BREAKING BARRIERS
Breaking Barriers: The Future of Pay Gap Transparency
Since 2017, UK employers with 250 or more employees have been required to publish annual gender pay gap data. This regime has helped drive greater transparency and prompted many employers to revisit pay, progression, and representation in their organisations. Now, the Government is consulting on whether similar obligations should apply in relation to ethnicity and disability pay gaps, as part of a wider effort to improve workforce equality.
On 14 March 2025, the Government launched a consultation on the Equality (Race and Disability) Bill, which includes proposals to introduce mandatory pay gap reporting for ethnicity and disability. The consultation seeks views from employers, employees, and other stakeholders on how these regimes might work in practice and what the implications might be.
The Proposals
The Government is consulting on:
Mandatory ethnicity pay gap reporting – building on its earlier 2023 guidance and aiming to improve consistency and comparability across employers.
Mandatory disability pay gap reporting – a new initiative, raising specific challenges around employee self-identification and data collection.
Race reporting requirements – requiring employers to collect and publish anonymised workforce data by ethnic group, complementing pay data and aiming to highlight broader representation issues.
The proposals are likely to apply initially to large employers, though the consultation leaves open how “large” should be defined. Currently, gender pay gap reporting applies to employers with 250 or more employees, and similar thresholds are being considered here.
Why Now?
The consultation responds to long-standing concerns that progress on workplace equality is inconsistent and difficult to measure. While many employers voluntarily report ethnicity and disability data, uptake remains patchy, and reporting approaches vary widely.
Bringing ethnicity and disability pay gap reporting onto a statutory footing would allow for greater standardisation, improved data quality, and public accountability. It would also help investors, consumers, and employees better understand how organisations are addressing systemic inequality.
Challenges for Employers
Pay gap reporting in these areas is not without difficulty. Ethnicity and disability are self-declared characteristics, and many employers find that declaration rates are low or inconsistent. Concerns around privacy, stigma, and the use of data can lead to under-reporting, particularly among disabled employees.
The consultation explores how employers can build trust and encourage disclosure, and whether any safeguards or exemptions are needed; for example, in cases where reporting would risk identifying individuals or produce misleading statistics due to small sample sizes.
For many organisations, particularly small and medium-sized businesses, these requirements could be resource-intensive. There may be a need for new data systems, staff training, updated policies, and communications campaigns to ensure accurate and meaningful reporting.
“Employers, especially those with over 250 staff, should start reviewing their data readiness now and consider contributing to the consultation to help shape a fair and practical reporting regime.”
Opportunities for Positive Change
Despite the challenges, many employers will see this as an opportunity to formalise existing work on diversity, equity, and inclusion (DEI). Gathering pay data by ethnicity and disability can help identify and address structural barriers, support targeted interventions, and demonstrate commitment to transparency.
Employers who already publish voluntary data, often in line with ESG or public sector frameworks, will be well placed to help shape future reporting standards. Others may wish to begin preparing by reviewing internal data collection practices and employee engagement strategies.
Race Reporting: The Next Step?
Alongside pay gap reporting, the Government is also seeking views on race reporting, requiring employers to publish anonymised data on the ethnic composition of their workforce. This goes beyond pay and is intended to support broader action on representation and progression.
The consultation explores how race data collection should be structured to ensure meaningful insights while protecting anonymity and building trust. Employers who already engage in voluntary ethnicity workforce reporting may wish to provide input on how standardisation could improve comparability across industries.
Enforcement and Compliance
The consultation also considers compliance mechanisms, including whether enforcement measures should be introduced alongside reporting requirements. While the gender pay gap reporting regime does not impose financial penalties, there may be new accountability measures to ensure employers act on the findings from ethnicity and disability pay gap data.
How to Respond
The Government is inviting views on a wide range of questions, including:
What level of detail is appropriate for ethnicity and disability categories?
How can employers collect data in a way that protects anonymity and builds trust?
Should thresholds and obligations be aligned with the existing gender pay gap regime?
What role should enforcement and guidance play in supporting compliance?
The consultation is open until 10 June 2025, and employers, HR professionals, and diversity leads are encouraged to participate, especially those already reporting or planning to improve their DEI data practices. Responses can be submitted online via the UK Government website.
In Summary
Mandatory ethnicity and disability pay gap reporting would mark a significant expansion of employers’ equality obligations. While data challenges remain, the move signals a clear policy direction and a continued emphasis on transparency in workplace outcomes. Employers, especially those with over 250 staff, should start reviewing their data readiness now and consider contributing to the consultation to help shape a fair and practical reporting regime.
If you would like advice on responding to the consultation or preparing for future pay gap reporting obligations, our team would be happy to assist.