Driving the implementation of Pay Gap Reporting

The push for greater equity, diversity, and inclusion (EDI) is both a moral imperative and a business priority for automotive employers. The proposed Equality (Race and Disability) Bill will only accelerate this.

The automotive industry is undergoing significant changes, with a pressing issue in the sector being the need for greater EDI. The sector has historically been dominated by white, non-disabled men, but there is a growing recognition of the value that EDI brings. EDI not only promotes equality but also injects fresh perspectives, enhances creativity, and streamlines decision-making. The proposed extension of pay gap reporting to cover ethnicity and disability pay gaps aims to help employers identify where to take action to address historical inequalities.

Disability and ethnic diversity in the automotive sector

In its report of March 2024, Insights by Diversity Task Force identified that individuals with disabilities constitute 15.5% of the automotive sector, which is slightly lower than their proportion in the general workforce. However, there has been a significant increase from 13.3% over the past two years, indicating a trend towards greater inclusivity. Ethnic diversity within the sector is progressing slowly, with non-White British individuals making up 13% of the workforce which falls short of their 18% representation in the general working-age population. Against this backdrop, if EDI and the promotion of greater inclusivity was not already at the forefront of automotive employers’ agendas, the proposed legislative changes in the forthcoming Equality (Race and Disability) Bill will undoubtedly steer it to a priority issue.

Upcoming legislation

The Equality (Race and Disability) Bill proposes mandatory ethnicity and disability pay gap reporting for large private and public sector employers, with ‘large employers’ being those with 250 or more employees. This Bill aims to extend the greater transparency for employers and employees brought about by mandatory gender pay gap reporting (which has been a legal requirement for large employers since 2017) to people from different ethnic groups and disabled people. The government has published a consultation running from 18 March 2025 to 10 June 2025 to seek views on how the proposed changes will work in practice. The consultation document outlines several key proposals, including using a similar reporting framework for ethnicity and disability pay gaps as that already in place for gender pay gap reporting.

Challenges and recommendations for employers

The main challenge for employers will be collecting the necessary data to undertake the pay gap calculations. The consultation suggests that the best way for employers to collect ethnicity and disability data is to ask employees to self-report, although the consultation recognises that employees should not be required to provide this information if they do not want to.

Without sufficient data, the value of the pay gap reporting will be diminished. One of the key steps for employers will therefore be engaging with and building trust with employees around the sharing of sensitive personal data on ethnicity and disability. Employers will need to ensure that their data collection processes are transparent and secure, and that employees feel confident in disclosing their personal information.

Although the government’s consultation proposes a broadly similar framework to that used for reporting the gender pay gap, we recommend that employers remain alive to the differences from a data protection perspective. To get ahead, affected employers should focus on forming a plan around how they intend to comply once the legislation comes into force. If an employer is already reporting on ethnicity and disability pay gaps, they may need to review their current process for classifying ethnicity and disability data to ensure compliance with the proposed legislation.

UK GDPR considerations

When collecting and processing personal data related to ethnicity and disability, employers must comply with the UK General Data Protection Regulation (UK GDPR). Under UK GDPR, personal data must be processed lawfully, fairly, and transparently. Employers must have a clear and justifiable reason for collecting this data and must inform employees about the purpose of data collection and how it will be used.

Sensitive personal data, such as information about an individual's health or ethnic origin, is classified as special category data under UK GDPR and requires extra protection. This distinguishes it from gender information, which is not automatically special category data (albeit should still be treated very carefully). Employers must ensure that they have appropriate safeguards in place to protect this data, bearing in mind the heightened protection afforded to special category data and the greater risk of adversely affecting an individual’s privacy rights in collecting this data.

Transparency around why the data is being collected will hopefully instil confidence in employees disclosing data to their employer, helping to produce more accurate reports.  In addition, the consultation suggests a minimum of 10 employees in any ethnic or disabled group to ensure that individuals cannot be identified inadvertently through pay gap reporting. Where there are fewer than 10 employees in a group, groups could be amalgamated, although again this has the potential to then dilute the value of the reporting.

Whilst employers may be keen to comply with the new reporting requirements as soon as they practically can, it is important to therefore remember that this is a balancing act with their obligations under UK GDPR.

Next Steps

As the automotive sector evolves, advancing equity, diversity, and inclusion is not only a moral responsibility but also a strategic business priority. The proposed Equality (Race and Disability) Bill signals a significant step toward increased transparency and accountability, building on the foundations laid by gender pay gap reporting.
From a practical perspective, employers must navigate the introduction of the new legislation by balancing compliance with its requirements with existing obligations, particularly in relation to data protection. This will allow employers to recognise and leverage the potential benefits the legislation may offer their workforce once implemented.