The UK government launched a consultation in March, which closed on 10 June, that looked at introducing mandatory ethnicity and disability pay gap reporting for certain employers. The consultation applies to large employers and large public bodies which are defined are those with 250 or more employees. The responses to this consultation will be used to inform the government’s drafting of the proposed Equality (Race and Disability) Bill and ensure that the legislation gives employers a clear framework on what is required of them.
Since 2017, large employers have been required to report their gender pay gap data in a bid to create greater transparency. The government is now proposing to replicate his framework for ethnicity and disability pay gaps and will mandate the Equality and Human Rights Commission, which already enforces the gender pay gap reporting, to do the same for ethnic and disability pay gaps.
Under the proposals, the following will need to be reported: mean differences in average hourly pay; median differences in average hourly pay; pay quarters – the percentage of employees in four equally-sized groups, ranked from highest to lowest hourly pay; mean differences in bonus pay; median differences in bonus pay; the percentage of employees receiving bonus pay; the overall breakdown of the workforce by ethnicity and disability; and the percentage of employees who did not disclose their personal data on ethnicity or disability.
Views have also been sought on whether employers should have to produce action plans for ethnicity and disability pay gaps, as a similar proposal for gender pay gap action plans is currently included in the Employment Rights Bill. This would provide employers with an opportunity to explain the reasons for any pay gaps and the steps they are taking to address them.
In relation to ethnicity pay gap reporting specifically, the government has proposed that the minimum threshold should be 10 employees in any ethnic group being analysed in terms of pay. If there are fewer than 10 employees in any of the classifications, employers should combine ethnic groups together, following the guidance on ethnicity data from the Office for National Statistics to ensure groupings are as comparable as possible. Where there are smaller numbers of employees in different ethnic groups, the government has advised that employers report a binary classification, for example, reporting the comparison between the largest ethnic group in the organisation and all other groups combined.
Again, in terms of disability reporting, there should be a minimum of 10 employees in each group being compared. If there are less than 10 employees with disabilities, it is presumed that the employer will still be required to file a report explaining that they cannot publish a disability pay gap to reduce the risk of individuals becoming identifiable.
The introduction of mandatory ethnicity and disability pay gap reporting will be a major change for UK employers, because many will not have been collecting and analysing such data to date. Employers may be concerned not only about the onerous tasks being asked of them, but also about the potential triggering liabilities and responsibilities if employees come forward and disclose that they consider themselves to be disabled, when they have not previously done so.
Christopher Hitchins is an employment law partner and Maya Sterrie is a trainee solicitor at Katten Muchin Rosenman
