With mandatory ethnicity and disability pay gap reporting on the horizon for large employers, Kavitha Sivasubramaniam talks to employers already reporting theirs, and the potential impact of its introduction.

Since 2017, organisations with 250 or more employees have been required by law to report their gender pay gap in a move that has been broadly welcomed across the UK. Last year, more than 10,400 companies reported their data.

By comparison, however, progress towards implementing mandatory ethnicity and disability pay gap reporting has been painstakingly slow. Plans to introduce it were first mooted in the Conservatives’ 2017 election manifesto, but governments since then have decided against it.

Now, several years on, the ‘Next Steps’ document, published alongside the Employment Rights Bill, confirmed the current Labour government’s intentions to publish and consult on a draft Equality (Race and Disability) Bill to cover the extension of equal pay rights. It will also extend pay gap reporting obligations, protect equal pay rights during outsourcing, and implement a new regulatory and enforcement unit for equal pay.

Addressing inequalities

Importantly, employers with more than 250 staff will be legally required to publish their ethnicity and disability pay gaps to mirror gender pay gap reporting. Alongside these requirements, the draft bill aims to address inequality for ethnic minorities and disabled people, giving these individuals a formal right to fair pay.

According to figures from the Office for National Statistics (ONS) report, Disability pay gaps in the UK: 2014 to 2023, the pay gap between disabled and non-disabled employees stands at 12.7% and has remained relatively stable since 2014.

Disability and ethnicity pay gaps

Disabled workers lose out on £4.3k a year due to pay gap

Disability pay gaps remain stable

Ethnicity pay gap reporting: a global challenge?

Meanwhile, TUC figures published in November 2024 showed non-disabled workers earn around £2.35 an hour more than disabled staff.

Debating the issue of mandatory reporting in Parliament last year, Labour’s Baroness Thornton said: “Requiring large companies to report on their ethnicity and disability gaps is a common-sense way to begin the process of tackling these glaring inequalities.”

Fazilet Hadi, head of policy at Disability Rights UK, highlighted that there are likely to be more disabled people in the workforce as people stay in work longer.

“If you measure and analyse what’s going on you can then take action based on your findings and take action to put things right, if necessary,” she says. “Employers must create an open atmosphere where people feel comfortable highlighting any reasonable adjustments they may need. They should create a culture where monitoring is seen as a tool for improvement.”

Effectively using data

The CIPD has called for the introduction of mandatory ethnicity pay gap reporting since 2021, and its recent report, Pay, performance and transparency 2024, revealed that interest is growing. It found 40% of large organisations were choosing to carry out an ethnicity pay gap analysis, while 27% were reporting their disability pay gap.

Lutfur Ali, senior policy and practice adviser for equity, diversity and inclusion at the CIPD, says: “Effectively using pay data as part of an EDI strategy can help create a more inclusive, fair, and motivated workplace, as pay disparities are a key indicator of inequality (including structural) and bias.”

But the collection of sensitive ethnicity and disability data is not as straightforward as gathering gender data, particularly as employees have to provide permission for their employers to hold this information. As a result, employers are often having to use incomplete data to calculate related pay gaps.

Many organisations rely on employees to voluntarily provide ethnicity or disability information and although they will have 100% completion rates for gender, it will be significantly less for ethnicity, and likely to be even lower for other diversity metrics, including disability.

Affordable housing provider Vivid, which has more than 1,000 employees across the UK, has voluntarily reported its ethnicity pay gap for the past five years.

Its director of people, Susan Noone, says: “Employees are more comfortable declaring their gender than they are declaring their ethnicity and or disability. Particularly with the latter where they fear it might have unintended consequences. We struggle often to explain to staff that we use the data for monitoring only and do not share it with those who are necessarily making internal decisions around promotion or hiring.”

The reason for pay gaps can be multifactorial; gender and, as identified by the government through its intention to introduce further reporting, ethnicity and disability are some such factors. Social mobility may be another one, explains Sam Greenhalgh, partner in the employment team at law firm Birketts.

“Whichever factor is used to measure pay gaps, the issue is often the method for calculating the pay gap (for whatever characteristic) and the steps the organisation takes to address it,” he says. “It will be interesting whether any meaningful data or cultural shift will occur if ethnicity and disability pay gap reporting is introduced given such reporting will rely on categorisation and disclosure from employees which they can often be reluctant to give.”

Aviva has published ethnicity pay gap data since 2021, and is hugely supportive of ethnicity pay gap reporting. Its diversity equity inclusion and executive search director Jonny Briggs says: “Gathering diversity insights from employees helps organisations provide support to all colleagues and learn how, where and when interventions may need to be made. Accurate data is a vital part of this journey.”

Employees are more comfortable declaring their gender than they are declaring their ethnicity and or disability. Particularly with the latter where they fear it might have unintended consequences” – Susan Noone, Vivid

The company is therefore continuing to work towards increasing completion rates across all diversity characteristic data to better understand its makeup and inform data-backed decisions and action plans, he explains.

Briggs says: “No matter what size an organisation is, analysing data and being transparent with colleagues about the diversity of the workforce is a key step in driving meaningful change and shaping a fairer, more inclusive workplace.”

The business case

Insurance group QBE decided to start reporting its ethnicity pay gap back in 2020 to be open and transparent, hold itself accountable and to do the right thing, explains Nikki Lees, people director for QBE International.

She says: “Although it’s not a mandatory requirement, we believe publishing this data alongside our annual gender pay gap report demonstrates our commitment to making QBE a more inclusive and diverse workplace.”

Findings from the McGregor-Smith Review in 2017 suggest that addressing the ethnicity pay gap is beneficial for both business and the economy. Organisations with diverse ethnic and cultural backgrounds may experience up to a 36% increase in profitability, and tackling racial disparities in the labour market could enhance the UK economy by £24 billion annually.

Aviva established six employee resource groups, bringing together a wide range of support networks from across the company, with its Aviva Ability community aiming to drive accessibility for everyone.

In its most recent colleague listening survey, 91% would recommend the company as a great place to work, and its people leaders score highly on supporting inclusion, wellbeing and helping people see how they can progress their career.

But it’s not just the big businesses that have a lot to gain from reporting their ethnicity and disability pay gaps.

Ali says: “Smaller organisations, though not legally required to report, should still analyse their pay data. Understanding disparities allows for understanding wider inequalities and to take proactive action, enhancing employee engagement, attracting and retaining diverse talent, and preparing for potential future regulations.”

Hadi agrees that a fair and inclusive pay strategy benefits businesses of all sizes.

“Smaller employers may not have the same processes, policies and procedures as big employers but they can still build a supportive environment, establish an open culture and make reasonable adjustments,” she adds.

Action points

In order to address existing pay gaps highlighted in its report, QBE has committed to actively reviewing processes and practices across the employee life cycle to reduce opportunities for systemic bias, as well as embedding inclusive recruitment principles to ensure a fair and inclusive approach to hiring and educating, and raising awareness about its existing pay gaps to hold people to account on their responsibility to reduce its pay gaps.

“Pay gaps can be easily misinterpreted so it’s important to tell the narrative alongside this so people can understand what’s driving any gaps. This is more about representation than pay equity,” Lees explains. “Last year we also introduced new sense of belonging targets as we know equality of experience is just as important as representation levels.”

According to Noone, the data findings have led to Vivid changing some recruitment processes, especially in advertising, particularly for middle manager and senior leadership roles. It actively encourages recruiters to aim for diversity in ethnicity as a minimum requirement.

What initially might feel like a huge challenge becomes less of one over time if small actions are consistently and regularly taken, she insists.

“Once any gaps are identified, be ambitious about what you can achieve as if you aim high you might be very surprised how much you can achieve,” Noone adds.

The data needs to be accompanied by a narrative to explain any disparities and an action plan to tackle these and measure progress, advises Ali.

He says: “The action plan should not just focus on improving diversity, especially at senior levels, but also on creating inclusive workplace cultures that promote and deliver equality of outcomes for all. This includes removing inequalities of access, opportunity, training and progression and empowering people that are marginalised and discriminated against to thrive.”

By publishing ethnicity pay data, employers can maintain accountability and ensure they stick to their organisational objectives. Even if they fall short of their targets, this transparency can enhance their brand image by displaying a willingness to acknowledge areas for improvement and a commitment to progress,” says Greenhalgh.

In advance of the introduction of mandatory reporting, he suggests employers consider improving existing data collection for accurate and comprehensive results, for example, including pay, bonuses, and working hours. Incorporating social mobility frames and the environment, industry and sector that they sit in is critical.

Greenhalgh says: “Employers need to understand themselves and how the data that is produced reflects, does not reflect or is influenced by these factors. The data can be used to produce actionable plans. Although this requires significant upfront work, it sets the foundation for meaningful progress.”

Mandatory reporting non-compliance could result in fines, legal actions and reputational harm, while the Equality and Human Rights Commission may enforce regulations and impose penalties, he warns.

“For companies committed to diversity and inclusion, engaging with these proposals will be essential, not only from the perspective of legal obligations but also stakeholder investment, to meet client demands and to retain and attract talent,” Greenhalgh concludes.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

Email(Required) OptOut From time to time, we will send you emails about selected products, events and services from Personnel Today and OHW+ - but you can choose to opt-out at any time. If you do not wish to receive these emails, please tick this box.NameThis field is for validation purposes and should be left unchanged.

Δdocument.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() );

/* = 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_129');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_129').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_129').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_129').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_129').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_129').val();gformInitSpinner( 129, 'https://www.personneltoday.com/wp-content/plugins/gravityforms/images/spinner.svg', true );jQuery(document).trigger('gform_page_loaded', [129, current_page]);window['gf_submitting_129'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}jQuery('#gform_wrapper_129').replaceWith(confirmation_content);jQuery(document).trigger('gform_confirmation_loaded', [129]);window['gf_submitting_129'] = false;wp.a11y.speak(jQuery('#gform_confirmation_message_129').text());}else{jQuery('#gform_129').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger("gform_pre_post_render", [{ formId: "129", currentPage: "current_page", abort: function() { this.preventDefault(); } }]); if (event && event.defaultPrevented) { return; } const gformWrapperDiv = document.getElementById( "gform_wrapper_129" ); if ( gformWrapperDiv ) { const visibilitySpan = document.createElement( "span" ); visibilitySpan.id = "gform_visibility_test_129"; gformWrapperDiv.insertAdjacentElement( "afterend", visibilitySpan ); } const visibilityTestDiv = document.getElementById( "gform_visibility_test_129" ); let postRenderFired = false; function triggerPostRender() { if ( postRenderFired ) { return; } postRenderFired = true; jQuery( document ).trigger( 'gform_post_render', [129, current_page] ); gform.utils.trigger( { event: 'gform/postRender', native: false, data: { formId: 129, currentPage: current_page } } ); if ( visibilityTestDiv ) { visibilityTestDiv.parentNode.removeChild( visibilityTestDiv ); } } function debounce( func, wait, immediate ) { var timeout; return function() { var context = this, args = arguments; var later = function() { timeout = null; if ( !immediate ) func.apply( context, args ); }; var callNow = immediate && !timeout; clearTimeout( timeout ); timeout = setTimeout( later, wait ); if ( callNow ) func.apply( context, args ); }; } const debouncedTriggerPostRender = debounce( function() { triggerPostRender(); }, 200 ); if ( visibilityTestDiv && visibilityTestDiv.offsetParent === null ) { const observer = new MutationObserver( ( mutations ) => { mutations.forEach( ( mutation ) => { if ( mutation.type === 'attributes' && visibilityTestDiv.offsetParent !== null ) { debouncedTriggerPostRender(); observer.disconnect(); } }); }); observer.observe( document.body, { attributes: true, childList: false, subtree: true, attributeFilter: [ 'style', 'class' ], }); } else { triggerPostRender(); } } );} ); /* ]]> */

 

Diversity and inclusion opportunities on Personnel Today

Browse more Diversity and inclusion jobs