In brief
The government published its response to the consultation on mandatory disability and ethnicity pay gap reporting on 25 March 2026, laying the foundations for the reporting requirements that will be implemented by amendments to the Equality Act 2010 (“Equality Act”).
The disability and ethnicity pay gap reporting regime will apply to large employers only (>250 employees in Great Britain) and will follow the existing gender pay gap reporting framework. Employers will also be required to provide an overview of their workforce by ethnicity and disability and details of declaration rates for these categories of data.
While the details and timeline of the changes are unclear, employers should take steps now so they are ready to comply when the requirements become law. The reporting framework relies on employees being willing to share information with their employer about their ethnicity and disability, which requires a high degree of trust in relation to how that information is used.
Recommended actions
Now
- Focus on building and maintaining a culture of trust with employees to increase their confidence in disclosing data to you.
In the future
- Plan an employee communications strategy to explain the purpose of the data collection and how it will be used.
- Determine who will have access to employees’ disclosures, having regard to data privacy and employment law obligations.
- Consider whether additional data protection safeguards are required to remain compliant with UK General Data Protection Regulation (UK GDPR) requirements.
In more detail
New reporting requirements
The government will likely require the same six headline measures currently reported for gender pay gap purposes (mean and median hourly pay gap; mean and median bonus pay gap; bonus participation; and pay quartiles) to be reported in respect of disability and ethnicity. In addition, employers will have to publish workforce reporting information, including the overall composition of their workforce by disability and ethnicity and the proportion of employees who did not state their disability or ethnicity status. The latter is intended to help readers navigate the reported figures where disclosure rates are low.
The government’s response sets out the categories to be used for the new reporting regime. Disability pay gap reporting will be based on a binary comparison (disabled vs. non-disabled, based on the Equality Act’s definition of disability), whereas ethnicity reporting will be more granular.
For data collection, employees will be presented with the 19 ethnicity classifications used in the Government Statistical Service’s (GSS) harmonised ethnicity standard. Employers will then report the ‘headline’ ethnicity pay gap based on a binary comparison (white vs. non-white), alongside more detailed comparisons between five pre-defined ethnic groups that follow the Office for National Statistics’ (ONS) guidance. For both disability and ethnicity reporting, it is believed that a minimum of 10 employees must be in each group for the comparison to be reported, to maintain their anonymity although the government has said it will work with the Information Commissioner’s Office to explore the most appropriate minimum threshold.
Employers will also be required to produce an action plan of how they will improve workplace equality in respect of both disability and ethnicity. This aligns with the requirement (from spring 2027 onwards) for large employers to produce a gender pay gap action plan.
Although these new legal requirements will add complexity for employers, it is important to recognise that pay gap reporting will bring with it several practical benefits. The collection of high-quality data will enable employers to build up an accurate picture of how pay and bonuses are distributed across the workforce, allowing them to respond accordingly. Additionally, a clear narrative alongside the reported figures will help employers communicate transparently with current and prospective employees and strengthen their reputation for being fair and inclusive, and employers may in particular want to draw out instances where a lack of data may be giving a misleading impression.
Practical considerations
Representativeness of data collected
Pay gap reporting will only be as meaningful as the data underpinning it. Unlike data used for gender pay reporting (which employers typically hold for payroll and HR purposes), disability and ethnicity data is often not held, and in any event, employees will not be required by law to disclose it. Low disclosure rates therefore risk producing figures that are not representative of the wider workforce and may be skewed if “prefer not to say” responses are disproportionately concentrated in particular groups.
As disability data collection requires employees to self-identify as either disabled or non-disabled based on the complex statutory definition, this data is particularly vulnerable to inaccuracies and inconsistent classification. Employers should also recognise that progressive and fluctuating conditions are caught, meaning the data may need to be periodically validated to ensure it is accurate on the reporting date.
Employers will also need to factor in the minimum reporting threshold of 10 employees per group, which may prevent reporting for certain groups altogether. To ensure that the data published is representative and reliable, employers will likely need a focused communications approach to build trust in why the data is being collected, how it will be used and how it will be protected.
Confidentiality and data protection
Although the proposed regime includes safeguards (including the minimum group-size threshold), employers will need to manage the risk that ethnicity or disability data could nonetheless be linked back to individuals, particularly where there are small numbers of employees in a particular category. This risk is heightened where reporting becomes more detailed (e.g., for ethnicity reporting), because breaking data down into smaller comparison groups can make it easier to draw conclusions about individual employees’ characteristics and pay.
If employees are concerned that published figures could allow inferences to be drawn about their ethnicity or disability status (or their pay), this may undermine trust and reduce their willingness to disclose in the future. It may also crystallise potential claims, noting that this type of reporting does not distinguish between the roles being carried out by the relevant population (e.g., in terms of skills, effort, responsibility and working conditions) and other factors influencing pay, such as performance.
In addition, where the published data is capable of being linked back to individuals (directly or indirectly), this can create a data protection risk for employers, as the information may not be truly anonymised and may therefore amount to personal data, requiring additional safeguards to remain UK GDPR-compliant. These may include implementing appropriate data security measures, carrying out Data Protection Impact Assessments, and appointing a data protection officer, where necessary.
Knowledge risk
A further practical issue for employers is the potential “knowledge risk” that can arise from collecting disability data for pay gap reporting. In practice, disclosures will likely be made to a central HR function, but employers may then face questions about whether this amounts to actual or constructive knowledge of an employee’s disability for Equality Act purposes. Specifically, employers could be required to make reasonable adjustments based on this knowledge, and failure to do so may increase their exposure to disability discrimination claims. Employers should therefore consider carefully how disability disclosures are handled, who has access to the data, and what (if anything) is communicated to managers.
For advice or to discuss what this means for you and your business, please get in touch with your usual Baker McKenzie contact.
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Lily Wallis, Trainee Solicitor, has contributed to this legal update.