Final stage impact assessment: Mandatory ethnicity and disability pay gap reporting (including workforce reporting and action plans)

Title: Mandatory Ethnicity and Disability Pay Gap Reporting (including Workforce Reporting and Action Plans)

Type of measure: Primary Legislation

Department or agency: Office for Equality and Opportunity, Cabinet Office

IA number: CO2035

RPC reference number: RPC-CO-25103-IA

Contact for enquiries: 

Jisha Hales, Head of Ethnicity and Disability Pay Gap Policy: jisha.hales@cabinetoffice.gov.uk

Jonah Munday, Economic Adviser: jonah.munday@cabinetoffice.gov.uk

Date:  17 March 2026

1. Summary of proposal 

This government committed to introducing mandatory ethnicity and disability pay gap reporting for large employers (those with 250 or more employees) in their 2024 manifesto. The proposed reporting framework has been aligned with the existing requirements for gender pay gap reporting, in force since 2017, to minimise the additional burdens on business. The proposed intervention will require large employers across Great Britain (England, Scotland and Wales) (except large public authorities in Wales and Scotland) to publish ethnicity and disability pay gap data on an annual basis. 

To improve the effectiveness of reporting in driving inclusive practices, the proposed reporting framework will incorporate measures requiring large employers to report on the overall composition of their workforce by ethnicity and disability (referred to as ‘workforce reporting’), report on self-declaration rates, and publicly commit to specific actions to address ethnicity and disability pay gaps within their existing Equality Action Plans. 

These measures will require all in-scope employers in Great Britain to report the percentage of their employees who are disabled and of different ethnic groups, and require them to develop and publish Action Plans to improve their ability to recruit, retain and develop employees possessing these characteristics. The additional reporting requirements should reduce the risk of unintended consequences resulting from this policy, such as employers intentionally not recruiting ethnic minority or disabled staff to reduce their pay gaps. The Action Plans will support greater uptake of interventions to drive more inclusive practices to address gaps.

This will contribute to making work pay for everyone and align with the breaking down barriers to opportunity mission.

2. Strategic case for proposed regulation 

Many ethnic minority groups and disabled people face significant barriers in the workplace, which are evidenced through persistent differences in participation and average pay. These gaps may be due to numerous factors, such as discrimination issues in recruitment, retention and progression. These additional barriers in the labour market lead to the talent and skills of ethnic minority and disabled people not being effectively utilised across Great Britain and compounding existing disparities in the relationship between people who share these characteristics and low pay and poverty. There may be broader barriers, such as cultural and educational differences, which are beyond the direct scope of this work, but can be explored as we develop the evidence base on the underlying causes of ethnicity and disability pay gaps. 

The government is committed to improving productivity and breaking down the barriers to opportunity. Introducing mandatory ethnicity and disability pay gap reporting will be a key tool to help achieve this. Identifying and addressing barriers for ethnic minority groups and disabled people in the labour market will help employers find and retain the best person for the job, and help individuals to find and retain fulfilling work within environments in which they feel valued and respected. This will enable them to flourish, improve their overall wellbeing and increase their household income relative to others.

The problem under consideration

Ethnicity pay gap analysis by the Office for National Statistics (ONS) shows persistent pay gaps for many ethnic minority groups. Their analysis[footnote 1] found that in the UK in 2022, ‘after holding personal and work characteristics constant, to provide an adjusted pay gap based on a like-for-like comparison, we find that UK-born White employees earn more on average than most ethnic minority employees’. 

ONS analysis of ethnicity pay gap data from 2012-2022 considered raw and adjusted pay gaps over this 10 year period, and found the following:

• in 2022, many ethnic groups earned less than the White British group, with employees from the Pakistani, Bangladeshi and mixed White and Black Caribbean groups showing the largest gaps

• Black, African, Caribbean or Black British employees earned less (£13.53) median gross hourly pay than White employees (£14.35), a pay gap which has been consistent since 2012
• although some ethnic minority groups earned more on average than White employees (for example, Asian and Asian British), there are significant differences when breaking this down into sub-groups – for example, Chinese (£17.73) and Indian (£17.29) employees are identified as higher earners than White British employees (£14.42), whereas Bangladeshi (£11.90) and Pakistani (£12.50) employees earn significantly less
• however, when looking at adjusted ethnicity pay gaps, which takes into account other characteristics that determine pay,[footnote 2] most of the gaps narrow or reverse – for example, UK-born Asian or Asian British employees earned on average 11.9% more than UK-born White employees, but after adjustment it was estimated that they earned 1.9% less – the reversal of the direction was consistent since 2015
• UK-born Black, African, Caribbean or Black British employees earned 6.5% more before adjustment, and then 5.6% less after adjustment, than UK-born White employees – the reversal of the direction happened for almost all years since 2012

There are also disparities in terms of employment and unemployment rates across different ethnic groups. Data from 2024[footnote 3] shows that the overall employment rate was 75%, which is similar to the employment rate for the White (including White other) group at 77% and the same as the White British group at 76%. However, the employment rate for all ethnic groups combined excluding the White group was lower at 69%. The employment rate for the combined Pakistani and Bangladeshi group was 60%. 

Similarly, there were differences when considering unemployment rates by ethnicity. The overall unemployment rate in 2024 was 4%, and 3% of those within the White (including White other) group and 3% within the White British group were unemployed, compared to 7% for all ethnic groups combined excluding the White group. The unemployment rate for the combined Pakistani and Bangladeshi groups was 8%. The unemployment rate for the Mixed ethnic group was 8% and the Black ethnic group was 8%

Economic inactivity also varies across different ethnic groups, with data for 2024 showing that the overall rate of economic inactivity was 22%, which was the same rate as the White British group and similar to the White (including White other) group at 21%, compared to 26% for all other groups combined excluding the White group. Similarly, the economic inactivity rate was higher at 35% for the combined Pakistani and Bangladeshi groups. The economic inactivity rate for Mixed ethnic group was 29% and Black ethnic group was 24%.

The reasons for poor labour market outcomes for certain ethnic groups are complex. The ONS found that when looking at the cumulative effect of pay-determining characteristics, the factors that had the greatest impact were occupation, qualifications, geography, age and sex.

Disparities in pay and participation across different ethnic groups may be the result of multiple factors, which need further consideration to identify the underlying causes. This can be difficult to achieve through high-level data and analysis at a national level. Mandatory ethnicity pay gap will provide employers with new, quality evidence to further understand any pay and participation disparities in their own workforce. 

On disability pay gaps, ONS figures published in 2024[footnote 4] show a similar picture of persistent pay gaps. This report puts the national disability pay gap in the UK in 2023 at 12.7%, with a median hourly pay of £15.69 for non-disabled employees and £13.69 for disabled employees. This pay gap has remained relatively stable since 2014.

While there is more to learn in terms of which groups of disabled people are most significantly impacted by disability pay gaps and why, the ONS report offers helpful insights. For example, the pay gap is most significant among those who identify their disability as significantly impacting them in their day to day activities, with this group experiencing a pay gap of 17.1% comparative to the 11.2% pay gap experienced by disabled employees who were limited a little. 

There is also some indication that pay gaps differ across impairment types and conditions, with no group appearing to be better paid than non-disabled people. Those who seem to experience the most significant pay gaps are disabled employees who are autistic (27.9%), have epilepsy (26.9%), or have severe or specific learning difficulties (20.3%). However, it is worth noting that – once adjusting for personal and work characteristics such as age, occupation, geography – gaps seemed to narrow most significantly for autistic employees (from 27.9% to 8.2%). The gap also narrows significantly for people with sight impairments, severe or specific learning difficulties and mental health conditions (reduced by 17.5%, 15.5% and 15.1% respectively) once such factors are considered.[footnote 5] This indicates that work to minimise the disability pay gap will require consideration of multiple factors. 

Factors highlighted by the ONS as having a cumulative impact on disability pay gaps include occupation, qualifications and geography. For example, disabled employees working as managers, directors or senior officials (11.1%) experienced significantly greater pay gaps than those working ‘elementary’ (1.3%), ‘sales and customer service’ (1.1%) or ‘caring, leisure and other service’ (0.0%) occupations. Interestingly, DWP figures indicate that disabled people tend to form a greater proportion of the workforce in these occupations than in other occupations.[footnote 6] The ONS pay gap report, however, highlights that minimum wage legislation may contribute to this difference, as occupations with the narrowest pay gap are also more likely to include roles paid at the minimum wage. 

As indicated above, intersectional issues also seem to be relevant in disability context, though not always as we might first expect. For example, disabled men appear to experience considerably greater pay gaps than disabled women (15.5% compared to 9.6% respectively). This must however be read in the context of the gender pay gap, meaning that women on average experience lower earnings than men, setting the comparative bar lower for disabled women. In real terms, disabled women still experience lower earnings than disabled men on average.[footnote 7]

The role that reasonable adjustments, which are vital to inclusive workplaces, might have to the disability pay gap has been highlighted by many stakeholders as important to understanding the nature and causes of the disability pay gap. For example, part-time working is a legitimate reasonable adjustment for many disabled people, with disabled people being significantly more likely to be in part-time work than non-disabled people (32.4% compared to 21.8% respectively).[footnote 8] It is interesting to note, then, that the pay gap seems to narrow for disabled people in part-time work compared to those in full-time work. This may indicate that more inclusive, flexible workplaces such as those which provide part-time working arrangements, support the narrowing of pay gaps. Alternatively it might be indicative of generally lower pay experienced by part-time workers. We do not have the data as yet to support such hypotheses.

What is clear is that addressing the disability pay gap is part of wider initiatives to address significant differences in employment rates, retention and progression between disabled people and non-disabled people,[footnote 9] which ultimately impacts on disabled people’s individual and household earnings. Within this context, the disability pay gap reporting package provides useful measures by which to start assessing issues of pay parity in large organisations for disabled people, acting as a driver of change when implemented alongside an expanded Equality Action Plan. We anticipate some cumulative impacts for these Action Plans given that people are multifaceted in their identity. Therefore actions designed to support women will likely support some ethnic minority women or women who are disabled who experience similar barriers. 

Data on disability can be less rigorous than for other protected characteristics such as gender. This is due to the need for individuals to self declare as disabled and different understandings of what disability is. Self declaration requires individuals to both perceive themselves as disabled and be comfortable declaring as such. This can be a particular issue in certain industries or with specific conditions where there is stigma around declaration, for example some mental health conditions. There is also a recognition that people at the intersection of disability and minority ethnicity are less likely to self identify as disabled.[footnote 10] These factors can lead to lower declaration rates which in turn may skew data.

Ethnicity data also relies on employees self-declaring their personal data, which can vary substantially between different employers. Low levels of self-declaration rates from employees on their ethnic background can have a significant impact on the reliability of the data, particularly if there are small numbers in different ethnic minority groups. 

The case for intervention

People from certain ethnic minorities and disabled people can experience multiple barriers in recruitment, retention, upskilling and progression practices and processes which ultimately result in pay gaps for these groups. The reasons for these barriers could include discriminatory assumptions about individuals, their abilities and culture, and how these factors might impact their capability to perform the role. Evidence indicates that some ethnic minority staff may experience barriers to inclusion, such as biases linked to names, hairstyles and accents. There may also be differences in terms of access to networking opportunities and recognition of international qualifications and experience, which can put ethnic minority people at a disadvantage when applying for roles or promotions. For disabled workers, barriers might also include delays or refusals to implement reasonable adjustments despite existing legal protections. In such instances, disabled workers might self-remove from the labour pool, stay in roles for which they have become overskilled instead of seeking promotion or new stretching roles, or experiencing unjust poor performance ratings that impact on pay outcomes. 

It is wrong for there to be any disparity in pay if the result of discriminatory behaviour or practices. A pay gap isn’t just a market failure, it can signal social issues also. The unfairness experienced by some people from ethnic minorities and disabled people runs counter to the social and legal expectations of equality, as set out in the Equality Act 2010. Persistent and significant pay gaps deny some citizens the experience and opportunities required to realise their talents and flourish in life. Addressing injustice is a clear rationale to intervene, as the market should treat everyone fairly. It is important that we make the problem visible and ensure that organisations are focusing on addressing it through systemic culture change.

Organisational cultures and leadership can privilege particular behaviours and networks, leading to structural disadvantages for those who do not fit these norms, regardless of their capability. Even for those sectors where there are high proportions of ethnic minority or disabled employees, there may be considerable disparities at the senior levels, which can indicate significant barriers to progression. Disabled employees in the “managers, directors and senior officials” occupation group had one of the widest disability pay gaps (11.1%).[footnote 11] On Ethnicity, the Parker Review[footnote 12] found that ethnic minority executives comprise between 9% and 11% of the total number of UK-based senior managers across the FTSE 100, FTSE 250 and in-scope private companies, compared to the target level of between 13% and 15%. Such issues can undermine the potential productivity of affected workers and negatively impact the price point of their labour. This has clear implications for both the income and spending power of affected employees. 

When people from ethnic minority groups and disabled people earn less, second-order impacts exist – primarily, disproportionately reducing the consumer power and disposable income of these groups. As such, both groups may experience knock-on effects such as: 

• reduced lifetime earnings and pensions
• ability to have secure housing
• ability to flourish in their social activities
• ability to advance innovations, entrepreneurial or education ambitions
• their preferences being underrepresented in the market compared to those of their peers

These can also create negative feedback loops in areas such as training and education, exacerbating the underlying problem. Such disparities impact on issues of social cohesion and wellbeing. For disabled people, reduced pay comparative to non-disabled peers further compounds issues of reduced disposable income resulting from the additional costs associated with disability.[footnote 13] Some of the above issues are known risk factors for health inequalities,[footnote 14][footnote 15] contributing to rising costs to the NHS and social care[footnote 16][footnote 17] and increased dependence on state support to supplement income.

Despite these disparities, ethnicity and disability pay gap reporting is currently not mandatory.  Some organisations currently collect this data voluntarily. This means data isn’t consistently nor uniformly collected across all in-scope organisations. Government intervention is needed to drive behaviour change among all large employers. Failure to intervene would increase the likelihood that pay gaps for both groups will continue to persist and that the underlying causes of these gaps will not be addressed. As the evidence provided above for both ethnic minority groups and disabled people demonstrates, while there are some differences in the specific barriers experienced, both groups experience similar pay gap trends. Additionally, there are strong indications that work to address pay gaps would have beneficial impacts for both groups – particularly if implemented with the additional reporting of workforce and self-declaration rates. 

Furthermore, while there has been an increase in voluntary reporting (particularly on ethnicity and among certain large employers who are leaders on inclusion and diversity) there is little evidence to show that this has been consistent in terms of spread and methodological approach. The government’s introduction of mandatory ethnicity and disability pay gap reporting will ensure that all in-scope employers follow a consistent and comparable approach, enabling opportunities for change across industries as opposed to singular organisations.  

Estimating the economic benefit of pay gap reporting is difficult given that it seeks largely to improve fairness in the labour market, which then may drive phenomena like increased productivity rather than directly create new labour market opportunities. Some research has, however, sought to put a monetary value to addressing pay gap issues.[footnote 18] 

Various research and experimental studies further show that diversity of thought and experience can substantially improve outputs across different  sectors. This may be particularly beneficial for growing sectors of the economy such as AI innovation, and ‘green’ jobs in industries related to mitigation of climate change.

Evidence from the post implementation review of the Gender Pay Gap regulations[footnote 19] shows that mandatory, enforced gender pay gap reporting delivers high compliance (around 97% overall), increases transparency and prompts employer action, with early signs of narrowing gaps (a 19% reduction among firms just above the threshold) within the first 2 years. Over half of reporting employers further showed improvements in their median gap or representation in top pay quartiles. The review also showed increased transparency across more than 12,600 organisations, and spurred employer action (those planning or taking action rose from 21% in 2017 to 50% in 2019).  

The burden on employers was found to be manageable and to fall over time, and the review found no evidence of adverse impacts on profits, with wider reputational and media attention reinforcing incentives to act. While reporting alone does not resolve structural drivers, gender pay gap reporting has clearly contributed to reductions in pay gaps and represents value for money in driving equal opportunities for all. This supports the use of pay gap reporting as a credible, low-cost lever for national change in line with the opportunity mission, particularly when part of a wider package of measures such as that proposed here. 

3. SMART objectives for intervention 

Ethnicity and disability pay gap reporting policy is an integral part of the Plan to Make Work Pay, and aligns with the mission to break down the barriers to opportunity. It supports this government’s aim to foster long-term, sustainable organisational change within the labour market, and enable the development of diverse and inclusive workforces by encouraging employers to better understand the factors driving inequalities and share effective practices to address them. The pay gap reporting package seeks to narrow pay gaps and drive more inclusive practices by ensuring greater transparency, increasing accountability for employers and understanding of their workforces. 

As the evidence set out above demonstrates, pay gaps experienced by many ethnic minority groups and disabled people may be indicative of numerous systemic issues that arguably distort the labour market in Great Britain. Pay gap reporting – together with workforce and self-declaration reporting – act as helpful metrics to support businesses to identify and remove barriers to entry and progression in their workforces, unleashing talent and maximising participation. Benefits of a diverse workforce include:

• increasing diversity of thought and lived experience, which can boost organisational efficiency and performance
• helping to create a modern workplace culture which can foster improved productivity[footnote 20] 

The inclusion of measures on workforce reporting and reporting of declaration rates will provide essential context for an employer’s pay gap figures and enable greater depth of understanding about the potential drivers of pay gaps identified. For example, the government recognises that pay gaps could initially widen due to increased recruitment of ethnic minority or disabled staff in entry level positions. The figures will be supported with narrative in reports that can add context. Government communication will also explain why increased recruitment from these groups would be a positive indicator in early years. When considering how best to address participation or pay gaps in a given organisation, the Action Plans will support employers to implement evidence-based interventions to improve workplace inclusion for ethnic minority and disabled employees. 

The immediate objective of pay gap reporting is to encourage all large employers (those with 250 or more employees) to report their data accurately and in line with the approach set out in the legislation, allowing for comparability across organisations and for this data to be used to design and implement effective Action Plans. Measurable outputs and outcomes in the pre and early implementation phases are:

• in 2026 to 2027, the government will launch guidance and practical tools to help employers improve the self-declaration rates from their employees on ethnicity and disability status
• in 2026 to 2027, the government will raise awareness of ethnicity and disability pay gap data through external communications, including what ‘pay gap’ means and how it differs to equal pay

By the start of the first reporting year (when the primary and supporting secondary legislation has come into force), the government will: 

• launch detailed guidance for employers on how to undertake their ethnicity and disability pay gap calculations
• launch guidance for employers on effective actions to tackle ethnicity and disability pay gaps
• provide an online reporting mechanism for employers to upload their ethnicity and disability pay gap data 

Measurable outcomes for each measure in their respective reporting year would be:

• reporting year 1: achieving up to 75% compliance across all in-scope employers for reporting pay gap figures and including interventions in Equality Action Plans to address ethnicity and disability pay gaps
• reporting year 3: achieving over 90% compliance, as above
• reporting year 5: positive indications that the pay gaps are on track to narrow or have already begun to do so – for disability, an increase in the proportion of the workforce that has declared a disability would also indicate progress

The intended effects of the policy are far reaching, and aim to support inclusive workplace practices. This will predominantly be achieved through the successful delivery of Action Plans. Wider indicators or proxy measures that could be used to evaluate progress within the first 3 to 5 years of implementation of Action Plans include:

• employer surveys indicate an improvement in workplace culture, with higher employee scores for wellbeing, productivity and inclusion
• lived experience roundtables or discussions with employees, indicating an improvement in perceptions of inclusive workplaces and experiences of appropriate support being provided  
• case studies of employers delivering successful actions – for example, targeted recruitment activity or new talent management, and progression schemes for ethnic minority and disabled staff
• improved employer statistics on recruitment, retention and progression rates for disabled and ethnic minority staff
• increased provision of reasonable adjustments   

4. Proposed intervention options and explanation of the logical change process whereby this achieves SMART objectives 

The pay gap reporting package is part of a wider government strategy to Make Work Pay and break down barriers to opportunity. It consists of 4 main constituent parts for employers:

• reporting on the same 6 metrics which are currently required for gender pay gap reporting, but for ethnicity and disability
• reporting on workforce composition by ethnicity and disability (a figure that is required to calculate pay gaps)
• reporting on self-disclosure rates
• adding and publishing interventions related to addressing ethnicity and disability pay gaps in their Equality Action Plans

The impacts that this package seeks to advance are those of reducing workplace barriers for ethnic minority and disabled employees, increasing recruitment, retention and progression of these groups over time. The reporting elements of this package are not direct interventions themselves. They provide important data which, when carefully analysed and supported by a narrative explaining the results, helps employers identify workplace inequalities for ethnic minority and disabled employees. This can also be collated to give a strategic view at industry, sector and national level. This publicly available information will increase transparency and accountability, allow industry and sector coordination and better inform government policy.

The most direct intervention will be the measure requiring employers to take actions to address ethnicity and disability pay gaps. Employers will need to publicise which interventions they will implement within their organisations to address internal barriers and issues that prevent disabled and ethnic minority workers from reaching their full potential. The publication of these plans will provide a clear commitment from employers of actions they intend to take and facilitate public scrutiny, including by their employees and media.

In practice employers may identify a large pay gap and uneven salary quartiles, despite having a significant number of ethnic minority or disabled employees. This could indicate higher proportions of ethnic minority and disabled employees being concentrated at lower levels in their workforce. This data, reported on a public digital platform, will be freely accessible and allow a range of stakeholders – such as members of the public, other employers, representative bodies, equalities advocates, trade unions and government – to track how successfully large employers are building inclusive workplaces and advancing equality of opportunity. 

Action Plans, a more direct intervention, will also be publicly published on this platform, allowing stakeholders to hold employers to account for the actions they commit to taking to reduce workplace inequities found in their data. For example, an employer who has identified that most of their ethnic minority and disabled employees are working in lower paid jobs may take action to improve progression of these groups through a dedicated mentoring scheme. Action Plans also allow employers to explain where such actions might not be appropriate. For example, some employers may have inclusive recruitment and retention practices that enable certain groups of disabled employees (for example, those with significant learning disabilities) to obtain and retain employment. This group might be disproportionately represented at lower grades if progression is not appropriate. Employers would be encouraged to retain such inclusive practices, even if they contribute to disability pay gaps in their organisation, and to explain and contextualise this information through a supporting narrative. 

The potential negative reputational impact of either not publishing data and Action Plans, or of reporting figures which indicate wide participation and/or pay gaps and failing to take action to address this year on year, are anticipated to alter employers’ behaviour. Anecdotal evidence from gender pay gap reporting indicates that transparency encourages competition between peer organisations driving up the quality of data and driving the pay gap down. Reputational and behavioural levers such as competitiveness with peers, highlighting successful organisations through communications campaigns, and Equality and Human Rights Commission (EHRC) enforcement, should push organisations to take pay gap reporting and Action Plans seriously, and encourage the sharing of best practice in the recruitment and development of disabled and ethnic minority staff. The iterative development and improvement of Action Plans over time is expected to lead to changing data trends and support the long-term policy objectives of reducing workplace barriers in recruitment, retention and progression for ethnic minority and disabled staff.

This approach builds on practices and evidence established by the gender pay gap reporting regime, in force since 2017, and new Equality Action Plans, the primary power for which is being introduced via the Employment Rights Bill. These interventions will follow the same rationale that public, comparable reporting of ethnicity and disability pay gaps and linked Action Plans prompt employers to improve recruitment, progression and pay outcomes for ethnic minority and disabled employees, narrowing gaps over time. 

Theory of change

A statutory framework aligned to existing standards and definitions, such as the Government Statistical Service (GSS) harmonised standards for ethnicity data and Equality Act 2010 definition of disability, enables comparable data to be more reliably produced. Relying on existing data standards, and aligning reporting as closely to the gender pay gap reporting requirements as possible, should enable employers to build on their existing practice, minimising additional administrative burdens as far as possible. Similarly, this approach builds on existing practice within employers on the processing of data. 

Employers should publish annual metrics (mean and median hourly and bonus pay gaps, breakdown of those receiving a bonus, pay quartiles, workforce representation and declaration rates) alongside Action Plans. This should address information asymmetries and place reputational pressure on organisations, providing clear and direct responsibility to each employer for their own pay gaps. Reputational incentives, public and employee scrutiny, board‑level accountability and compliance levers drive change.

In the short to medium term, employers will be encouraged to consider a range of actions to remove barriers for ethnic minority and disabled employees, including:

• fair pay and bonus policies
• inclusive recruitment
• targeted development and actions to reduce occupational segregation
• raising self-declaration rates and levels of representation at senior levels
• improving progression and retention practices, including around provision of reasonable adjustments for disabled employees

The expected long‑term impact is sustained reductions in ethnicity and disability pay gaps, greater workforce equality and increased organisational performance.

The government will monitor and assess national performance, identify gaps and unintended consequences, and use these to inform further policy interventions. This will drive further change to address the underlying complex causes of inequality.

Ethnicity pay gap reporting logic model

1. Inputs

1.1. External resource

1.2. Data

1.3. Policy-related evidence

1.4. OEO staff resource

2. Activities

2.1. Build reporting platform

2.2. Develop new legislation on ethnicity pay gap reporting

2.3. Produce guidance on how employers can comply with new regulations

2.4. Spread awareness by delivering comms campaign

2.5. Engage with employers in scope of regulation

3. Outputs

3.1. Employers use new reporting platform

3.2. Legislative measures are put in place (both primary and secondary)

3.3. Businesses are aware of their new obligations

3.4. Employers report on their pay gaps

3.5. Employers build action plans and strategies

4. Outcomes

4.1. Public transparency – people are able to view EPGs online

4.2. Employees are better informed when making choices about employment

4.3. Employees are empowered to drive change

4.4. Employers who perform well (or badly) are celebrated (or highlighted)

4.5. Employers take voluntary steps to reduce pay gaps

4.6. Employers successfully reduce their own pay gaps

5. Impacts

First-order impacts:

5.1. Clearer understanding of trends in ethnicity pay gaps

5.2. Better paid ethnic minority employees

5.3. Reduction in national ethnicity pay gap

Possible second-order impacts:

5.4. Increased formal employment rates for ethnic minority groups

5.5. Increased tax receipts or reduced benefit costs

5.6. Improved diversity and representation within businesses

5.7. More diversity in senior roles and across sectors

5.8. Ethnicity will be a less consequential factor on labour market outcomes

Disability pay gap reporting logic model

1. Inputs

1.1. External resource

1.2. Data

1.3. Policy-related evidence

1.4. OEO staff resource

2. Activities

2.1. Build reporting platform

2.2. Develop new legislation on disability pay gap reporting

2.3. Produce guidance on how employers can comply with new regulations

2.4. Spread awareness by delivering comms campaign

2.5. Engage with employers in scope of regulation

3. Outputs

3.1. Employers use new reporting platform

3.2. Legislative measures are put in place (both primary and secondary)

3.3. Businesses are aware of their new obligations

3.4. Employers report on their pay gaps

3.5. Employers build action plans and strategies

4. Outcomes

4.1. Public transparency – people are able to view DPGs online

4.2. Employees are better informed when making choices about employment

4.3. Employees are empowered to drive change

4.4. Employers who perform well (or badly) are celebrated (or highlighted)

4.5. Employers take voluntary steps to reduce pay gaps

4.6. Employers successfully reduce their own pay gaps

5. Impacts

First-order impacts:

5.1. Clearer understanding of trends in disability pay gaps

5.2. Better paid disabled employees

5.3. Reduction in national disability pay gap

Possible second-order impacts:

5.4. Increased formal employment rates for disabled people

5.5. Increased tax receipts or reduced benefit cost

5.6. Improved diversity and representation within businesses

5.7. More diversity in senior roles and across sectors

5.8. Disability will be a less consequential factor on labour market outcomes

5. Summary of longlist and alternatives 

As ethnicity and disability pay gap reporting were manifesto and King’s Speech commitments of the government, our analysis has focused primarily on that intervention. However, for completeness, we have also given limited consideration to alternatives to placing a legal duty on employers to report and publish their pay gaps and workforce make up, and to developing, publishing and implementing Action Plans. 

Do nothing

Doing nothing to intervene would continue the status quo of leaving it to the market to resolve disparities of pay for ethnic minority groups and disabled people. This would rely on individual employers deciding to institute reporting in their organisation, with employers deciding themselves how to collect the relevant data and conduct their calculations. To date, voluntary approaches to ethnicity pay gap reporting and disability workforce reporting have had low levels of uptake. A lack of  standardised data collection processes, calculations or release periods also prevents the gathering of comparable data needed to effectively address the information asymmetry.

While employers who are already committed to narrowing pay gaps and building inclusive workplaces would likely continue to make progress, it is unlikely that the pay gap would narrow at a national level given that trends since 2013 have worsened or stagnated. Depending on market factors and individual employers’ economic priorities, taking no action could therefore create the conditions for worsening inequality in the workplace.

Voluntary reporting with an accreditation scheme

We have considered developing the ethnicity voluntary reporting framework into a scheme whereby people who report receive accreditation of some form. This would be expanded to include disability pay gap reporting. This would build on best practice in the public and private sector to produce a consistent set of standards and metrics which employers would have to use to receive accreditation. This would create a clear and comparable data set of the participating organisations.

Our analysis suggests that this approach would have a considerable number of issues and be inadequate at addressing ethnicity and disability pay gaps and their underlying drivers. The self selecting nature of participants would likely see data skewed as the participating organisations would already be committed to narrowing their pay gaps. A voluntary scheme is less likely  to include organisations that need to make the most progress, and would not provide the same level of reputational pressure as a mandatory scheme. It would also limit the value of using the data collected to assess national trends, and potentially be counterproductive by masking the problem.

Such concerns are based on prior experience[footnote 21] and our assessment of the current voluntary reporting environment, including where frameworks have been developed and promoted to support employers. Following a public consultation on ethnicity pay gap reporting in 2018, the government published guidance for voluntary ethnicity pay reporting in 2023. The primary aims were to provide a methodology which employers could follow and to promote consistency. Although the guidance was promoted through stakeholder channels, evidence gathered through our recent pay gap consultation and related stakeholder engagement has not provided evidence on the uptake of the framework.

Consideration of disability pay gap reporting by the government only began in 2024. Prior to that, reporting metrics most under discussion were around disability workforce reporting – a metric that highlights the proportion of a workforce identifying and declaring as disabled. A voluntary framework for disability workforce reporting was published in 2018. Once more, however, indicators are that there has been relatively low uptake. A government consultation was run in 2021 to 2022 on mandatory disability workforce reporting for large employers, which showed broad support for a mandatory approach, which was not implemented at that time. Some employers have however started reporting their disability pay gaps on a voluntary basis, but uptake is not widespread.

Alternative or additional metrics

There are a number of alternative metrics which could be used to drive more inclusive practices which may lead to improved recruitment, retention and progression. These include measures of applicants for positions, time-to-promotion analysis, workforce segregation indexes, turnover rates, implementation of reasonable adjustments among others. These measures would undoubtedly be valuable measures and enhance the overall understanding of what is happening in relation to inclusion in the workplace. 

However, the desire for enhanced understanding to drive action needs to be balanced against the administrative burden to business, particularly in light of other new measures being brought forward across government – for example, through the Employment Rights Bill. Pay gap reporting has the advantage that it is already in place for gender, meaning that employers have some existing understanding of how the metric functions, its benefits and limitations. Alternative or additional metrics beyond those proposed in the pay gap package would largely be new metrics for employers, neither building on existing voluntary work nor expanding from gender pay gap reporting. These would therefore require an even steeper learning curve for employers, as well as a greater level of change to HR processes and IT systems with none of the administrative synergies available for pay gap reporting. 

We actively considered reporting on additional metrics to track workplace inclusivity for ethnic minority and disabled people in the public sector, such as pay differences between ethnic groups and disabled and non disabled employees by grade or salary band and data on recruitment, retention and progression, through our recent consultation[footnote 22] on mandatory ethnicity and disability pay gap reporting. While there were high levels of support for such reporting, concerns were also raised about the additional burden to organisations in a climate of tightening budgets. As such, reporting on these additional metrics will be voluntary, supported by guidance for those public bodies able and willing to lead the way. This guidance will be available in the public domain for use by other employers should they wish to use it.  

Measures relating to reasonable adjustments were also suggested in the disability workforce consultation as a metric useful to assessing the inclusivity of workplaces. While we recognise that metrics of this nature might provide useful insights into disability inclusive practices for both employers and employees, this is a complex area that is currently in flux with work taking place elsewhere in government that will impact the landscape – for example, work being undertaken by DWP in their Mayfield Review and by their Neurodiversity Expert Panel, and the Disability Unit’s own work on time limits for employer responses to requests. We believe it is wise to await further developments (including possible implementation of new interventions) before considering additional reporting requirements in this space.

Recruitment and progression quotas

Amending the law to set specific quotas for the recruitment and progression of ethnic minorities or disabled people has been considered. This could include setting targets to ensure a certain percentage of new hires are from ethnic minority or disabled groups, targets to ensure workforces are proportionately representative of Great Britain, or targets for representation of ethnic minority and disabled people in senior roles. 

Quota systems do operate in several EU countries (for example, France and Germany) in relation to disabled people in the workforce. Indeed, Great Britain itself operated a quota system until the mid-1990’s for disabled people. However, this was abolished, along with the keeping of a ‘disability register’, when Great Britain moved towards a more anti-discrimination approach to disability rights. This move was welcomed by many in the disability rights movement. 

To implement this would require substantial changes to the existing legal equalities framework. This would be a considerable undertaking, requiring extensive consultation. In the current stakeholder climate, it would be fair to anticipate a negative reception to the idea of quotas (and possible associated proposals of government-held registers) by both business and representative organisations. Their concerns would be further supported by the limited success of such approaches in peer countries such as Germany.[footnote 23] 

Tax incentives

There are potential incentives that the government could implement rather than regulation. These could include reliefs for relevant recruitment outcomes  or for participating in voluntary reporting schemes. For example, a ‘per individual’ incentive could grant the employer a full relief from employer national insurance contribution for the first 12 months after appointing new employees from ethnic minorities or disabled people. 

This is the approach used to improve the post service employment opportunities of veterans. Since 2021, the UK has had national insurance relief for veterans – a group with a sizable proportion of disabled people (48.7%).[footnote 24] The scale of the veteran population and the unique context of adapting to post service life, however, differ greatly from the proportion of the population that ethnic minority groups and disabled people represent and the continual barriers to employment these groups experience. Furthermore, a review of the policy demonstrated some limitations to its effectiveness. There is no reason to believe that the policy would be more effective in the context of improving recruitment of people from ethnic minority groups or disabled people, and the size in the populations of the comparative groups would make the loss of revenue to the government undesirable in the current fiscal environment. Furthermore, such action would do nothing to improve retention beyond the tax relief period or progression. 

Diversity requirements in government procurement and funding 

Pay gap reporting statistics, and other diversity requirements (for example, having a clear inclusion strategy), could be made a requirement in government procurement and funding. Work to implement this could build on considerations for public procurement set out in the Public Procurement (Social Value) Act, which could complement existing requirements on government departments to comply with the Public Sector Equality Duty (at section 149 of the Equality Act 2010) when delivering services and making decisions. 

This, however, is only likely to impact the practices of organisations seeking public contracts. While this does tend to be larger employers, it does not include the vast majority of large employers across Great Britain. As such, this approach is unlikely to offer a universal approach which encourages support for inclusive workforces across all currently in-scope employers. Furthermore, it is likely this would add pressure to particular industries, such as in the public and third sector, who often struggle to obtain government contracts. As such it would be misaligned to our objective and leave large gaps in the labour market. 

Regional or sector based intervention

Some of the affected groups – particularly certain ethnic minority groups and disabled people – are more highly clustered in certain parts of Great Britain than in others. For example, a large share of Great Britain’s Black and Asian population is centred in London. In contrast, a greater incidence of disability is found in the North East of England than the rest of England, with the lowest proportion of disabled people residing in London and the South East.[footnote 25] Given readily available insights into the regional spread of target groups, an alternative to national regulation could be specific and targeted interventions in areas with the highest proportions of affected population groups. 

Innovative policy interventions could include government backed trials in partnership with particular employers or sectors in target locations. For instance, targeted recruitment or progression programmes for ethnic minority groups could be run by partnering with large employers, local government and grassroot community groups in cities with high ethnic minority populations, such as London, Birmingham or Leicester. 

There is some indication that disabled people are also under-represented in certain sectors, such as in construction or financial and insurance businesses.[footnote 26] Similar trial partnership programmes could be supported for disabled people in sectors identified as having the lowest levels of disabled employees. 

Evaluations of these trials could later be used to support an expansion of these programmes across Great Britain or sectors, or provide guidance for employers, local government and charities on what actions work to improve recruitment, retention and progression of ethnic minority and disabled employees. However, such programmes are likely to be significantly more resource intensive, and would not address the issue nationally, likely leaving areas where the issues remain unaddressed. A localised or sector-based approach would therefore not inculcate our objective for a national cultural shift in the labour market. 

Including all employers

A mandatory pay gap reporting scheme could be made applicable to all employers, regardless of their size. This would capture small and micro businesses and would ensure the pay gap was an active consideration with all organisations. 

The usefulness of data collected by organisations with fewer employees than this may be limited, given that the size of the data may not be large enough to meet thresholds for reporting implemented to protect employee anonymity. As such, it is likely that  expanding the policy to smaller employers would create a great deal of compliance administration without any usable data being produced as a result.

When considering the costs and time associated with compliance compared to the wider benefits, the scale of burden on small and micro businesses will significantly outweigh the marginal utility of including them. This is reinforced by the fact that a significant proportion of workers in Great Britain work for an organisation with more than 250 employers.[footnote 27]

Ahead of implementation, government officials will engage with businesses in scope of the policy (those with 250 to 500 employees) and those who may fall in scope in the future (those with 200 to 249 employees) to understand their unique challenges. This will inform government guidance for ethnicity and disability pay gap reporting, which will include specific support for these businesses, to help reduce any additional burdens they may face.

6. Description of shortlisted policy options carried forward 

As this was a manifesto and King’s Speech commitment of the government we have not undertaken an options appraisal. 

7. Regulatory scorecard for preferred option

Part A: Overall and stakeholder impacts 

(1) Overall impacts on total welfare

		Directional rating Note: Below are examples only
Description of overall expected impact	The overall social impact of ethnicity and disability pay gap reporting measures is expected to be positive, but with a considerable level of uncertainty. Existing evidence from gender pay gap reporting practices indicates a likely neutral impact on businesses, a positive impact on narrowing pay gaps, but also a possibility of negative impacts on overall average wages. In the lack of evidence around whether equivalent impacts are to be expected resulting from ethnicity and disability focused policies, the overall social impact of this policy is judged to be Uncertain.	Uncertain Based on all impacts (incl. non-monetised)
Monetised impacts	Total best estimate NPSV: -£161.2 million, based on a 10 year appraisal period, base year 2025 and 3.5% discount rate. This comprises business NPV of -£161.0 million and public sector NPV of -£0.2 million. Sensitivity analysis around assumptions made throughout the cost modelling give a low estimate NPSV of -£89.1 million and high estimate NPSV of -£215.5 million.	Negative Based on likely £NPSV
Non-monetised impacts	Non-monetised benefits include both business benefits (positive effects on workplace culture as a result of increased transparency) and household benefits (decreased ethnicity and disability pay gaps).	Positive Based on available evidence of non-monetised impacts
Any significant or adverse distributional impacts?	The distributional impacts covered below include an uneven distribution of business costs, both across industries and regions, and distributive impacts on households as a result of closing ethnicity and disability pay gaps. These distributional impacts are not judged to be adverse impacts, especially as one of the primary objectives of the policy is a redistributive objective of narrowing existing pay gaps.	Yes Significant but not adverse distributional impacts

(2) Expected impacts on businesses

Category	Description of impact	Directional rating
Description of overall business impact	Evidence from the Gender Pay Gap Reporting Post Implementation Review shows that, despite the presence of monetised business costs, the overall effect on business profits is negligible, indicating a likely neutral impact on businesses once non-monetised benefits have been taken into account.	Neutral Based on all impacts (including non-monetised)
Monetised impacts	Business NPV: -£161.0 million Approx net financial cost to business EANDCB: £18.8 million, all of which is assessed to be administrative costs. No pass-through costs have been identified.	Negative Based on likely business £NPV
Non-monetised impacts	The primary non-monetised benefits for businesses come from the cultural improvements from increased transparency and decreased pay gaps. If impacts from ethnicity and disability pay gap reporting follow those observed from gender pay gap reporting, the non-monetised benefits for businesses should positively counteract the monetised costs.	Positive Based on available evidence of non-monetised impacts
Any significant or adverse distributional impacts?	Business impacts are expected to be distributed relatively evenly across UK regions, as the proportion of businesses with 250 or more employees does not differ significantly across regions. The region with the highest proportion of businesses with 250 or more employees is the North East, with 0.46%, and the regions with the lowest proportion are the East and South West, with 0.32%. There is greater variance in representation of businesses with 250 or more employees across industry groups, with the Production industry (1.12%) and Insurance and Finance industries (0.96%) being most disproportionately affected. Organisations with fewer than 250 employees are exempt from this regulation, ensuring there are no adverse distributional effects on small and micro businesses.	Yes Significant but not adverse distributional impacts

(3) Expected impacts on households

Category	Description of impact	Directional rating
Description of overall household impact	The overall household impact is expected to be positive, but with a considerable level of uncertainty. Distributional effects of the policies are likely to be positive in line with the policy objectives, but impacts on overall wages are very difficult to predict.	Uncertain Based on available evidence on potential households impacts
Monetised impacts	Household NPV: £0 million There are assessed to be no direct impacts on households arising from this policy package. All costs incurred are faced by businesses and are not expected to be passed through to households.	Neutral Based on likely household £NPV (no direct household costs)
Non-monetised impacts	Existing evidence from gender pay gap reporting practices indicates a likely positive impact on narrowing pay gaps, but also a possibility of negative impacts on overall average wages (if the pay gaps are narrowed by slowing the growth of the higher paid groups). Therefore the overall effect of non-monetised impacts will depend on the extent to which each of these effects plays out in the cases of ethnicity and disability pay gap reporting.	Uncertain Based on available evidence on potential households impacts
Any significant or adverse distributional impacts?	Household distributional impacts will be around the ethnicity and disability characteristics. If pay gap reporting policies have their intended effect, and follow the same pattern from gender pay gap reporting policies, impacts will include a decrease in the size of existing ethnicity and disability pay gaps for organisations in scope of the measures. Given that around half of UK employees work for organisations with 250 or more employees, this will also likely have an impact on the nationwide ethnicity and disability pay gaps, leading to a relative transfer of income towards currently lower paid disabled people and individuals from ethnic minority backgrounds.	Yes Significant but not adverse distributional impacts

Part B: Impacts on wider government priorities

Category	Description of impact	Directional rating
Business environment: Does the measure impact on the ease of doing business in the UK?	The introduction of additional administrative costs (as quantified and outlined above) is expected to have a small negative impact on the ease of doing business in the UK. However, administrative costs are relatively small and not expected to impact competition, and the exemption of organisations with fewer than 250 employees minimises any barriers to entry.	May work against
International Considerations: Does the measure support international trade and investment?	Ethnicity and Disability pay gap reporting measures are not expected to have any significant impact on international trade or investment, but the international equality landscape is complex and constantly changing. If introduction of these measures is seen to be divergent from interests of international investors, there could be a small negative impact on investment, but if the UK is seen positively as an international leader in equality practices this could positively impact international investment. <brIn the absence of any empirical evidence on this effect, the impact is judged to be Uncertain.	Uncertain
Natural capital and Decarbonisation: Does the measure support commitments to improve the environment and decarbonise?	This measure is expected to have no impact on UK natural capital and decarbonisation.	Neutral

8. Monitoring and evaluation of preferred option

Monitoring and evaluation of the implementation of the pay gap reporting package will be undertaken annually, as reporting results are received. This will be punctuated by the post-implementation review (PIR) of the policies 5 years after commencement, and follows the same approach taken with gender pay gap reporting. Such an approach provides large employers with sufficient time to implement, adapt and embed practices relating to these new pay gap reporting requirements. Assessing the performance of the ethnicity and disability pay gap reporting schemes at the same point in their life-cycle as was undertaken in gender pay gap reporting will also allow the government to assess the performance of the new schemes against the existing ones.

The primary indicator of success will be a downward trend in the size of each pay gap, together with an upward or neutral trend in workforce reporting and declaration rates. A more expansive list of additional data points for use in the PIR will have to be considered in the context of how the policy evolves, the outcomes of ongoing work such as regression analysis about the drivers of pay gaps, and the feasibility of collecting accurate data to inform consideration of chosen metrics. The reporting itself will be the primary source, and will likely be supplemented by qualitative and quantitative bespoke research (as per the approach used for the gender pay gap). 

Monitoring and evaluation plan 

The PIR is intended to be conducted 5 years after implementation. It will be for the Secretary of State to determine the time at which the PIR will take place within this constraint (unless there is a clear and obvious reason for delaying the review). 

The review will be led by the Minister for Women and Equalities (or their equivalent). At a minimum, it is envisioned that it will consult with the following stakeholders: 

• large employers
• trade unions
• disabled people’s organisations
• organisations representing people from ethnic minorities
• Equality and Human Rights Commission
• large public sector employers
• sector organisations

The review will assess the extent to which the impacts of the independent statutory pay gap regulation have achieved the primary policy objectives. The policy objectives include: 

• narrowing ethnicity and disability pay gaps
• increasing declaration rates
• increasing the representation of people from ethnic minority groups and disabled people at different levels in large workforces

To monitor and evaluate the efficacy of the scheme, potential evaluation questions relevant to value for money and impact considerations include: 

Policy area or objective	Specific impact or outcome	Possible metrics
Financial performance	Value for money	Cost-benefit analysis
Efficiency	Swift, unencumbered regulation	Recorded regulatory activity, monitoring and enforcement.
Compliance	Successful advocacy-first regulation with enforcement where required	Recorded failed compliance and enforcement action.
Proportionality impact	Minimise unnecessary burden on large employers (250 or more employees)	Reported employer compliance activities and costs (including time spent collecting and preparing data, monitoring and reporting costs)
Stakeholder sentiment	The satisfaction and experiences of key stakeholder groups as a result of this policy package	Surveys to test view with key stakeholders, including employers, representative bodies, trade unions and equality organisations Interviews with employees
Policy reach	Has the policy had the desired impact on the ethnicity and disability pay gaps, employment rates, and inclusive practices Distributional impacts of the regulation	Pay gaps and trends Declaration rates National-level employment rates

Next steps 

The government will continue to work to expand and finalise a monitoring and evaluation plan. This will involve continued engagement with stakeholders, further research to fill evidence gaps, finalisation of evaluation questions, and further detail on the form of the evaluation approach and data collection.

9. Minimising administrative and compliance costs for preferred option

Ethnicity and disability pay gap reporting measures build on the calculations adopted for gender pay gap reporting. This approach is in large part intended to minimise the administrative burden on employers. In particular, this approach recognises that while there are different challenges in the gathering of data stage across the 3 reporting regimes, employers should be able to transfer much of their knowledge of existing processes on gender to disability and ethnicity, and apply best practice and ways of working across all 3 areas.

For example, employers should be able to use the same processes for many aspects of the proposed new requirements, including making the 6 calculations which are currently required for gender pay gap reporting, uploading their data on the government platform, securing internal clearances (since the statutory reporting deadline will mirror those for gender) and developing Equality Action Plans which will cover all 3 protected characteristics. 

Additional benefits include:

• minimising the need for separate work
• saving time
• helping to avoid problems by building on proven methods
• enabling HR professionals to progress through the learning curve faster

Annually recurring costs to employers include the time spent by HR managers on collating the data and producing the figures, internal clearance processes, uploading data onto their website and the government platform. This platform is being built with a focus on streamlining reporting for employers, enabling them to report data for all 3 pay gap reporting regimes in one place. The proposal to include actions to address pay gaps across the regimes in a single Equality Action Plan is further evidence of the package seeking to streamline processes for employers wherever possible. As above, most of these activities could be done together across the reporting regimes, minimising additional costs. The additional costs generated post-data collection should be able to be absorbed into the existing business as usual costs of administering gender pay reporting. 

Some in-scope employers already conduct disability and ethnicity pay gap reporting on a voluntary basis. Transition for these organisations may be even smoother, and arguably burdens may be reduced with the introduction of the pay gap reporting platform envisioned to launch in the implementation phase.

The most significant additional administrative burdens and costs are likely to occur when organisations collect the data needed to make the pay gap calculations. For employers who do not already collect ethnicity and disability data, there will be a clear need to develop or adapt systems that will enable such collection. This may include making amendments to HR systems and investing in data collection drives ahead of the first reporting year. However, the ethnicity and disability pay gap reporting policy has been developed with these burdens in mind. 

This consideration has contributed to the decision to take a binary self-declaration approach when collecting data for disability pay gaps (inviting individuals to self-declare their disability status, and requiring analysis of disabled employees compared with non-disabled employees rather than analysis broken down by different categories of disability). While more granular data would provide additional insights that might be useful, there would be significant risks to anonymity and data quality which have further supported this decision. Businesses have also raised the likely need to collect disability data on a recurring basis due to employees potentially developing disabilities at different stages in life. This significantly differs from gender and ethnicity data collection, which can (in most instances) be collected once from individual employees. Little can be done to avoid this but the impacts for business will remain under review as this policy evolves and is implemented.

A slightly different approach is proposed for ethnicity, balancing the need to minimise burdens to business with having metrics that are fit for purpose given disparities in pay gaps across ethnic minority groups. For ethnicity pay gap comparisons, binary comparisons between the White (including other) ethnic group and all other ethnic groups combined will be the minimum requirement for all in-scope employers. However, for those employers who meet the minimum employee threshold (of 10 employees per group being reported on), they will be required to undertake more granular comparisons comparing the White (including other) ethnic group with the other 4 broad ethnic groups set out in the GSS ethnicity harmonised standard (for example, Asian, Black, Mixed and Other). The legislation will not require more granular comparisons than this, in view of the potential burdens on employers to analyse and compare the current list of 19 ethnicity categories listed in the standard. In developing the legislation, the government has considered potential future changes to the harmonised standard on ethnicity, which is periodically reviewed and subject to change.

The government will help employers to comply with the reporting requirements, including dealing with queries in a timely manner and resolving technical issues, with the aim of securing high levels of compliance across all in-scope employers. As such, the government will launch guidance to help employers fulfil the reporting requirements, including practical tools on improving self-declaration rates, step by step instructions on how to undertake the different calculations, and advice on effective actions to address ethnicity and disability pay gaps. The sharing of best practice will also be facilitated so that employers can benefit from the experiences of others. 

Mandatory ethnicity and disability pay gap reporting will only apply to organisations of 250 and above employees in size. This means small and micro businesses are not in scope of the policy. The 250 threshold was chosen, in part, to avoid significant business burden on micro, small and some medium businesses, and to match inclusion criteria for gender pay gap reporting. Large employers are more likely to have the systems and resources in place to comply with these new reporting regimes.

Declaration

Department:  Cabinet Office

Contact details for enquiries:  

Jisha Hales, Head of Ethnicity and Disability Pay Gap Policy

jisha.hales@cabinetoffice.gov.uk

Jonah Munday, Economic Adviser

jonah.munday@cabinetoffice.gov.uk

Minister responsible: Seema Malhotra MP

I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options.

Signed: [Signed by Seema Malhotra MP]

Date: 17 March 2026

Summary: Analysis and evidence

PV base year: 2025

	1. Business as usual (baseline)	2. Do-minimum Option	3. Preferred way forward (if not do-minimum)	4. More ambitious preferred way forward	5. Less ambitious preferred way forward
Net present social value (with brief description, including ranges, of individual costs and benefits)	The baseline scenario is set as a NPSV of £0.0 million. This represents the continuation of the current voluntary approach to ethnicity and disability pay gap and workforce reporting. For the baseline scenario it is assumed that without government intervention and regulation there would be no change to the numbers of organisations reporting this information.	Not costed, as per urgency procedures for manifesto commitments.	Total best estimate NPSV: -£161.2 million, based on a 10 year appraisal period, base year 2025 and 3.5% discount rate. This comprises business NPV of -£161.0 million and public sector NPV of -£0.2 million.	Not costed, as per urgency procedures for manifesto commitments.	Not costed, as per urgency procedures for manifesto commitments.
Public sector financial costs (with brief description, including ranges)	£0.0 million		Based on estimates from equivalent regulation on gender pay gap reporting, public sector administrative costs are expected to be £235,000 for one-off building of the webpage with annual costs for maintenance assessed to fall within existing costs of maintaining the GPG service. This gives a public sector NPV of -£0.2 million
Significant un-quantified benefits and costs (description, with scale where possible)	No un-quantified costs or benefits are identified in the baseline scenario.		Existing evidence from gender pay gap reporting practices indicates a likely positive impact on closing pay gaps, but also a possibility of negative impacts on overall average wages (if the pay gaps are closed by slowing the growth of the higher paid groups). Therefore the overall effect of non-monetised impacts will depend on the extent to which each of these effects plays out in the cases of ethnicity and disability pay gap reporting. The primary non-monetised benefits for businesses come from the cultural improvements from increased transparency and decreased pay gaps. If impacts from ethnicity and disability pay gap reporting follow those observed from gender pay gap reporting, the non-monetised benefits for businesses should positively counteract the monetised costs.
Key risks (and risk costs, and optimism bias, where relevant)	In reality it is difficult to predict whether voluntary reporting would increase, decrease or remain the same in the absence of government intervention. Long term trends indicate voluntary reporting rates increasing, but short term economic incentives and the current challenging global equality and diversity landscape could cause some organisations to stop reporting in the near future if not required by regulations.		A range of risks have been identified, assessed and mitigated where possible. These include risks relating to disclosure rates, accuracy of reported data, insufficient incentives to act, unpredictable labour market dynamics, small sample sizes, misinterpretation and distortion of data. See section ‘Risks and assumptions’ in the evidence base for further details.
Results of sensitivity analysis	No sensitivity analysis conducted on business as usual scenario.		Sensitivity analysis around assumptions made throughout the cost modelling give a low estimate NPSV of -£89.1 million and high estimate NPSV of -£215.5 million.

Evidence base 

Problem under consideration, with business as usual, and rationale for intervention 

For details, see ‘Strategic case for proposed regulation’ (section 2).

Policy objective 

For details, see ‘SMART objectives for intervention’ (section 4).

Description of options considered

For details see ‘Summary of long-list and alternatives’ (section 5) and ‘Description of shortlisted policy options carried forward’ (section 6).

International comparisons

Relevant international evidence on mandatory ethnicity and disability pay gap reporting (in addition to workforce reporting and Action Plans) is limited. However, for the purposes of this impact assessment there are 3 categories of policy approach taken towards this issue that provide helpful context for UK policymaking:

• countries with similar existing frameworks on gender pay gap reporting, but currently no legislation mandating equivalent actions for ethnicity and disability
• countries that, due to differing legal and constitutional frameworks, are unable to introduce regulations mandating reporting on ethnicity and disability
• countries with regulations mandating some actions on publishing ethnicity and disability data at an organisation-level

An example from each category is expanded below.

Example 1: Denmark

In 2006, Denmark was the first country to pass legislation obligating companies to provide gender-disaggregated wage statistics to their employees. As this legislation has now been in place for nearly 20 years, much of the best evidence on the success and effects of pay gap reporting policies more generally come from Denmark. Extensive economic research shows that the 2006 mandatory pay reporting law was successful in its primary goal of narrowing the gender pay gap. However, this success came with several complex and notable side effects on wages, hiring, and productivity. A particularly notable study[footnote 28] found that firms affected by the law experienced a small decrease in productivity (around 2.5%), counteracted by a decreased total wage bill resulting from lower male wages (around 2.8%), leading to no significant overall effect on firm profitability in the 2 years after implementation of the regulations. These are similar to the effects observed from UK gender pay gap reporting captured in the PIR, but the drivers for ethnicity and disability pay gaps differ significantly from the drivers for gender pay gaps so it is uncertain whether similar effects should be expected as a result of the proposed policies in this assessment.

Example 2: France

In some countries, including France, data protection laws strictly prohibit companies from collecting and processing any personal data related to an individual’s racial or ethnic origin, making mandatory ethnicity pay gap reporting legally impossible. The Data Processing, Data Files, and Individual Liberties Act of 1978 (often called Loi “Informatique et Libertés” in France) makes it illegal for businesses to even ask the ethnicity of employees. This prohibition is part of a contrasting approach to equality legislation, considered a cornerstone of the legal and moral framework in France designed to protect citizens from state-sponsored discrimination.

Example 3: South Africa

The only country that appears to have any legal requirements for organisations to report information on their workforce and remuneration with specific consideration to ethnicity and disability is South Africa. The Employment Equity Act (1998) requires “designated employers”, (generally those with 50 or more employees or those who meet a specific annual turnover threshold), to regularly submit 2 reports to the Department of Labour. These provide details on the company’s workforce profile, showing the distribution of employees across different occupational levels by ethnicity, gender, and disability, as well as similar information on employee pay broken down by ethnicity, gender and disability. While this regulatory approach differs in process and outcome (information is submitted privately to government, rather than shared publicly),  the requirements are the closest international example to ethnicity and disability pay gap and workforce reporting requirements being proposed in the UK. The South African government publish annual reports[footnote 29] with aggregated findings from these employer submissions, which evidence a lack of progress on these issues nationwide. However, in the absence of any counterfactual, these do not provide any strong evidence on the impacts of the regulations on equality objectives.

Consultation findings

The government consulted on its proposed approach to mandatory ethnicity and disability pay gap reporting between 18 March and 10 June 2025, with actions taken to ensure participation from all key stakeholder groups. There were 857 responses in total, including 355 individuals and 294 organisations. Respondents included good representation from disabled people and individuals from different ethnic minority groups, as well as organisations representing a range of sizes, sectors and interests. 

There were high levels of net agreement (strongly agree and somewhat agree) with all the proposals set out in the consultation. The key results from the public consultation and how they map onto policy decisions are outlined in the table. 

Consultation finding

Mandatory ethnicity and disability pay gap reporting – 87% agreed large organisations should report, helping to increase transparency.

Policy decision

Implement mandatory ethnicity and disability pay gap reporting for employers with 250 employees and above.

Consultation finding

High levels of agreement to mirror gender pay gap where possible to make reporting consistent, comparable and simple for employers:

• 88% agreed same geographic scope 
• 84% agreed same 6 calculations
• 87% (ethnicity) and 88% (disability) agreed same reporting dates
• 90% (ethnicity) and 91% (disability) agreed to reporting data on an online portal
• 82% (ethnicity) and 83% (disability) agreed same enforcement policy

Some respondents suggested stronger enforcement.

Policy decision

Implement ethnicity and disability pay gap reporting with the same geographic scope, calculations, reporting dates and reporting portal as gender pay gap to streamline reporting and limit business burden.

Enforcement is also likely to mirror the gender pay gap, however officials are considering if any alternatives are necessary, and reviewing the need to create a criminal offence.

Consultation finding

Ethnicity data collection and reporting:

• 77% agreed with collecting ethnicity data using GSS harmonised standard on ethnicity
• 73% agreed report minimum binary calculation (some wanted to go further)
• 73% agreed at least 10 employees per group reported (some wanted the threshold to go up, some down)
• 81% agreed use ONS guidance to aggregate groups

Some respondents raised concerns about the harmonised standard not including ‘Sikhs’ and ‘Jews’ in reporting structures, and many noted that the comparator should be the White group including White other, not white British, to avoid skewed data.

Policy decision

Implement ethnicity pay gap reporting, requiring a binary calculation as a minimum and further calculations comparing up to 5 ethnic groups where possible according to the GSS harmonised standard and ONS guidance on aggregation. Require 10 employees per group reported to protect confidentiality. 

The ONS harmonised standard for ethnicity is regularly reviewed (evidenced by a current consultation), and provides the most appropriate ethnicity groupings for this policy. The legislation has been developed in a way which provides flexibility to update changes to the full list of ethnicity classifications if the harmonised standard is reviewed or updated. The comparator will be the White group, including White other.

Consultation finding

Disability data collection and reporting:

• 73% agreed with reporting disability data using a binary approach 
• Agreement to use the Equality Act 2010 definition of disability (ensures consistency, but may not represent all impairments)
• 76% agreed at least 10 employees per group reported (some wanted the threshold to go up, some down)

Policy decision

Implement disability pay gap reporting, requiring a binary comparison and using the Equality Act 2010 definition of disability. Require 10 employees per group reported to protect confidentiality.

Consultation finding

Workforce reporting and declaration reporting: 

• 83% agreed employers should also report on their workforce breakdown by disability and ethnicity
• 86% agreed employers should report the percentage of employees who did not state their ethnicity or disability status

It was believed this would provide essential context to figures. Concerns were raised about the risk of low self-declaration rates, and some employers suggested introducing a self-declaration reporting threshold.

Policy decision

Implement workforce reporting and declaration reporting for ethnicity and disability pay gap reporting. 

Officials to develop guidance and practical tools to help employers improve self-declaration rates. A self-declaration reporting threshold will not be imposed as this could act as a perverse incentive to avoid reporting. Requiring declaration reporting will ensure pay gap reporting figures can be interpreted accurately. 

Consultation finding

Action Plans were seen as essential to create lasting change:

• 81% agreed employers should produce an ethnicity action plan
• 85% agreed employers should produce a disability action plan

Some respondents raised concerns about ensuring employers were held accountable to Action Plans.

Policy decision

Require employers to take actions to address ethnicity and disability pay gaps. The policy approach on how these actions will be monitored and assessed will be developed in line with the plans on Equality Action Plans.

Consultation finding

Additional reporting requirements for public bodies:

• 80% agreed public bodies should report pay differences between ethnic groups by salary band or grade
• 81% agreed public bodies should report on recruitment, retention and progression by ethnicity
• 82% agreed public bodies should report pay differences between disabled and non-disabled employees by salary band or grade
• 82% agreed public bodies should report on recruitment, retention and progression by disability

Policy decision

Additional reporting requirements will not be mandated, but encouraged through guidance and public sector engagement. This is to avoid additional cost burdens on the public sector, and therefore possible new burdens on government funding. Many of the calls for these measures came from the private sector wanting the public sector to lead the way, so we will make use of positive public sector examples to mitigate this in communications.

Additional consultation challenges raised

Costs of pay gap reporting to businesses was raised by employers, including:

• concerns for smaller organisations
• costs for new or changes to HR systems, either to begin reporting or for those voluntarily reporting who need to adjust how they collect data

Requests for guidance for employers, including advice on:

• data collection
• raising declaration rates
• non office based staff
• intersectional analysis 

Policy actions

New burdens will be minimised by streamlining reporting regimes, designing ethnicity and disability pay gap reporting as closely to gender as possible.

Officials will also engage with smaller employers around the 250 employee threshold to understand their unique issues and provide specific support in guidance.

Officials will develop a range of guidance and provide teach-ins when implementation comes into force, covering these issues. To achieve this, officials will engage with a range of stakeholders, including employers with a large proportion of non desk-based staff.

For intersectionality specifically, guidance will encourage large organisations, with less confidentiality risk, to consider this where appropriate, particularly on intersecting actions for gender, disability and ethnicity Action Plans. 

Roundtables

The consultation was also supported by 9 targeted roundtables. Stakeholders raised similar points as those raised via written responses to the consultation document. This engagement further ensured appropriate levels of representation from all key stakeholder groups: employers, employer and employee representative bodies, equality stakeholders across ethnicity and disability, civil society, trade unions, the public sector, other government departments and arms length bodies, and the devolved governments. Our policy decisions have therefore taken account of diverse viewpoints, including from across the UK. 

Relevant policy evaluations

In 2023 the government published a post-implementation review[footnote 30] (PIR) of the 2017 gender pay gap (GPG) reporting regulations, evaluating the extent to which the objectives of the reporting requirements had been met in the first 5 years of implementation. Below is a summary of the key findings from the review, in addition to possible implications for the proposed similar measures applying to ethnicity and disability.

Policy objectives

The primary goal of the 2017 regulations was to use increased transparency to prompt change and intensify efforts to close the gender pay gap. By mandating that large employers publish internal GPG metrics, the policy aimed to ensure both employers and the public were aware of pay gaps at an organisational level and to encourage them to take effective remedial action. The ultimate ambition was that the cumulative impact of these individual actions would help reduce the national GPG over the long term.

Key findings

The review concluded that the regulations’ objectives have been achieved to some extent, and recommended retaining the measure without changes. Although the pandemic limited the available evidence, the review found positive impacts and no significant adverse effects, leading to the conclusion that the regulations remain appropriate and valuable. The core objective of delivering transparency was highly successful, with overall compliance remaining above 97% in all enforced reporting periods. However, the review noted that this increased transparency in reporting has not necessarily led to greater public understanding of what the GPG metric represents.

There is significant evidence that the regulations have contributed to a reduction in the GPG, especially in organisations just above the 250-employee threshold. Analysis found the regulations narrowed the GPG in these firms by 19%[footnote 31] within the first 2 years of implementation. This narrowing was primarily attributed to a 2.6% reduction in the growth of men’s real hourly pay, linked to a relative slowdown in their promotion opportunities compared to women’s. The goal of prompting employer action was only partially met, with 50% of employers in 2019 reporting they were either planning or already taking action to close their gap.

The review found “marginally positive” evidence that a small majority of individual organisations have narrowed their GPG since reporting began. A comparison of 2017 to 2018 data to 2020 to 2021 showed that 51% of organisations reported an improvement in their median GPG, though it is unclear how much of this can be directly attributed to the regulations versus other external factors.

Costs and burdens on employers

The reporting burden on employers has significantly decreased over time as organisations familiarised themselves with the requirements and embedded them into ‘business as usual’ activities. The share of employers finding the process “straightforward” rose from 35% in 2018 to 56% in 2019, while those finding it “difficult” halved from 30% to 15%.

The review found the regulations had no apparent effect on organisations’ profits. While one study found “suggestive evidence” of a minor negative effect on productivity, this was balanced by a significant decrease in firms’ labour costs.

Implications for ethnicity and disability pay gap reporting measures

A voluntary approach is unlikely to be sufficient for achieving transparency in firm-level pay gaps. The GPG review provides compelling evidence that a mandatory, enforced approach is essential for high compliance. When enforcement was suspended for the 2019-20 reporting year, overall compliance fell from 99.8% to 64.1%. The review concluded that regulation is necessary for the majority of employers to continue publishing their data.

The GPG review clearly demonstrates that simply mandating reporting does not however guarantee that employers will take action to fix the problem, as only 50% did so, justifying the need for action plan measures alongside requirements for publication of workforce and pay gap metrics.

It is difficult to anticipate whether or not similar effects on wages will be observed as a result of ethnicity and disability pay gap reporting measures, especially as analysis behind the drivers of each of the different pay gaps finds different causes across characteristics. It therefore should not be assumed that pay gaps will be reduced as a result of ethnicity and disability pay gap reporting alone, or that any narrowing of the gap will come as a result of decreased pay growth from the previously higher-paid group.

The presence of some financial benefits for businesses arising from pay gap reporting practices is substantiated in part by the absence of any negative effects on overall business profits. If there were no financial benefits for businesses from engaging in pay gap reporting practices, we would expect to observe a negative effect on profits as a result of the administrative burden incurred, whereas in practice there has been no evidence of reduced profits for businesses in scope of the requirements.

Summary and preferred option with description of implementation plan

The government intends for the mandatory disability and ethnicity pay gap reporting regime to be operational and in place by 2029. The process will follow the model of gender pay gap reporting. There would be an annual publication of data. This requires an annual reporting cycle, in line with the statutory dates set for gender pay gap reporting, where in-scope employers collect the snapshot of pay information each year (31 March for public bodies and 5 April for all other employers) and report their data within the following 12 month period. This would be submitted via the government’s online reporting portal and enforced by the Equality and Human Rights Commission (EHRC). 

The intended threshold for participating organisations will be those with 250 or more employees. Evidence has suggested this threshold balances the most useful impacts with minimising disproportionate administrative burdens. There are several additional burdens for organisations at sizes below 250 employees. Once an organisation crosses 250 employees, it is likely to have developed dedicated human resources functions to manage recruitment, payroll and performance processes across the organisation. Similarly, at this size the data set is likely to be large enough so that data can be effectively anonymised, mitigating data protection issues. 

As the majority of UK workers work for large organisations, this approach will capture most individuals impacted by pay gaps while limiting the administrative burden for most businesses, as the majority of UK businesses are small or micro businesses. This strikes an appropriate balance between achieving the outcomes of the policy and minimising administrative burdens.

Requiring employers to collect this data will improve the transparency of organisations in the labour market increasing the accuracy, consistency and reliability of data available, and provide incentives to address identified barriers experienced ethnic minority groups and disabled people within their organisation. The annual reporting will enable tracking of year on year performance and the consistent metrics will enable comparison between different organisations by anyone. This will allow these organisations to be held accountable for their performance.

Given the evidence pointing to the need for a mandatory requirement on organisations, new legislation will be required to ensure compliance and give the government (or a named public body) the necessary enforcement powers. Mandatory reporting will be given effect through primary legislation with more detailed regulations implemented in secondary legislation. Using secondary legislation for the design of the scheme gives greater flexibility, allowing adaptability over time.

The Equality and Human Rights Commission (EHRC) currently enforces the UK’s gender pay gap reporting requirements through a structured compliance regime that combines enforcement powers with reputational pressure. They use enforcement powers (set out in the Equality Act 2006) to take the following steps where employers have failed to meet the statutory reporting requirements for gender pay gap reporting:

• send a warning notice to organisations that have failed to report
• carry out an investigation to confirm whether or not an employer has breached the statutory requirements
• if an investigation finds that an employer has breached the regulations, the EHRC can issue a statutory ‘unlawful act notice’, requiring the employer to comply with the reporting obligations
• if the employer is a public body, the EHRC may carry out a public sector assessment or send a ‘statutory compliance notice’
• if any public sector organisation fails to comply with a statutory compliance notice, the EHRC can seek a court order
• failing to comply with a court order is an offence, punishable with an unlimited fine if convicted

In addition to these steps, the Commission’s litigation and enforcement policy allows for public naming of defaulters, which leverages reputational incentives to drive compliance. These reputational drivers have proved to be very effective in securing high levels of compliance for gender pay gap reporting since 2017, with no enforcement activity going beyond the ‘investigation’ stage of the EHRC’s compliance regime. 

As part of the government’s public consultation on ethnicity and disability pay gap reporting, views were sought on whether the enforcement policy should mirror the approach taken for gender pay gap reporting and the levels of agreement were high for this proposal. As such, the government intends to replicate the approach, with the exception of including the power to make non-compliance a criminal offence in regulations, since this option has not been adopted in regulations for gender pay gap reporting, with existing enforcement mechanisms deemed sufficient. 

However, concerns were also raised in relation to disability pay gap reporting that some disability inclusive organisations may have larger pay gaps in some instances due to inclusive practices. This is why the government is opting for measures requiring employers to report on the make-up of their workforce as well as pay gaps. This will enable more nuanced narratives in situations such as the above, helping to ensure that reputational incentives work as intended across the reporting schemes. 

We are building on the successful implementation of gender pay gap reporting and following its model. 

NPSV: monetised and non-monetised costs and benefits of each shortlist option (including administrative burden)

Costs and benefits to business

These regulations will apply to businesses and voluntary sector organisations[footnote 32] with 250 or more employees in England, Scotland and Wales, of which there are estimated to be 9,135 according to the ONS Business Register (2025).[footnote 33] 8,045 of these organisations are private sector businesses and 1,090 are voluntary sector organisations, all of which would be in scope of the new requirements.

Estimates for the existing proportion of organisations already voluntarily carrying out actions proposed through the new requirements are made using a combination of externally conducted surveys along with a government issued survey[footnote 34] shared to businesses prior to the introduction of these measures.

Aside from hourly pay values which have been taken directly from ONS Annual Survey of Hours and Earnings (ASHE) data, all monetary estimates in the following analysis have been rounded to avoid the risk of spurious accuracy. Organisation-level cost estimates are presented to the nearest £1 and population-level cost estimates are presented to the nearest £1,000. Summary NPV and EANDCB figures are presented to the nearest £0.1 million as per impact assessment guidance.

Measure 1: Mandatory ethnicity and disability pay gap reporting

One-off costs

Familiarisation costs: it is understood that ‘familiarisation’ means reaching the point where appropriate members of staff (for example, HR professionals or senior officials) are aware of the legislative change and understand next steps for their organisation. This will include understanding what new information they as an employer are required to publish.

Familiarisation costs are expected to resemble previous familiarisation costs of mandatory gender pay gap reporting[footnote 35] where 2 HR professionals would need to familiarise themselves with legislative changes related to this measure, as both could be expected to take steps to ensure the organisation follows requirements of the measure. 

In 2025, the median salary for a Human Resource Manager and Director was £29.79 per hour excluding overtime.[footnote 36] This cost is uplifted by 30% to cover non-labour costs, as per Standard Cost Model principles, to a rate of £38.73 per hour.

Existing estimates from previous impact assessments suggest that the time required for 2 Human Resource Managers or Directors to familiarise themselves with new reporting requirements is 2 hours each. Therefore the best estimate for the familiarisation cost for each new reporting requirement is £155 per employer. Applied to all 9,135 in-scope employers, this gives a total of £1.415 million familiarisation costs for each new reporting requirement across England, Scotland and Wales.

The number of affected businesses is expected to be equal for familiarisation costs for ethnicity pay gap reporting and disability pay gap reporting, with the total familiarisation costs of these measures estimated to be £2.83 million. This is due to the same employers being in scope for both reporting schemes, with the same statutory reporting dates applying for gender, ethnicity and disability.

Training costs for each new reporting requirement are also expected to resemble the training costs of mandatory gender pay gap reporting where 2 HR professionals would need training time to learn how to calculate each of the new metrics required categorised by ethnicity and disability. The actual time needed to learn these calculations may be lower in practice, given alignment with GPG calculations. 

Existing estimates from previous impact assessments suggest that training time required for 2 Human Resource Managers or Directors to learn how to calculate each of the new required metrics would be 4 hours each. Therefore the best estimate for the training cost for each new reporting requirement is £310 per employer.

It is understood that while not mandatory, a proportion of large employers already voluntarily report their ethnicity pay gaps. Our best estimate for the proportion of employers with 250 or more employees already voluntarily reporting their ethnicity pay gaps is 44%, based on survey findings detailed in the assumptions below, meaning that 56% employers in-scope would be required to begin reporting. This equates to 5,116 employers in England, Scotland and Wales. While they would still face familiarisation costs for the new mandatory requirements, evidence gathered indicates that they would not face significant additional costs of calculating pay gaps. Applying the training costs to each of these 5,116 employers gives total one-off training costs for ethnicity pay gap reporting of £1.585 million.

There is less evidence of employers already voluntarily reporting disability pay gaps, so it is assumed that training costs on how to calculate disability metrics would be faced by the vast majority of employers in-scope. Applying the training costs to all 9,135 employers gives total one-off training costs for disability pay gap reporting of £2.83 million.

Therefore the total one-off costs, including familiarisation and training, for ethnicity pay gap reporting total £3 million, and the total one-off costs for disability pay gap reporting total £4.246 million. This gives a total initial cost of the Mandatory ethnicity and disability pay gap reporting measure as £7.246 million.

Annual costs

Recurring annual costs for employers are expected to resemble existing equivalent annual costs for gender pay gap reporting, including time taken for HR professionals to recalculate metrics and prepare the metrics in a suitable format to be published on the portal, time taken for a senior official to sign-off the metrics before publication, as well as time taken for a communications professional to upload the required information onto the website. Evidence from existing requirements indicates no difference for time taken to re-calculate metrics depending on the size of the employer.

The time required for 2 Human Resource Managers or Directors to re-calculate the required metrics on an annual basis is estimated to be 5.5 hours each, meaning the annual calculation costs per employer are £426 for ethnicity pay gap reporting and £426 for disability pay gap reporting. 

In 2025, the median salary for a Chief Executive or Senior Official was £44.22 per hour excluding overtime.[footnote 37] This cost is uplifted by 30% to cover non-labour costs, as per Standard Cost Model principles, to a rate of £57.49 per hour.

In 2025, the median salary for an IT Professional was £28.98 per hour excluding overtime.[footnote 38] This cost is uplifted by 30% to cover non-labour costs, as per Standard Cost Model principles, to a rate of £37.67 per hour.

The time taken for one Human Resource Manager or Director to prepare the metrics in a suitable format is estimated to be 3 hours, the time required for a Chief Executive or Senior Official to sign off the metrics before publication is estimated to be one hour, and the time required for an IT Professional to upload the required information is estimated to be 0.25 hours. This means the annual publication costs per employer is £183 for ethnicity pay gap reporting and £183 for disability pay gap reporting. The total recurring annual costs of recalculating and publishing required information is £609 for ethnicity pay gap reporting and £609 for disability pay gap reporting.

For the 5,116 employers that will be required to start calculating ethnicity pay gap metrics as they don’t already calculate these voluntarily, along with the costs for all 9,135 employers to report the metrics through the required portal, this will incur total recurring annual costs of £3.852 million. For all 9,135 employers in scope of the requirements to start calculating and reporting disability pay gap metrics, this will incur total recurring annual costs of £5.564 million. This gives total annual recurring costs of the Mandatory ethnicity and disability pay gap reporting measure as £9.416 million.

Business NPV of mandatory ethnicity and disability pay gap reporting: -£88.3 million

Equivalent Annual Net Direct Cost to Business (EANDCB) of mandatory ethnicity and disability pay gap reporting: £10.3 million

Assumptions

This impact assessment captures the costs of organisations calculating and reporting ethnicity and disability pay gaps, but not any voluntary actions to increase self-declared rates of ethnicity and disability status among their employees. 

This analysis assumes that the sample from the 2023 BITC survey on Ethnicity Data Capture and Transparency[footnote 39] is relatively representative of the population of business with 250 or more employees, indicating that 44% of employers already publish data on pay gaps. This assumption seems a fair mid-point compared to results from the survey[footnote 40] shared to businesses, which suggested that only 27% of employers with 250 or more employees already calculate ethnicity pay gaps and only 9% already publish these calculations, but only 18% anticipated any set up costs and 55% anticipated new ongoing reporting costs. A 2024 CIPD survey[footnote 41] on pay, performance and transparency also found that 40% of large employers were already carrying out ethnicity pay gap analysis, further supporting the accuracy of this estimate.

The analysis also assumes that no businesses already calculate and publish data on disability pay gaps. In reality we are aware of a few organisations that already voluntarily publish disability pay gaps, but the number is negligible. Only one respondent to the business survey indicated that they already calculate and report disability pay gaps.

It is assumed that the costs of calculating and reporting ethnicity and disability pay gaps are equal to the costs of calculating and reporting gender pay gaps, based on time requirements in the original gender pay gap reporting Impact Assessment.[footnote 42] This is assumed as possible efficiencies from similarities to existing processes are likely to be offset by additional complexity of ethnicity and disability categorisation and familiarisation with necessary related guidance.

Finally this analysis assumes that organisations that already report their ethnicity pay gaps will not face new costs for one-off training and ongoing calculation (which they are assumed to already know how to do and be doing voluntarily), but will still face costs for familiarisation of the new measures and requirement to publish through the government pay gap reporting portal.

Sensitivity analysis

It is assumed through this analysis that those organisations already collecting and analysing ethnicity data are doing so in a way that will not create new costs when required to publish pay gap reporting metrics. However, it is possible that new costs will be faced if, for example, organisations currently doing this voluntarily use different ethnic groupings or calculate pay gaps using different methodologies. If we instead assume that all organisations in scope would face the new same costs, the overall one-off costs of ethnicity pay gap reporting would be £4.246 million (up from the best estimate of £3 million) and the overall annual costs would be £5.564 million (up from the best estimate of £3.852 million).

It is also assumed through the analysis that no organisations are already carrying out the required actions on disability pay gaps and so all organisations will face new costs of calculating and reporting disability pay gap metrics. In practice, a small minority of firms already publish information on disability pay gaps. If assuming that most firms (90%) will face new costs, but some firms (10%) will be able to produce the required metrics without any additional costs, the overall one-off costs of disability pay gap reporting would be £3.963 million (down from the best estimate of £4.246 million) and the overall annual costs would be £5.175 million (down from the best estimate of £5.564 million).

Measure 2: Mandatory ethnicity and disability workforce reporting

To avoid duplicative counting of costs, various costs that could be considered under the measure of mandatory ethnicity and disability workforce reporting are captured under the measure of mandatory ethnicity and disability pay gap reporting. This includes one-off familiarisation and annually recurring reporting costs, as the requirements under mandatory pay gap reporting require employers to publish details on the breakdown of employees by ethnicity and disability in each pay quartile in their organisation. As the costs of calculating and publishing this information are already captured, that also implicitly captures the costs of reporting on the composition of the workforce by ethnicity and disability.

Therefore the primary costs specifically captured under this measure for the purposes of the impact assessment are the costs of collecting and processing ethnicity and disability data of employees, where organisations don’t already do this voluntarily.

It is understood that while not mandatory, a significant proportion of large employers already voluntarily collect data on the ethnicity of their employees. Our best estimate for the proportion of employers with 250 or more employees already voluntarily collecting data on the ethnicity of their employees is 89%, meaning that 11% employers in scope would be required to begin collecting this data. This equates to 1,005 employers in England, Scotland and Wales.

It is also understood that while not mandatory, a significant proportion of large employers already voluntarily collect data on the disability status of their employees. Our best estimate for the proportion of employers with 250 or more employees already voluntarily collecting data on the disability status of their employees is 71%, meaning that 29% employers in scope would be required to begin collecting this data. This equates to 2,649 employers in England, Scotland and Wales.

The one-off legal and compliance costs for advice on collecting and procession special category data are estimated to be approximately £2,500 per employer, based on analysis of market rates for outsourcing these services. Applying this to the 1,005 employers that will be required to begin collecting ethnicity data (possibly for the first time) gives a total one-off cost for ethnicity workforce reporting of £2.513 million. Applying the same cost to the 2,649 employers that will be required to start collecting disability data gives a total one-off cost for disability workforce reporting of £6.663 million. This gives a total initial cost of the mandatory ethnicity and disability workforce reporting measure as £9.135 million.

The annual recurring costs for the services of an outsourced data protection officer (DPO) are estimated to be approximately £2,000 per employer, based on analysis of market rates for outsourcing DPO services. At present expert advice has been that it looks unlikely that employers will be required to appoint DPO services. However, if they are, applying this to the 1,005 employers that will be required to begin storing and processing ethnicity data gives total annual recurring costs for ethnicity workforce reporting of £2.01 million. Applying the same cost to the 2,649 employers that will be required to start storing and processing disability data gives total annual recurring costs for disability workforce reporting of £5.298 million. This gives total annual recurring costs of the Mandatory ethnicity and disability workforce reporting measure as £7.308 million.

Business NPV of mandatory ethnicity and disability workforce reporting: -£72.0 million

Equivalent Annual Net Direct Cost to Business (EANDCB) of mandatory ethnicity and disability workforce reporting: £8.4 million

Assumptions

This section of the impact assessment captures costs of collecting and processing ethnicity data, but not familiarisation costs or costs of reporting, which are counted under the pay gap reporting section. The impact assessment also captures costs of collecting new data, but not any voluntary actions to increase declaration or reporting rates of characteristics among employees.

This analysis assumes that the sample from the 2023 BITC survey[footnote 43] on Ethnicity Data Capture and Transparency is relatively representative of the population of business with 250 or more employees, indicating that 89% of employers already voluntarily capture data on the ethnicity of their employees. This assumption is supported by findings from the business survey,[footnote 44] in which 82% of employers with 250 or more employees responded that they already collect data on ethnicity of staff and expect no new costs from collecting and reporting this data.

The analysis also assumes that the sample from the 2024 GRiD survey on disability data collection is relatively representative of the population of businesses with 250 or more employees, indicating that 71% of employers already voluntarily capture data on the disability status of their employees. This assumption is supported by findings from the business survey in which 80% of employers with 250 or more employees responded that they already collect data on disability status of staff and expect no new costs from collecting and reporting this data.

It is assumed that entirely new HR systems which are likely to be associated with significant software costs to capture workforce data will not be required, as all in-scope employers are already required to be capturing similar HR data for gender pay gap reporting. Therefore these estimates capture the additional costs of expanding data captured through existing systems.

It is assumed that legal and compliance advice will be required as ethnicity and disability status are classified as ‘special category data’ under UK GDPR, which imposes stricter legal obligations than gender data. Organisations therefore may need external legal advice to draft updated privacy notices and ensure a lawful basis for processing this sensitive data.

It is acknowledged that employers not already collecting disability data may not have a Data Protection Officer (DPO). While we do not think that organisations will need to use these services, if they are required to hire one, it would be to process special categories of data on a large scale, to ensure compliance with data protection laws, write and review data protection policies, provide training on reporting of characteristics, and carry out audits. Organisations are legally required to appoint a DPO if core business activities involve processing large-scale special category data.

The impact assessment assumes that this measure would not be implemented alone, without corresponding regulations on ethnicity and disability pay gap reporting. If the measure were considered in isolation, some of the costs currently captured under the costs of pay gap reporting (for example, senior sign off and publication of data) would need to fall under the overall calculations for workforce reporting.

Sensitivity analysis

It is assumed in this analysis that 89% of employers already capture ethnicity data and 71% of employers already capture disability data and therefore won’t face one-off costs (including legal fees) of new requirements to publish ethnicity and disability workforce data. However it is possible that new formal requirements will mark a change in how these activities are done compared to voluntary actions, and that all organisations in scope will face new costs of legal and compliance advice. If we assume that all organisations in scope will face these new costs once, the overall combined one-off costs would be £22.84 million (up from a best estimate of £2.513 million on ethnicity workforce reporting and £6.663 million on disability workforce reporting).

It is assumed that this measure could create new costs if the services of a Data Protection Officer (DPO) are required, but it is possible that in many cases ethnicity and disability workforce reporting would not be for a primary business purpose and therefore wouldn’t require a DPO, or that most larger organisations already have a DPO for other purposes. Therefore, if we assume that the new measures won’t create DPO-related costs, there would be no annual costs specifically associated with ethnicity and disability workforce reporting (and not already captured in the section above on pay gap reporting).

It is assumed in this analysis that relevant legal and compliance advice fees would be around £2,500 per organisation, based on market research of equivalent services. However, it is possible that these fees might vary in practice based on a variety of factors including business size and existing contracts. If fees were faced at the average rate of £1,000 per organisation – a realistic lower bound – this would reduce one-off costs of ethnicity workforce reporting to £1.005 million (down from a best estimate of £2.513 million) and reduce one-off costs of disability workforce reporting to £2.649 million (down from a best estimate of £6,662,500). If fees were faced at the average rate of £5,000 per organisation – a realistic upper bound – this would increase one-off costs of ethnicity workforce reporting to £5.025 million (up from a best estimate of £2.513 million) and increase one-off costs of disability workforce reporting to £13.245 million (up from a best estimate of £6.663 million).

Measure 3: Ethnicity and disability action plan requirements

The approach taken to setting regulations for ethnicity and disability Action Plans has been done in a way to minimise ongoing burdens to businesses, requiring only a single action plan to capture actions aiming to address gender, ethnicity and disability pay gaps. This means that no additional Action Plans will need to be published above what will already be required through the action plan regulation in the Employment Rights Bill.

Set-up costs and ongoing reporting costs for one action plan per employer in scope of the proposed regulations have already been captured in the Impact Assessment on Requiring large employers to publish Equality Action Plans[footnote 45] published alongside the Employment Rights Bill in October 2024. Therefore the only additional costs on top of the costs captured in the previous impact assessment are familiarisation costs of the requirements to include ethnicity and disability related actions in those plans.

Familiarisation costs of the new action plan requirements are expected to be similar to those estimated in the previous Equality Action Plans Impact Assessment, but due to the similarities of the new proposed regulations on including disability and ethnicity actions in these Action Plans, it is assumed that familiarisation time with be approximately half of that required for familiarisation of the original new action plan requirements.

The time required for 2 Human Resource Managers or Directors and 1 Chief Executive or Senior Official to familiarise themselves with the additional action plan requirements on ethnicity and disability is assumed to be 0.5 hours each, so the best estimate for the total familiarisation cost is £67 per employer with 250 or more employees. Therefore total initial costs of the Ethnicity and disability action plan requirements works out as £616,000 for all employers in England, Scotland and Wales.

Business NPV of mandatory ethnicity and disability Action Plan elements: -£0.6 million

Equivalent Annual Net Direct Cost to Business (EANDCB) of mandatory ethnicity and disability action plan elements: £0.1 million

Assumptions

This impact assessment assumes that the preceding measure on gender Action Plans currently included in the Employment Rights Bill becomes regulation before this proposed measure. If this measure is introduced without the corresponding regulation on gender, the costs should be assumed to be exactly equal to those calculated in the gender action plan impact assessment.[footnote 46]

The analysis assumes that familiarisation costs for the new legislation on ethnicity and disability Action Plan elements will be considered as a single process of familiarisation, rather than 2 separate processes for ethnicity and disability characteristics, so costs will not be duplicated. The analysis also assumes that familiarisation time for the new legislation will be less than for gender Action Plans, given the similarity to existing legislation preceding this measure in the Employment Rights Bill.

It is assumed that set-up costs and ongoing costs of producing Action Plans to tackle ethnicity and disability pay gaps will be covered under the costs of producing gender Action Plans, as only a single Equality Action Plan will be required from employers under the overall package of regulations.

Only the costs of producing Action Plans, rather than subsequent (voluntary) costs of implementing the actions outlined in those plans will be captured in the impact assessment.

Sensitivity analysis

It is assumed that the familiarisation time for the new Action Plan measures (0.5 hours) will be lower than the time estimated for the previous gender Action Plan measure (1 hour) due to similarities with existing legislation and associated time savings. However, if there are no such time savings we would assume that the familiarisation time for the new Action Plan requirements is also 1 hour, giving increased overall initial costs of £1.233 million (up from a best estimate of £616,000).

It is also assumed that only one familiarisation process would be required for new Action Plan requirements, but it is possible that if there are nuances between ethnicity and disability requirements, 2 separate familiarisation processes would be required – one hour of familiarisation for new ethnicity Action Plan requirements and one hour of familiarisation for new disability Action Plan requirements. Once again this would double the familiarisation costs of the new measures, cumulatively giving an upper bound estimate for initial costs of £2.466 million.

Total costs to businesses

Analysis of costs to business for the 3 measures captured in this impact assessment has been conducted in such a manner that the total costs to businesses are a simple sum of the costs identified above. Duplicative costs have been identified and removed at an earlier stage.

The net present value to businesses of the measures has been calculated using standard impact assessment parameters of a 3.5% discount rate over a 10 year appraisal period. This decision has been taken to maintain consistency with other similar legislative measures and due to the lack of any rationale to diverge from standard values specific to the measures considered in this assessment.

The total initial cost of all measures combined, including familiarisation and one-off setup costs, totals £5,997 per business and £16,997,000 for businesses in England, Scotland and Wales. The total annual cost of all measures combined, including all annual repeatable costs, totals £5,218 per business and £16,725,000 for businesses in England, Scotland and Wales.

Applying a 3.5 discount rate to these costs over a 10 year appraisal period gives an estimated total business Net Present Value (NPV) of -£161.0 million. The total Equivalent Annual Direct Cost to Business (EANDCB) is estimated to be £18.8 million.

Taking into account sensitivity analysis from testing various uncertain assumptions gives a low estimate business NPV of -£88.9 million and high estimate business NPV of -£215.3 million.

A full list of assumptions made throughout this cost analysis is set out below, alongside the justification for each assumption and outcomes of any associated sensitivity analysis:

Assumption	Justification	Related sensitivity analysis
Approximately 44% of employers in scope already voluntarily publish ethnicity pay gap data, so will face reduced costs as a consequence of the new pay gap reporting requirements.	Based on data from the cited 2023 BITC survey and corroborated by findings from the cited 2024 CIPD survey and government-issued business survey.
No businesses already publish data on disability pay gaps and so all organisations in scope will face new costs for this.	While there are some individual instances of publication, there is very little evidence of widespread publication of disability pay gaps. This was corroborated by responses to the government-issued survey.	If we instead assume that 10% of organisations will be able to produce the required disability metrics without any additional costs, the overall one-off costs of disability pay gap reporting would be £3,963,000 (down from the best estimate of £4,246,000) and the overall annual costs would be £5,175,000 (down from the best estimate of £5,564,000).
Costs of EPG and DPG reporting resemble existing costs of previous GPG reporting.	Possible efficiencies from similarities to existing processes are likely to be offset by the additional complexity of ethnicity and disability categorisation and familiarisation with necessary related guidance.
Organisations that already report their ethnicity pay gaps will not face new costs for one-off training and ongoing calculation but will still face costs for familiarisation of the new measures and requirement to publish through the government pay gap reporting portal.	As above, possible efficiencies from similarities to existing processes are likely to be offset by the additional complexity of ethnicity and disability categorisation and familiarisation with necessary related guidance.	If organisations already voluntarily reporting are required to change calculation methodologies, they may also face new costs. If we instead assume that all organisations in scope would face the new same costs, the overall one-off costs of ethnicity pay gap reporting would be £4,246,000 (up from the best estimate of £3,000,000) and the overall annual costs would be £5,564,000 (up from the best estimate of £3,852,000).
The time required for 2 Human Resource Managers or Directors to familiarise themselves with new pay gap reporting requirements is 2 hours each.	These were the times estimated based on research and interviews for the original gender pay gap reporting impact assessment. They were not challenged by employers at the time of the original assessment and consultation, and there is no evidence found from the gender pay gap reporting PIR indicating that this was an inaccurate approach to costing.
The training time required for 2 Human Resource Managers or Directors to learn how to calculate each of the new required metrics would be 4 hours each.	These were the times estimated based on research and interviews for the original gender pay gap reporting impact assessment. They were not challenged by employers at the time of the original assessment and consultation, and there is no evidence found from the gender pay gap reporting PIR indicating that this was an inaccurate approach to costing.
The time required for 2 Human Resource Managers or Directors to re-calculate the required metrics on an annual basis is estimated to be 5.5 hours each.	These were the times estimated based on research and interviews for the original gender pay gap reporting impact assessment. They were not challenged by employers at the time of the original assessment and consultation, and there is no evidence found from the gender pay gap reporting PIR indicating that this was an inaccurate approach to costing.
The average hourly pay of chief executives required to sign off published data for organisations in scope of these regulations is the same as the median nationwide chief executive hourly pay (£44.22 per hour as provided by ONS ASHE data, standard occupational code 111).	This is assumed to maintain a consistent approach with previous impact assessments on similar legislative measures, including the previous gender pay gap reporting impact assessment and gender action plan impact assessment.	It is possible that chief executive pay for the organisations in scope would be much higher than the nationwide median, as the regulations only apply to larger employers and evidence shows that firm size is the most influential factor in determining CEO pay.[footnote 47] If instead of the median chief executive pay, we assume chief executives in scope are paid similar to the 80th percentile of the ASHE distribution (£74.29 per hour) this would increase recurring annual costs of both ethnicity and disability pay gap reporting from £609 per organisation to £648 per organisation, and increase the initial costs of action plans from £67 per organisation to £87 per organisation.
The average hourly pay of IT professionals required to upload data for organisations in scope of these regulations is the same as the median nationwide IT Professional hourly pay (£28.98 per hour as provided by ONS ASHE data, standard occupational code 213).	This is also assumed to maintain a consistent approach with previous impact assessments on similar legislative measures, including the previous gender pay gap reporting impact assessment. No evidence found from the gender pay gap reporting PIR indicated that this was an inaccurate approach to costing.	ASHE data indicates a range of median hourly pay from £23.83 per hour for IT quality and testing professionals to £31.07 for IT business analysts, architects and systems designers and therefore the potential cost impact from this task being completed by a more or less skilled IT professional for 15 minutes per year is negligible. In practice the task is likely to be completed by a range of different IT professionals.
The average hourly pay of HR Managers or Directors required to prepare the data for organisations in scope of these regulations is the same as the median nationwide HR Manager or Director hourly pay (£28.98 per hour as provided by ONS ASHE data, standard occupational code 1136).	This is assumed to maintain a consistent approach with previous impact assessments on similar legislative measures, including the previous gender pay gap reporting impact assessment and gender action plan impact assessment. No evidence found from the gender pay gap reporting PIR indicated that this was an inaccurate approach to costing.
Approximately 89% of employers in scope already voluntarily capture data on the ethnicity of their employees, so will face reduced costs as a consequence of the new workforce reporting requirements.	Based on data from the cited 2023 BITC survey and corroborated by findings from the government-issued business survey.	If the new formal requirements marked a change in how these activities are conducted compared to voluntary actions, all organisations in scope might face new costs of legal and compliance advice. This would likely only be incurred once per business for both ethnicity and disability data, so the overall combined one-off costs would be £22.84 million (up from a best estimate of £2.513 million on ethnicity workforce reporting and £6.663 million on disability workforce reporting).
Approximately 71% of employers in scope already voluntarily capture data on the disability status of their employees, so will face reduced costs as a consequence of the new workforce reporting requirements.	Based on data from the cited 2024 GRiD survey and corroborated by findings from the government-issued business survey.
Entirely new HR systems which are likely to be associated with significant software costs to capture workforce data will not be required.	All in-scope employers are already required to be capturing similar HR data for gender pay gap reporting, and evidence suggests that a significant majority of large employers are already capturing this data.
Legal and compliance advice will be required if organisations are collecting ethnicity and disability for the first time, and would cost approximately £2,500 per organisation.	Ethnicity and disability status are classified as ‘special category data’ under UK GDPR, which imposes stricter legal obligations than gender data. Cost estimates are based on market research of the price of equivalent services.	Fees might vary in practice based on a variety of factors including business size and existing contracts. If fees were faced at the average rate of £1,000 per organisation – a realistic lower bound – this would reduce one-off costs of ethnicity workforce reporting to £1,005,000 (down from a best estimate of £2,513,000) and reduce one-off costs of disability workforce reporting to £2,649,000 (down from a best estimate of £6,662,500). If fees were faced at the average rate of £5,000 per organisation – a realistic upper bound – this would increase one-off costs of ethnicity workforce reporting to £5,025,000 (up from a best estimate of £2,513,000) and increase one-off costs of disability workforce reporting to £13,245,000 (up from a best estimate of £6,663,000).
In some instances it is possible that employers will need to pay for the services of a Data Protection Officer (DPO).	Organisations are legally required to appoint a DPO if core business activities involve processing large-scale special category data.	If ethnicity and disability pay gap reporting is not classified as a ‘core activity’, or if organisations already have an assigned DPO, then additional costs would not be incurred.
This measure would not be implemented alone, without corresponding regulations on ethnicity and disability pay gap reporting.	This package of measures is intentionally being introduced together due to interlinked benefits and processes from the measures, so it is unlikely that any one measure would be introduced without the others.	Cost analysis would need to be restructured to move some of the costs currently captured under pay gap reporting to be covered under workforce reporting – this does not affect overall low or high cost estimates for this impact assessment.
The preceding measure on gender Action Plans currently included in the Employment Rights Bill becomes regulation before this proposed measure, so some action plan requirements will already exist when these regulations are introduced, reducing additional publication burdens.	Political and legislative factors influencing the likelihood of introduction of Gender Action Plan regulations are assessed to be equivalent (or very similar to) the factors influencing the likelihood of introduction of Ethnicity and Disability Action Plan requirements.
Familiarisation time for the new legislation will be less than for gender Action Plans, given the similarity to existing legislation preceding this measure in the Employment Rights Bill.	As noted above, the requirements on each characteristic will be identical to preceding requirements on gender Action Plans, so efficiencies are expected in the familiarisation process.	If there are no such time savings we would assume that the familiarisation time for the new Action Plan requirements would also be 1 hour (as outlined in the gender Action Plan IA), giving increased overall initial costs of £1,233,000 (up from a best estimate of £616,000).
Familiarisation costs for the new legislation on ethnicity and disability Action Plan elements will be considered as a single process of familiarisation, rather than 2 separate processes for ethnicity and disability characteristics, so costs will not be duplicated.	The complexity of ethnicity and disability characteristics is less relevant to action plans as no statistical work or quantitative calculation is required, and the requirements on each characteristic will be identical.	It is possible that if there are nuances between ethnicity and disability actions, 2 separate familiarisation processes would be required – one hour of familiarisation for new ethnicity Action Plan requirements and one hour of familiarisation for new disability Action Plan requirements. Once again this would double the familiarisation costs of the new measures, cumulatively giving an upper bound estimate for initial costs of £2,466,000.

Public sector costs

To calculate the costs to the public sector, we have focused on the costs of expanding the existing GPG reporting service. This primarily consists of the staff costs. Ongoing maintenance costs will be budgeted for as part of the existing service budget.

The estimated one-off cost of expanding the online reporting service to include ethnicity and disability pay gap data is £235,000. This estimate has been based on modifications being developed and designed in-house and covers staff costs. Ongoing costs would be hosting and maintenance (developer) costs. These costs are part of the existing GPG service and are unlikely to significantly increase with the addition of disability and ethnicity pay reporting. 

After the initial digital build and implementation, staff costs more generally are likely to fluctuate throughout the reporting cycle. Based on the experience from GPG reporting these would be impossible to quantify across the 5 years since implementation. The number of staff working on GPG reporting has fluctuated dramatically across the 5 years, and continues to do so within the year, with resources being drawn flexibly around reporting deadline dates. Similarly, the costs for enforcement of the regulations are not included. This is carried out by the independent EHRC and is therefore managed under their own budget. 

As ethnicity pay gap and disability pay gap reporting build on the experience of gender pay reporting it is likely the implementation and day to day costs will be lower, as both will benefit from the work developing and implementing the GPG reporting service first and the economies of scale. 

Impact on small and micro businesses

The measures outlined in this impact assessment apply only to organisations with 250 or more employees, making all small and micro businesses (SMBs) exempt from requirements. As a result, there are zero expected costs for SMBs.

Costs and benefits to households’ calculations

There are expected to be no direct costs or benefits to households resulting from these policies, and no business costs are expected to be passed through to households as there is no evidence of pass-through impacts from evaluations of gender pay gap reporting in the UK or elsewhere. Therefore both the Household Net Present Value (NPV) and the Equivalent Annual Net Direct Costs to Households (EANDCH) are £0 million.

Some indirect impacts on households may arise from the actions businesses take on the back of information and consequences from pay gap and workforce reporting measures. The primary indirect impact is expected to be a decrease in ethnicity and disability pay gaps, caused by a relative increase in income for disabled and ethnic minority employees.

Overall impacts on average wages and household incomes are uncertain, as a closing of the pay gap can manifest in multiple ways. Evidence from the Gender Pay Gap Reporting Post-Implementation Review found that the gender pay gap decreased in size as a result of the measure, but the primary mechanism through which this was achieved was a slowing of growth of male wages having a small negative effect on average wages. If ethnicity and disability pay gaps also narrow through slowing in wage growth for the currently higher paid groups, this would also have a negative impact on average wages. However, given that these policies are not in place elsewhere around the world, there is no evidence to indicate how this will play out in the cases of ethnicity and disability pay gaps. It is equally plausible that these gaps could close through an increase in the wage growth for the currently lower paid groups, which would be associated with an overall increase in average wages.

Business environment

The expanded regulation should have marginal effects at most on the wider business environment. It will not place any regulation that will affect a company’s ability to bring a new product or service to market, nor will it require changes to the production, provision or sale of any existing goods or services. Specific sectors may be more significantly impacted than others. For example, sectors providing consultancy related to HR may have to change both their own reporting practices and the services and products they provide. However, these impacts should still be minimal as the familiarisation and implementation costs, such those arising from a HR specialists investing time to understand what the legislation requires and staff training costs, will be lower due to transferable knowledge and practices from gender pay gap reporting.

Actions have been taken to minimise any potential negative impacts on the business environment. This includes exempting all organisations with fewer than 250 employees to reduce costs to SMBs and barriers to market entry, as well as providing and signalling information and guidance to businesses at the earliest possible opportunity to support businesses certainty, and promote investor and market confidence.

Domestic competition

Generally the reporting and publishing of pay gap information for disability and ethnicity will address information gaps and create reputational incentives to improve performance. We do not expect it to create any disincentives for companies to compete within the labour market or in those specific sectors related to the HR sector of the services market.

UK internal market

The measures are intended to apply to Great Britain. This means there could be potential divergence on the UK labour market. There is a very slight chance that the different approach between Great Britain and Northern Ireland could influence decisions on where to base staff for reporting purposes. This could result in businesses choosing to locate in NI to avoid the need to comply with the regulations. However this is likely to be a very minor consideration if it is factored in at all. 

There may also be variations for public bodies in Great Britain, since the UK government legislation will only apply to public sector organisations in England (and some specified cross-border authorities), with separate devolved arrangements for Scottish and Welsh public authorities. However, this is unlikely to have a significant impact. 

International competition 

The possible impact on employers in Great Britain will be dependent on the size of the extra cost, the costs in other countries who have reporting requirements and will vary across sectors. It could make Great Britain a less attractive place to base staff, particularly for companies operating primarily in countries with lower diversity and inclusion reporting requirements. However, this administrative burden or reputational risk is likely to be a small consideration compared to others when making investment decisions.

Trade implications

These regulations will primarily affect the labour market of Great Britain and are not expected to have an impact in the trade of goods. 

Environment: Natural capital impact and decarbonisation

These regulations are expected to have no direct interaction with natural capital or other environmental or climate issues.

Wider impacts 

Equality

The policy should bring non monetised benefits to society and individuals by helping remove disparity in the pay and progression of people based on disability status or ethnic background. The ethnicity and disability pay gaps are part of a broader system of socioeconomic inequality that often affects disabled people and ethnic minority groups disproportionately, including lower-paid jobs, higher unemployment rates, and poorer housing. For the individual affected, barriers to recruitment and progression can negatively impact self-esteem, reduce financial resilience, undermine integration, and contribute to overall income inequality. This has been consistently linked to lower national happiness, lower social trust, and worse health and mental health outcomes for the affected groups. 

Persistent ethnicity and disability pay gaps can be compounded by wider socioeconomic inequalities affecting many, though not all, disabled people and those from ethnic minority backgrounds. This can cause higher risks of poverty, lower wealth and, for some, higher unemployment and overcrowded or poor-quality housing. 

Lower incomes weaken financial resilience by constraining savings and increasing exposure to financial shocks, which is associated with poorer mental health and lower self‑esteem, though causal pathways are complex and vary across groups. Lower comparative income also lowers their potential spending power, limiting their ability to engage in society on par with peers who do not face these barriers. This can have a negative impact on social integration.

Closing pay gaps should help address disadvantages faced by these groups and provide benefits to society in terms of greater fairness, and equality. This could play a part in fostering a more inclusive and meritocratic society in Great Britain.

UK region

To understand how the business burden is distributed across the country it is key to understand how businesses in scope of the regulations are geographically distributed across UK regions. This is also broken down by broad industry category in the following section.

As the table below sets out, while the number of businesses falling into scope of this regulation are disproportionately located in London and the South East, this is representative of the geographical spread of business location more generally in the UK. When we look instead at the proportion of businesses in each region that will be in scope of the regulations, the variance between regions is relatively low. The region with the highest proportion of businesses with 250 or more employees is the North East, with 0.46%, and the regions with the lowest proportion are the East and South West, with 0.32%.

UK Region	Number of businesses with 250 or more employees	Percentage of businesses in region with 250 or more employees
North East	240	0.46%
North West	835	0.40%
Yorkshire and The Humber	590	0.42%
East Midlands	560	0.41%
West Midlands	660	0.40%
East	695	0.32%
London	1,985	0.42%
South East	1,225	0.38%
South West	515	0.32%
Wales	230	0.36%
Scotland	510	0.43%

Source: ONS, UK Business (2025), Table 14, Legal Status Category 1

Industry

When the distribution of businesses with 250 or more employees is considered by broad employment category, there is a greater level of variance seen. In some industries the proportion of businesses with 250 or more employees and therefore affected by these regulations is very low (Public administration and defence: 0.00%, Construction: 0.10%, Property: 0.17%) whereas in other industries the number of businesses affected is around or above 1% (Production: 1.12%, Finance and Insurance: 0.96%), as shown below.

Industry Group	Number of businesses with 250 or more employees	Percentage of businesses in industry group with 250 or more employees
Agriculture, forestry and fishing	90	0.36%
Production	1,405	1.12%
Construction	305	0.10%
Motor trades	210	0.34%
Wholesale	505	0.57%
Retail	445	0.27%
Transport and Storage (inc. postal)	380	0.48%
Accommodation and food services	690	0.50%
Information and communication	540	0.30%
Finance and insurance	435	0.96%
Property	165	0.17%
Professional, scientific and technical	875	0.24%
Business administration and support services	1,160	0.65%
Public administration and defence	0*	0.00%
Education	145	0.42%
Health	605	0.78%
Arts, entertainment, recreation and other services	280	0.23%

*values rounded to base 5, so there may be one or more businesses in scope in this industry. Source: ONS, UK Business (2025), Table 12, Legal Status Category 1

Risks and assumptions

The government will monitor and mitigate risks through the implementation and ongoing delivery of the reporting regime. We have set out identified risks below. These are in part based on the experience of the implementation and operation of  gender pay gap reporting.

The current gaps in evidence specifically relating to ethnicity and disability pay gap reporting mean we cannot fully anticipate costs, benefits, or behavioural responses across sectors. This weakens the evidence base for policy and creates risks of misestimating the effects on productivity, recruitment, retention and wage dynamics. To mitigate this, we intend to undertake future analysis and modelling to better quantify policy impacts. Structured economic analysis and evaluation will allow iterative refinement as more evidence becomes available.

There is a risk that employers may report inaccurate pay gap data due to a variety of reasons, including discrepancies in collecting and categorising personal data, misinterpreting the methodology, and making errors in the calculations. These risks may be greater for ethnicity and disability pay gap data than is currently the case for gender pay gap reporting, due to such data being more sensitive and open to greater subjectivity given its reliance on employee self-declaration. The government will consider mitigations in the design and implementation aspect of the policy, which may include:

• mandating standardised definitions and methods
• providing detailed step by step instructions on how to make the calculations (with illustrative examples)
• requiring publication of disclosure rates
• embedding automated data validation with enforcement activity potentially also looking at suspect data (as it has done for GPG reporting)

Where enforcement is limited or stakeholder attention is weak, there is little pressure on employers to act beyond minimal compliance. This risks low declaration, poor quality reporting and limited follow‑through. Mitigation should combine EHRC action within its powers,[footnote 48] targeted communications that make expectations clear, and the public naming of non‑compliers to create reputational incentives. Sector‑specific engagement, visible leadership endorsement, and accessible reporting tools can further raise salience and improve compliance.

There is a risk of gaming or superficial responses, such as reclassifying roles or outsourcing functions to manipulate headline figures without addressing underlying issues. Clear guidance on definitions, boundaries and reporting practices, supported by audit and verification where appropriate, can reduce these behaviours. Requiring narrative explanations and Action Plans alongside metrics sets expectations for genuine improvement rather than cosmetic changes. Consistency in job families, grading and role categorisation across reporting periods will also limit scope for manipulation.

Partnerships are a potential gap in the policy, as partners are not classed as employees and will not therefore be included within pay gap calculations. This means  equity partners and LLP members, who are non-salaried, will not be included in pay gap reports even though partnership structures are common in high paid professional services, such as legal, accountancy and medical among others. Partners are typically the highest‑paid and least representative cohorts, and their exclusion can understate headline gaps, distort comparisons with firms using an employee model, and mask progression barriers to partnership. It may also incentivise reclassification of senior roles to sit out of scope. While including partners poses legal and methodological challenges given profit‑share remuneration and small numbers, this limitation is difficult to address directly without increasing the complexity of the legislation. Instead, the government will mitigate this risk with guidance and encourage organisations with this corporate structure to recognise the issue through clear narrative and supplementary representation reporting.

External shocks – such as sectoral restructuring, inflation or changes in labour demand – can shift pay gaps independently of employer behaviour, making year‑on‑year movements hard to interpret. Mitigation requires multi‑year tracking to distinguish structural trends from cyclical noise and sector‑specific analysis to contextualise changes. Communicating these caveats clearly helps prevent over‑interpretation of single‑year changes and supports more balanced performance assessment.

Low or uneven declaration undermines data quality and trust, particularly where employees have privacy concerns or where employers lack robust data systems. Privacy by design, clear communications about purpose and safeguards, and the use of appropriate lawful bases for processing can support responsible data collection. Minimum reporting thresholds, multi‑year trend analysis and cautious interpretation reduce the risk of misleading figures. Culture change – built through transparency, engagement and visible use of the data to drive positive action – is key to improving participation and data completeness.

Small sample sizes make results volatile and can lead to misleading conclusions or inadvertent disclosure risks. Setting thresholds, aggregating where appropriate, and emphasising multi‑year trends can stabilise insights. Where numbers are tight, organisations should prioritise careful commentary, explain statistical limitations, and avoid drawing strong conclusions from small, noisy datasets.

Aggregation can mask important differences between ethnic groups, producing a “White vs ethnic minority” headline that obscures distinct experiences and outcomes. Mitigation involves publishing the headline metric but also disaggregating by specific ethnic groups where numbers permit, with clear explanations of any limitations and confidentiality constraints. This approach balances transparency with statistical robustness and protects against oversimplified narratives.

Intersectional gaps – such as differences at the intersection of ethnicity, gender, disability or age – are often concealed by averages. Optional disaggregation, where numbers allow, and qualitative narrative can illuminate these patterns. Case studies, employee voice mechanisms and targeted diagnostics help identify barriers that may not appear in aggregated data. Safeguards should prevent identification risks in small groups.

There is a persistent risk that pay gap metrics are misinterpreted as evidence of equal pay breaches or individual discrimination cases. Clear guidance and communications must explain what pay gaps do and do not measure: they reflect average differences, not legal compliance with equal pay, and they require separate processes to assess discrimination. Awareness raising communications, advice for HR and communications teams, and alignment with EHRC guidance, will help maintain clarity and avoid conflation.

Confounding factors such as role mix, geography, grading structures and sector‑specific shocks can drive differences in pay gaps irrespective of fairness or discrimination. Robust diagnostics – examining grade distribution, occupational mix, part‑time vs full‑time patterns and location effects – should accompany headline figures. Continuity of reporting and consistent methodology across years allow meaningful comparisons and more reliable interpretation.

Finally, pay gap reporting alone cannot directly resolve the underlying causes of inequality. While reputational pressure and well‑constructed Action Plans can address some drivers within organisations – such as progression pipelines, recruitment practices and flexible working – wider systemic issues in equality will need to be managed through other policies working in concert with reporting. It is important to set realistic expectations, position reporting as one tool within a broader equality strategy, and track progress over multiple years.

1. Ethnicity pay gaps, UK: 2012-2022, Office for National Statistics. November 2023 ↩

2. Occupation, working pattern, employment sector, age, sex, disability status, marital status, whether an individual has dependent children, highest qualification, geographical region and country of birth ↩

3. ONS, Annual Population Survey ↩

4. Disability pay gaps in the UK: 2014 to 2023, Office for National Statistics, 2024.  ↩

5. The gap narrows least for people with progressive illnesses, and increases for those with ‘severe disfigurements, skin conditions, allergies’, Ibid. ↩

6. Employment of disabled people 2023, Department of Work and Pensions, 2024. ↩

7. ‘The median hourly pay for disabled men was £14.44, compared with £17.08 for non-disabled men. The median hourly pay for disabled women was £13.11, compared with £14.50 for non-disabled women.’, taken from Disability pay gaps in the UK: 2014 to 2023. ↩

8. Employment of disabled people 2023, Department of Work and Pensions, 2024. ↩

9. ‘The disability unemployment rate was 7.1% in Q2 2023, compared to 3.5% for non-disabled people.’ and ‘On average, between 2014 and 2022, disabled workers moved out of work at nearly twice the rate (8.9%) of non-disabled workers (5.0%). Workless disabled people moved into work at nearly one-third of the rate (10.0%) of workless non-disabled people (27.3%)’, Employment of disabled people 2023.  ↩

10. ‘Moving beyond ‘the cheapest kind of understanding’: enriching policy responses to BAME mental health inequality.’, Harvey, Bath Spa university, 2021 ↩

11. Ethnicity pay gaps, UK: 2012 to 2022  ↩

12. Parker Review, 2025  ↩

13. Reports of the extra costs include: ‘Disability price tag 2024’, Scope, 2024. The financial wellbeing of disabled people in the UK: The extra costs of disability’, University of Bristol and Financial Fairness Trust, 2023 ↩

14. ‘Marmot review ten years on’, Michael Marmot, 2020 ↩

15. What are Healthcare inequalities?  ↩

16. ‘Illustrating the relationship between poverty and NHS services’, Kings Fund, 2024 ↩

17. ‘Nine major challenges facing health and care in England’, The Health Foundation, 2023 ↩

18. Press release, Business in the Community, 2025 ↩

19. ‘Post-implementation review of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017’, Cabinet Office, 2023 ↩

20. Brigitte Rohwerder, Diversity and Inclusion within Organisations, K4D Helpdesk Report (Brighton: Institute of Development Studies, 17 May 2017).  ↩

21. When enforcement was suspended on gender pay gap reporting for the 2019-20 reporting year, overall compliance fell from 99.8% to 64.1%. ↩

22. Equality (Race and Disability) Bill: mandatory ethnicity and disability pay gap reporting - GOV.UK ↩

23. ‘The employment statistics of severely disabled people: description and research potential’, Journal for Labour Market Research, 2025 ↩

24. ‘Health and wellbeing of UK armed forces veterans: Veterans’ Survey 2022, UK ↩

25. [Disability, England and Wales: Census 2021](https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandwellbeing/bulletins/disabilityenglandandwales/census2021#:~:text=Meanwhile%2C%20London%20(15.7%25%2C,5.2%20to%207.2%20percentage%20points.) ↩

26. ‘The employment of disabled people, 2024’, Department of Work and Pensions, 2024 ↩

27. ‘There are around 8,000 large businesses (defined as businesses with 250 or more employees), accounting for 0.2% of businesses but 40% of employment and 48% of turnover’, ‘[Business statistics](https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf#:~:text=There%20are%20around%208%2C000%20large%20businesses%20(defined,40%25%20of%20employment%20and%2048%25%20of%20turnover.)’, House of Commons Library, 2024 ↩

28. Bennedsen, Simintzi, Tsoutsoura and Wolfenzon (2022). Do Firms Respond to Gender Pay Gap Transparency? ↩

29. Department of Employment and Labour, Republic of South Africa (2025) 25th Commission for Employment Equity (CEE) Annual Report ↩

30. Office for Equality and Opportunity (formerly Government Equalities Office), Post-implementation review of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (2023) ↩

31. Blundell, J., Duchini, E., Simion, S. and Turrell, A. (2021, revised 2024) Pay Transparency and Gender Equality ↩

32. It will also apply to public bodies in England with 250 or more employees.  ↩

33. ONS, UK Business (2025), Table 14, Legal Status Category 1 and 7 ↩

34. In-house survey on the costs of Ethnicity and Disability Pay Gap Reporting provided by the Office for Equality and Opportunity to businesses (2025) ↩

35. Office for Equality and Opportunity (formerly Government Equalities Office), Gender Pay Gap Reporting Impact Assessment (2016) ↩

36. ONS, Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14 (2025) ↩

37. ONS, Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14 (2025) ↩

38. ONS, Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14 (2025) ↩

39. Business in the Community, Race at Work Charter Ethnicity Data Capture and Transparency (2023) ↩

40. In-house survey on the costs of Ethnicity and Disability Pay Gap Reporting provided by the Office for Equality and Opportunity to businesses (2025) ↩

41. CIPD, Pay, performance and transparency survey (2024) ↩

42. Office for Equality and Opportunity (formerly Government Equalities Office), Gender Pay Gap Reporting Impact Assessment (2016) ↩

43. Business in the Community, Race at Work Charter Ethnicity Data Capture and Transparency (2023) ↩

44. In-house survey on the costs of Ethnicity and Disability Pay Gap Reporting provided by the Office for Equality and Opportunity to businesses (2025) ↩

45. Office for Equality and Opportunity, Equality Action Plans Impact Assessment (2024) ↩

46. Office for Equality and Opportunity, Equality Action Plans Impact Assessment (2024) ↩

47. Blanes, F., de Fuentes, C. and Porcuna, R. (2019) Executive remuneration determinants: New evidence from meta-analysis ↩

48. Negotiations on the EHRC’s role on enforcement for ethnicity and pay gap reporting are on-going. However, policy is being designed to align broadly with those in place for GPG, which are set out on the EHRC’s website here.  ↩