The Government will bring in legislation to compel employers to publish details on ethnicity and disability pay gaps, alongside current gender pay reporting.
In response to a consultation on this issue the government said it was moving forward with primary legislation, with a view to introducing these new reporting requirements from Spring 2027.
The new rules will apply to organisations with 250 or more employees, as well as public bodies, and will broadly mirror the existing gender pay gap reporting regime. The government has also signalled that it wants smaller employers to report on a voluntary basis.
Under the proposals, employers will be required to disclose the ethnic and disability composition of their workforce alongside pay gap data. In addition, organisations will need to produce action plans setting out how they intend to address disparities across gender, ethnicity and disability.
For ethnicity reporting, data collection must follow the Government Statistical Service’s harmonised ethnicity standards, with results aggregated in line with Office for National Statistics guidance. Employers will be required to report pay gaps using at least a binary comparison, with a minimum of 10 employees in each group.
Similarly, disability pay gap reporting will adopt a binary framework — comparing disabled and non-disabled employees — based on the Equality Act 2010 definition of disability, again with a minimum threshold of 10 employees per group.
The government said it will now move to develop primary legislation alongside supporting regulations, which will set out the detailed reporting requirements needed to implement the policy.
It said there were almost 850 responses to its consultation, from employers, industry bodies and advocacy groups, with broad support for mandatory reporting.
Industry experts say the changes will significantly increase the complexity of pay gap reporting and require a more sophisticated approach to workforce analytics.
Melissa Blissett, pay gap analytics lead at Barnett Waddingham, said: “This will transform gender pay gap reporting into a requirement for organisations to publish a full equality action plan.
“Data requirements are no longer two-dimensional — it’s not just male versus female. Organisations will face the challenge of analysing data across multiple ethnicities and considering how to report intersectionally, for example comparing the gender pay gap segmented by ethnicity.
“Challenges will arise around data collection, particularly for disability, where individuals may be less willing to disclose. Deeper data analysis will be essential to enable organisations to provide a data-led explanation and tell their diversity story with clarity and confidence.”
For pensions and benefits professionals, the new framework is likely to sharpen the focus on inclusive reward strategies, data governance and employee engagement, particularly as employers seek to align pay gap reporting with wider wellbeing and DEI objectives.