UK: Government releases consultation

in short

The government has published a consultation seeking comments on how to introduce mandatory racial and disability pay reports to employers with 250 or more employees. The consultation will end on June 10, 2025.

• The government promised in its 2024 Labor Declaration to introduce race and gap reports to large employers in the King’s speech in July 2024.
• The consultation aims to make a point of view on how these measures should be implemented and proposes a framework similar to the gender pay gap report that can be used as the basis for new obligations. Therefore, many proposals are not surprising to employers.
• However, the consultation recognizes data collection and other differences regarding the purpose of reporting on race and disability pay gaps. Employers should ask the employee to report their race and opt out.
• Responses to consultations will be used to shape future proposals to be included in the upcoming Equality (Race and Disability) Act.
• The consultation will end on June 10, 2025. If you want to respond, you can do it here.
• For more information or to discuss what this means for your business, please contact your usual Baker McKenzie contact.

Last year’s Labor election manifesto was followed by a new government speech by the new July 2024 and promised legislation to provide mandatory racial and disability pay gap reports for large employers (defined as those with 250 or more employees – those who also require gender pay reports to be published annually).

This consultation aims to provide a perspective on how these measures are implemented and draw on the 2021-22 workforce report consultation.

The answers to this consultation will be used to shape proposals in the upcoming Equality (Race and Disability) Act. There will also be a call for evidence to inform other parts of the bill, including providing equal pay protection to ethnic minorities and persons with disabilities.

Scope of obligation

Despite ongoing discussions with the Government of Scotland and Wales, the government’s intention is that a report on race and disability wage gap should be necessary for large (250 or more employees) of the private or voluntary sectors that are mandatory (250 or more employees) in Great Britain (England, Wales and Scotland, only England, only England, only England, only England, only England), as well as large British public sector agencies, as well as certain public institutions throughout the Great Britain.

Payment gap calculation

The government recommends using the same compensation gap measures as currently applicable to gender compensation reports. This means that the employer must report

• Average difference in average hourly wages
• Median difference in average hourly wages
• Salary quarter – 4 employees percentages of equal size groups, from highest to lowest pay ranking
• Average difference in bonus payments
• Median difference in bonus wages
• The percentage of employees who receive the bonus is paid for the relevant protected characteristics.

Additionally, employers will be required to report an overall breakdown of the workforce due to race and disability, as well as the percentage of employees who have not disclosed this data to give compensation report statistics.

Action Plan

An action plan can help employers determine why there is a salary gap and how they plan to end their salary. An effective action plan should include clear specific goals and time frames for completion.

The former government consulted on the workforce report for people with disabilities. The results of this consultation highlight the need to support initiatives to increase workplace inequality, with the current government recommending that the racial and disability pay gap action plan must be mandatory among scope employers.

Date, deadline and law enforcement

These will be the same as the gender pay gap report: for private sector employers, the snapshot dates of April 5 each year and the requirements for reporting data before April 4 the following year. EHRC’s current gender pay gap implementation policy will be expanded to race and paid gap reports.

Race data collection

There are two methods for ethnic data collection and reporting: binary and non-binary basis. Non-binary is preferred because it can determine salary gaps between races with higher accuracy and more efficient solutions to reduce gaps.

Employees should be asked to use detailed racial classifications used by the government to report their own race (e.g., in the 2021 UK Census). These do vary in the UK countries, so employers whose employees are distributed across the UK need to carefully organize the data.

The government encourages employers to publish salary data in as many ethnic groups as possible, but recommends at least 10 employees in any ethnic group analyzed. To do this, it may be necessary to add some ethnic groups together to reach a total of 10 or more. As employers need to be as coherent and comparable as possible, the consultation shows that employers follow existing national office guidance.

When is it impossible to report all races?

In the unlikely event, because for example, employers have fewer employees in different races, they will be able to report their own data in binary. For example, this means:

• (Preferred solution for the government) White British employees and everyone else
• (Next preferred solution) White staff (if there are fewer than 10 whites in the UK, but more than 10 white staff in total) and more
• (Last preferred solution) Most non-white groups and everyone else

Disability data collection

The definition of disability for these purposes will be the definition of the Equality Act and employees will be required to report persons with disabilities themselves if they do not wish to disclose damage to their employers.

There are also methods for collecting and reporting on pay gaps in binary (salary differences between persons with disabilities and non-disabled employees) and non-binary (identifying different types of damages) methods. The government recommends a simpler binary approach, believing that employers are easier to implement.

Like race, there should be at least 10 employees in each group.