Preparing for new regulations on ethnicity and disability

Draft Equality (Race and Disability) Bill

The King's Speech of 17 July 2024 outlined the UK government's legislative agenda, including priorities aimed at promoting security, fairness, and opportunity for all. Among the 40 proposed bills is the draft Equality (Race and Disability) Bill. This draft bill requires organisations to expand their focus on fairness and equality in the workforce.

Important update: On Tuesday 18 March 2025, the Government launched its consultation on the Equality (Race and Disability) Bill: mandatory ethnicity and disability pay gap reporting.

Join us at PwC's Ethnicity and Disability Pay Gap Reporting Webinar where we will go through the Government consultation and its impacts for firms in more detail.

Date: Thursday 3 April
Timings: 9.30 - 10.30am

What is included in the draft Equality (Race and Disability) Bill?

Enshrining in law the full right to contractual equal pay for ethnic minorities and disabled people

Currently, the Equality Act 2010 (as amended) provides that men and women should receive ‘equal pay’ if they perform ‘equal work’. Under the legislation, a failure to provide equality of contractual terms can be very costly and cause extensive reputational damage to organisations.

The new Government plans to extend the legal requirement of equal pay for equal work to both ethnic minorities and disabled people. Extending the legal right of contractual equal pay to ethnic minorities and those with disabilities will provide a specific framework for claims for individuals who have been paid differently to comparable colleagues.

Introducing mandatory ethnicity and disability pay gap reporting

Mandatory gender pay gap reporting was introduced in 2017 for organisations with 250 employees or more. An increasing number of organisations have voluntarily reported on pay gaps beyond gender as part of their broader focus on Diversity, Equity and Inclusion (“DE&I”).

The draft Equality (Race and Disability) Bill plans to extend gender pay gap reporting such that employers with 250 employees or more will also be required to disclose ethnicity and disability pay gaps. This enhanced transparency will identify pay disparities at an organisation-wide level and prompt employers to constructively consider why pay gaps exist and how to tackle them.

Additionally, changes to the way equal pay is enforced and the enforcement body are expected to be consulted on.

Actions to take now

Ensure you have collected ethnicity and disability data, in line with applicable legal safeguards, so you can analyse your equal pay risks and calculate pay gaps.

Assess the quantity and quality of the ethnicity and disability data you have collected. We recommend aiming for disclosure rates of at least 80% to ensure that data is representative of your workforce.

Review your grading / job levelling structure to ensure you can appropriately compare roles and pay within your organisation.

Calculate your ethnicity and disability pay gaps to understand the state of fairness and equality within your workforce and to prepare for mandatory disclosure.

Conduct an equal pay review to identify potential equal pay risks within your workforce, considering differences based on gender, ethnicity and disability as a minimum. Any pay disparities should be tested against potential “material factors” and an action plan to resolve unjustifiable differences should be implemented.

We would strongly recommend conducting any equal pay analysis with the support and guidance of experienced employment lawyers.This will ensure that the highly complex legal framework for equal pay is considered and embedded within all stages of the review, and will also enable legal advice on potential risk areas to be legally privileged. This allows organisations to analyse their data, results and risk profile confidentially. We have a team of employment lawyers who work alongside our DE&I specialists to provide expert legal advice on equal pay matters.

How we can help

We have a multidisciplinary team of DE&I advisors, lawyers, reward specialists, data analysts and HR systems consultants that come together to provide end-to-end support for achieving your DE&I ambitions.

Collect diversity demographic data

Collecting diversity data (e.g. ethnicity) from employees comes with a number of considerations, from data protection to communications. We help organisations determine what to collect, ensure legal compliance, review HR systems and engage their workforce in a data collection campaign.

Job levelling

Reviewing and/or creating job levelling structures helps ensure robust and clear levels within the organisation, thereby creating a consistent structure through which to identify legally comparable roles and ensure pay equality. This can be particularly helpful for businesses who have grown rapidly or through acquisition.