Equality (Race and Disability) Bill, and the supporting regulations and government guidance.

The government has indicated that it will provide detailed guidance on how the calculations should be carried out.

Key Action Points for Human Resources and In-house Counsel

Although large employers are already familiar with gender pay gap reporting, there is added complexity in relation to ethnicity and disability data. Ethnicity and disability data is often incomplete, categorised inconsistently and based on self-identification and voluntary disclosure. This gives rise to practical challenges for employers around data quality, interpretation and disclosure rates.