Equality and Inclusion Bill

The Equality (Race and Disability) Bill 2025: A New Era for Pay Equity in the UK

The United Kingdom is poised for a significant advancement in its equality legislation with the introduction of the draft Equality (Race and Disability) Bill 2025. This proposed legislation aims to build upon the foundations of existing equality laws, specifically the Equal Pay Act 1970 and the Equality Act 2010, by addressing persistent pay disparities experienced by ethnic minority and disabled individuals. Currently in its draft stage, with consultations having been launched in March 2025, the Bill signals a strong governmental commitment to fostering a more equitable and transparent working environment across the nation. The impetus behind this Bill stems from a recognition that while the Equality Act 2010 provides a comprehensive framework for protection against discrimination based on various protected characteristics, including race and disability, specific measures are needed to tackle systemic pay gaps. Data consistently reveals that most ethnic minority groups, on average, earn less than their White British peers, and disabled people generally have lower incomes than non-disabled individuals. The draft Equality (Race and Disability) Bill seeks to directly confront these disparities by introducing mandatory reporting requirements and strengthening enforcement mechanisms, thereby enhancing transparency and prompting employers to proactively identify and address the root causes of unequal pay. This article will delve into the anticipated provisions of the Equality (Race and Disability) Bill, exploring its key requirements, the employers it will cover, the enhanced rights it will afford employees, potential penalties for non-compliance, its projected timeline, and the crucial steps employers can take to prepare for its eventual enactment. While the Bill remains in its draft form and specific details may evolve through parliamentary debate and further consultation, its core principles represent a pivotal step towards a more inclusive and fair labour market in the UK.

Overview

The Equality (Race and Disability) Bill 2025 represents a landmark legislative initiative in the United Kingdom, designed to significantly bolster the existing legal framework for pay equity. Its primary objective is to extend the principles of pay transparency and equal pay, which have historically focused on gender, to encompass race and disability. The Bill is a direct response to the ongoing challenges faced by ethnic minority and disabled individuals in achieving fair remuneration, despite existing anti-discrimination laws. By introducing new obligations for employers, the government aims to create a more level playing field and drive meaningful change in workplace practices. At its core, the Bill proposes two major legislative changes. Firstly, it will introduce mandatory ethnicity and disability pay gap reporting for large employers, mirroring the successful model established for gender pay gap reporting in 2017. This requirement is intended to shine a light on disparities within organisations, compelling businesses to confront and explain any differences in average pay between different racial and disability groups. The transparency generated by such reporting is expected to act as a catalyst for employers to investigate underlying causes, such as recruitment practices, promotion opportunities, and unconscious bias, and to develop strategies to close these gaps. Secondly, the Bill aims to extend and strengthen the right for ethnic minority and disabled people to make equal pay claims. This provision seeks to provide a more robust legal avenue for individuals who believe they are not receiving equal pay for equal work compared to colleagues who do not share their protected characteristics. This extension is crucial, as current equal pay legislation, while broad, has primarily been utilised in the context of gender. The Bill also intends to establish a dedicated Equal Pay Regulatory and Enforcement Unit, which will be tasked with improving the enforcement of equal pay provisions across the board. This new unit is expected to provide greater oversight and ensure that employers are held accountable for compliance, thereby enhancing the effectiveness of the legislation. Furthermore, the Bill is expected to include measures to prevent employers from using outsourcing of services as a means to circumvent equal pay obligations. It also commits to protecting the ability to draw on equal pay comparators where workers' terms and conditions can be attributed to a single source, ensuring that provisions previously derived from EU law remain enshrined in UK law. The overarching goal of the Equality (Race and Disability) Bill is not merely to impose new regulations but to foster a culture of fairness and equality in the workplace. By making pay disparities visible and providing stronger legal recourse, the Bill seeks to empower employees and encourage employers to proactively address systemic inequalities, ultimately contributing to a more inclusive and prosperous society.

Key Requirements

The draft Equality (Race and Disability) Bill 2025 outlines several key requirements that will significantly impact how large employers operate and report on their pay structures. These requirements are designed to enhance transparency and accountability regarding pay disparities related to race and disability. The most prominent requirement is the introduction of mandatory ethnicity and disability pay gap reporting for large employers. This will mirror the existing gender pay gap reporting framework, which has been in place since 2017. Employers will be required to publish specific data relating to the pay of their employees, disaggregated by ethnicity and disability status. While the precise metrics are subject to finalisation through consultation, it is highly anticipated that these will align closely with gender pay gap reporting requirements. This would likely include:

• **Mean and Median Hourly Pay Gap:** Employers will need to calculate and report the difference between the average (mean) and midpoint (median) hourly pay of ethnic minority and disabled employees compared to their non-ethnic minority and non-disabled counterparts. These figures provide a broad overview of pay disparities across the organisation.
• **Mean and Median Bonus Pay Gap:** Similar calculations will be required for bonus payments, highlighting any differences in the average and median bonuses received by different racial and disability groups.
• **Proportion of Employees Receiving a Bonus:** Employers will need to report the percentage of ethnic minority and disabled employees who received a bonus, compared to other employee groups.
• **Pay Quartiles:** Organisations will be required to show the proportion of ethnic minority and disabled employees within four equally sized pay quartiles, ranked from the lowest to the highest earners. This provides insight into the representation of these groups at different levels of the pay hierarchy, indicating potential barriers to progression.

These reporting obligations are intended to provide a clear picture of pay disparities within an organisation, prompting employers to analyse the underlying reasons for any gaps and develop action plans to address them. The Bill also aims to extend the right to make equal pay claims to ethnic minority and disabled people, providing a specific legal framework for individuals to challenge pay differences if they believe they are being paid less than a comparable colleague due to their race or disability. This significantly strengthens the legal recourse available to these protected groups. Furthermore, the Bill proposes the establishment of an Equal Pay Regulatory and Enforcement Unit. This unit will play a crucial role in ensuring compliance with the new reporting requirements and in enforcing equal pay provisions. Its creation signifies a more proactive approach to tackling pay discrimination, moving beyond reliance solely on individual claims. The Bill is also expected to address the issue of outsourcing, aiming to prevent employers from using it as a loophole to avoid equal pay obligations. This demonstrates a commitment to comprehensive coverage and preventing circumvention of the law.

Covered Employers

The scope of the Equality (Race and Disability) Bill 2025, particularly concerning its mandatory reporting requirements, is designed to target larger organisations where pay disparities are often more pronounced and where the impact of transparency can be most significant. The Bill proposes that the mandatory ethnicity and disability pay gap reporting obligations will apply to "large employers". Specifically, the threshold for coverage is expected to be organisations with **250 or more employees**. This mirrors the existing threshold for gender pay gap reporting, ensuring consistency and leveraging established reporting mechanisms. This means that both private and voluntary sector organisations, as well as large public bodies, that meet this employee headcount will be subject to the new reporting duties. The rationale behind focusing on employers with 250 or more employees is multifaceted. Larger organisations typically have more complex pay structures, a greater diversity of roles, and a larger workforce, which can sometimes mask underlying inequalities. By requiring these entities to report, the Bill aims to:

• **Maximise Impact:** Target a significant portion of the UK workforce, ensuring that a large number of employees benefit from increased transparency and accountability.
• **Leverage Existing Infrastructure:** Build upon the experience and systems already in place for gender pay gap reporting, making the transition to ethnicity and disability reporting more manageable for covered employers.
• **Drive Systemic Change:** Encourage larger organisations, which often set industry standards and influence supply chains, to lead the way in addressing pay equity.

It is important for employers approaching or exceeding this 250-employee threshold to begin considering how they will collect and analyse the necessary data, even if they have not previously engaged in voluntary ethnicity or disability pay gap reporting. The Bill's focus on large employers underscores the government's intention to tackle systemic issues within the labour market, recognising that significant change often begins with the largest players. While smaller employers may not be directly subject to the mandatory reporting, the broader cultural shift towards greater pay transparency and equity is likely to influence best practices across all sizes of organisations.

Employee Rights

The Equality (Race and Disability) Bill 2025 is set to significantly enhance the rights of ethnic minority and disabled employees in the United Kingdom, particularly concerning equal pay. Building on the foundational protections of the Equality Act 2010, the Bill aims to provide more specific and robust mechanisms for challenging pay discrimination. A cornerstone of the Bill is the **extension of the right to make equal pay claims to ethnic minority and disabled people**. Currently, while the Equality Act 2010 prohibits discrimination based on race and disability, the specific legal framework for "equal pay for equal work" has historically been more prominently applied in gender-related cases. The new Bill will explicitly provide ethnic minority and disabled individuals with a clear legal avenue to challenge situations where they believe they are receiving less pay than a comparator who does not share their protected characteristic, for doing work of equal value, like work, or work rated as equivalent. This means:

• **Direct Right to Equal Pay:** Employees will have a direct legal right to claim equal contractual terms, including pay, if they can demonstrate they are performing equal work to a comparator of a different race or disability status who is paid more.
• **Broader Scope for Claims:** This extension will provide a specific framework for claims, making it easier for individuals to pursue justice in cases of suspected pay discrimination based on race or disability.
• **Protection Against Outsourcing Avoidance:** The Bill is also expected to include provisions to ensure that outsourcing of services cannot be used by employers to avoid paying equal pay. This protects employees whose terms and conditions might otherwise be manipulated through complex contractual arrangements.
• **Access to Comparators:** The Bill is committed to protecting the ability to draw on equal pay comparators where workers' terms and conditions can be attributed to a single source, ensuring that provisions previously derived from EU law remain enshrined in UK law. This is vital for establishing valid comparisons in equal pay claims.

Beyond individual claims, the mandatory ethnicity and disability pay gap reporting will empower employees collectively. The increased transparency will allow employees to:

• **Identify Disparities:** Employees will be able to see their employer's reported pay gaps, providing objective data that can highlight potential systemic issues within the organisation.
• **Inform Discussions:** This data can serve as a basis for informed discussions with employers, trade unions, or employee representatives about addressing pay inequalities.
• **Drive Accountability:** The public nature of the reporting will place greater pressure on employers to take action, as their commitment to diversity, equity, and inclusion will be visible to their workforce, potential recruits, and the wider public.

The establishment of an Equal Pay Regulatory and Enforcement Unit will further strengthen employee rights by providing a dedicated body to oversee compliance and improve enforcement. This unit could offer guidance, investigate complaints, and take action against non-compliant employers, thereby providing an additional layer of protection for employees. Overall, the Equality (Race and Disability) Bill aims to create a more equitable and accountable environment, where ethnic minority and disabled employees have clearer rights and stronger mechanisms to ensure they receive fair and equal pay.

Penalties

As the Equality (Race and Disability) Bill 2025 is currently in its draft stage, the precise details of penalties for non-compliance are yet to be fully defined and legislated. However, drawing parallels with existing equality legislation, particularly the gender pay gap reporting regulations and the broader Equality Act 2010, it is possible to anticipate the likely consequences for employers who fail to meet their obligations under the new Bill. For the mandatory ethnicity and disability pay gap reporting, the penalties are expected to follow a similar structure to those for gender pay gap reporting. While there are no direct financial penalties for simply having a pay gap under the current gender pay gap regulations, the primary enforcement mechanism has been through public scrutiny and the potential for legal action by the Equality and Human Rights Commission (EHRC). It is highly probable that the new Bill will empower the EHRC or the proposed Equal Pay Regulatory and Enforcement Unit to take action against employers who fail to comply with the reporting requirements, such as:

• **Enforcement Notices:** The regulatory body could issue enforcement notices, requiring non-compliant employers to fulfil their reporting obligations within a specified timeframe.
• **Court Orders:** Persistent failure to comply could lead to court orders compelling organisations to publish their data.
• **Reputational Damage:** A significant, and often more impactful, consequence of non-compliance or reporting large, unexplained pay gaps is reputational damage. This can affect an organisation's ability to attract and retain talent, damage its brand image, and impact consumer perception. In an increasingly socially conscious market, negative publicity regarding pay inequality can have substantial commercial repercussions.

Regarding the extended right to make equal pay claims for ethnic minority and disabled individuals, the penalties for employers found to be in breach of equal pay law would be more direct and potentially severe. If an employee successfully brings an equal pay claim in an Employment Tribunal, the employer could face:

• **Compensation for Arrears of Pay:** The Tribunal can order the employer to pay arrears of pay, including benefits, for up to six years prior to the date the claim was brought.
• **Damages for Discrimination:** In cases where discrimination is proven, the Tribunal can also award damages for injury to feelings, which are uncapped.
• **Recommendations:** The Tribunal may make recommendations to the employer to take specific steps to alleviate the adverse effect on the claimant or other employees.
• **Legal Costs:** Employers may also be liable for the claimant's legal costs, which can be substantial.

The establishment of an Equal Pay Regulatory and Enforcement Unit is intended to improve enforcement mechanisms. This unit could have powers to investigate, mediate, and potentially impose fines or other sanctions for breaches of equal pay law, although the specifics of these powers would be detailed in the final legislation. The Bill's commitment to preventing outsourcing as a means to avoid equal pay obligations also suggests that any such attempts would be met with robust enforcement and potential penalties. In summary, while the exact penalty framework for the draft Equality (Race and Disability) Bill is still under development, employers should anticipate a combination of regulatory enforcement for reporting failures, significant financial and reputational consequences for proven equal pay breaches, and the oversight of a dedicated enforcement body. The aim is to ensure that the new legal rights and reporting duties are taken seriously and lead to tangible improvements in pay equity.

Timeline

The Equality (Race and Disability) Bill 2025 is currently in its formative stages, and while there is a clear commitment from the UK government to introduce this legislation, the precise timeline for its enactment and implementation remains fluid. Understanding the anticipated progression of the Bill is crucial for employers to plan their compliance strategies. Key milestones and expectations for the timeline include:

• **Consultation Period (March 2025 onwards):** The government launched a consultation on mandatory ethnicity and disability pay gap reporting on 18 March 2025. This consultation sought views from various stakeholders, including employers, public sector bodies, race and disability advocacy groups, and individuals from ethnic minority groups and disabled people. The purpose of this initial consultation was to gather feedback to shape the draft legislation, particularly concerning the reporting mechanisms. A call for evidence on how to "make the right to equal pay effective" for ethnic minority and disabled people also closed on 30 June 2025.
• **Anticipated Draft Bill (Spring 2025 / Early 2026):** A draft Bill was anticipated by Spring 2025. Some sources also suggest a draft Bill is expected in early 2026. This draft legislation would then be subject to further scrutiny and potential amendments.
• **Parliamentary Debate:** Once a formal draft Bill is introduced, it will need to undergo the full parliamentary process, including readings, committee stages, and debates in both the House of Commons and the House of Lords. This process can be lengthy and may involve further amendments based on political consensus and expert input.
• **Royal Assent and Enactment (Likely 2026 onwards):** There is no set date for the Bill to come into force. It is generally expected that the Bill may well be enacted in 2026 or later, after it has successfully navigated the parliamentary stages. Some provisions of related legislation, like the Employment Rights Act 2025, are expected to take effect in 2026, with the Equality (Race and Disability) Bill potentially coinciding with broader reforms.
• **Implementation Dates:** Even after the Bill receives Royal Assent, there will likely be a phased implementation, with specific dates set for different aspects of the legislation to come into effect. For example, there will be a lead-in period before mandatory reporting requirements become enforceable, allowing employers time to prepare. The government has confirmed it will provide a timeline for this work soon.

It is important to note that as of early 2026, the Bill remains in its draft and consultative phase, and its full text has not yet been published. The timelines provided are based on parliamentary statements and expert predictions, and are subject to change depending on government priorities, parliamentary scheduling, and the outcomes of ongoing consultations. Employers are advised to monitor official government announcements and legal updates closely for the most current information regarding the Bill's progression.

Compliance Steps

Given that the Equality (Race and Disability) Bill 2025 is in its draft stage, proactive compliance steps are essential for employers to prepare for its eventual enactment. Early preparation will not only ensure a smoother transition but also demonstrate a commitment to diversity, equity, and inclusion (DE&I) within the organisation. Here are key compliance steps employers should consider:

• **Review and Enhance Data Collection Capabilities:**
  • **Ethnicity Data:** Ensure robust and ethical methods for collecting ethnicity data from employees. This should be voluntary, clearly explained, and include a "prefer not to say" option. Review existing HR systems to confirm they can accurately record and disaggregate this data.
  • **Disability Data:** Similarly, review and enhance the collection of disability status data. Ensure employees understand why this data is being collected (e.g., for pay gap analysis and to identify support needs) and that it will be handled sensitively and confidentially.
  • **Data Representation:** Strive to ensure that the data collected is representative of the entire workforce to enable accurate analysis.
• **Conduct Internal Pay Gap Analysis:**
  • **Voluntary Reporting:** Even before the Bill becomes law, consider conducting voluntary ethnicity and disability pay gap analyses, mirroring the methodology used for gender pay gap reporting (mean/median hourly pay, bonus pay, pay quartiles). This will provide valuable insights into current disparities and allow for early intervention.
  • **Identify Root Causes:** Go beyond simply calculating the gaps. Investigate the underlying reasons for any identified disparities. This could involve reviewing recruitment, promotion, performance management, and pay review processes.
• **Review Pay Structures and Job Roles:**
  • **Job Evaluation:** Conduct thorough job evaluations to ensure that roles of equal value are compensated equally, irrespective of the incumbent's race or disability. Review job level structures and grading where appropriate to ensure accurate comparison of pay levels.
  • **Salary Benchmarking:** Benchmark salaries against market rates, ensuring that internal pay scales are fair and do not inadvertently disadvantage certain groups.
  • **Transparency in Pay Decisions:** Enhance transparency around pay decision-making processes, including criteria for salary increases, bonuses, and promotions.
• **Develop Action Plans:**
  • **Strategic Initiatives:** Based on internal analyses, develop concrete action plans to address any identified pay gaps. These plans should include measurable objectives and timelines.
  • **DE&I Strategy Integration:** Integrate pay equity initiatives into broader diversity, equity, and inclusion strategies. This could involve targeted recruitment, mentoring programmes, unconscious bias training, and flexible working arrangements.
  • **Communication:** Prepare to communicate findings and action plans internally and externally, demonstrating a commitment to addressing inequalities.
• **Train HR and Management:**
  • **Legal Obligations:** Ensure HR teams and line managers are fully aware of the upcoming legal obligations under the Bill, including reporting requirements and the extended equal pay rights.
  • **Fair Treatment:** Provide training on fair recruitment, promotion, and performance management practices to minimise bias and ensure equitable opportunities for all employees.
• **Engage with Stakeholders:**
  • **Employee Consultation:** Engage with employee representatives, trade unions, and employee resource groups (ERGs) to gather feedback and ensure that pay equity initiatives are well-received and effective.
  • **Legal Counsel:** Seek legal advice to ensure that all compliance steps align with the evolving legislative requirements and best practices.

By taking these proactive steps, employers can not only prepare for the legal requirements of the Equality (Race and Disability) Bill but also foster a more inclusive, fair, and equitable workplace culture, which ultimately benefits both employees and the organisation.

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