How to calculate and report your ethnicity pay gap

In short

Ethnicity pay gap reporting is voluntary in the UK. In March 2026 the government confirmed it will make it mandatory for employers with 250 or more employees, but no start date has been set.
The government's voluntary guidance (April 2023, updated May 2023) uses the gender pay gap method: a snapshot date, hourly pay, mean and median gaps, and pay quarters.
The proposed minimum is a comparison of White employees (including White Other) with all other groups combined, plus the share of staff who did not state their ethnicity.
In the lumi reward benchmark, 71.3% of organisations do not run ethnicity pay gap analyses at least annually. 24.1% do so partially and 4.6% do (n = 261).
By the end of this guide you will have collected the data, chosen your groupings, calculated the measures, checked group sizes and drafted a narrative and action plan.

Before you start

Legal basis. No law requires you to report an ethnicity pay gap today, but race discrimination in pay is unlawful under section 39(2) of the Equality Act 2010. Ethnicity is special category data. The Data Protection Act 2018 (Schedule 1, paragraph 8) allows you to process it to monitor equality of opportunity or treatment, if you do not use it for decisions about individuals and have an appropriate policy document. Employees can ask you in writing to stop.

Who to involve. Reward, payroll, HR systems, data protection, legal, employee networks and communications.

What you need. Payroll data for the snapshot pay period, contractual hours, bonuses paid in the 12 months to the snapshot date, leave status, and self-reported ethnicity.

For the evidence and the status of the proposed duty, see our briefing, Ethnicity and disability pay gaps: the UK evidence and the proposed reporting duty.

Step 1: Set the scope and snapshot date

Use the gender pay gap population. "Relevant employees" are everyone employed on the snapshot date. "Full-pay relevant employees" excludes anyone on reduced or no pay because of leave in the snapshot pay period. Hourly pay measures use full-pay relevant employees; bonus measures use all relevant employees.

◆ Decision: which snapshot date?

Your gender pay gap date (5 April for private and voluntary employers, 31 March for public bodies in England). The government intends to use these dates. One data extract serves both reports, but the workload peaks at once.
Another date, such as your pay review. This spreads the work, but the figures are harder to compare with your gender pay gap and with any future mandatory report.

Step 2: Collect ethnicity data and improve disclosure

Ask employees to state their own ethnicity, using the Government Statistical Service (GSS) harmonised standard. For England and Wales it follows the 2021 Census: 19 detailed groups within five broad groups. Scotland and Northern Ireland have their own versions. The government intends to require the GSS questions under the new duty. Allow one answer, and always offer "prefer not to say".

Tell employees how you will use the data and how you will prevent anyone being identified. To raise disclosure, explain what you did with last year's results, say who sees individual records, involve employee networks, and let people update their record at any time.

Record "prefer not to say" and "no answer" separately.

Asked how ready they are for the proposed ethnicity and disability pay gap reporting duty, 41.9% of organisations in the lumi reward benchmark have not started, the common answer. 31.4% are reviewing data readiness, 20.1% are analysing gaps and 6.6% are reporting-ready (n = 229, "Not applicable" excluded).

Step 3: Prepare the payroll data

Follow the gender pay gap rules:

Ordinary pay includes basic pay, allowances, piecework, pay for leave and shift premiums. It excludes overtime, redundancy pay, benefits in kind and expenses.
Bonus pay includes profit sharing, productivity, performance, incentive and commission payments, and long-service awards with a money value.
Hourly pay is ordinary pay plus any bonus (pro-rated where needed) paid in the snapshot pay period, converted to a weekly figure and divided by weekly hours.

Step 4: Choose your groupings and comparator

◆ Decision: how many groups?

Binary: White (including White Other) and all other groups combined. This is the proposed minimum and the easiest to keep confidential. It can hide gaps that run in opposite directions. In the words of the 2023 guidance: "Only reporting 2 ethnic groups will mask detail and nuance which might be vital for understanding ethnicity pay gaps and identifying relevant actions."
Five broad groups (Asian, Black, Mixed, White, Other). The proposal would require these where group sizes allow. More detail, smaller groups.
Detailed groups. The 2023 guidance notes that a single "Asian" group can hide lower pay for Bangladeshi and Pakistani employees than for Indian employees. Detailed groups need large numbers.

◆ Decision: which comparator?

White including White Other, as proposed. The government's reason is that high earners in the White Other group could distort the figure for all other groups combined.
White British, as in the ONS national series. Closer to national statistics, but a different figure from the proposed duty.
Every pair of groups, as the 2023 guidance suggests. The fullest picture, but many figures to explain.

Keep the choice each year. Leave employees who did not state their ethnicity out of the gap calculations, but include them in the pay quarters as a separate category. Never merge them with an ethnic group.

Step 5: Calculate the measures

For each comparison:

gap = (reference group pay − comparison group pay) ÷ reference group pay × 100

A positive gap means the comparison group is paid less. Calculate the mean and median hourly pay gaps, the share of each group in each hourly pay quarter (sort full-pay relevant employees by hourly pay and split into four equal groups), each group's share of the workforce, and the share who did not state their ethnicity. The 2023 guidance strongly encourages bonus measures where bonuses are a large part of pay. The proposed duty would require all six gender pay gap measures.

In the lumi reward benchmark, "no" is the common answer when organisations are asked whether they run ethnicity pay gap analyses at least annually, at 71.3%. 24.1% do so partially and 4.6% do (n = 261).

Worked example. An invented workforce of 28 full-pay relevant employees. Hourly pay in pounds (invented figures):

White (14): 14.20, 15.10, 16.40, 17.80, 18.60, 19.50, 20.30, 21.40, 22.90, 24.60, 26.80, 29.50, 33.00, 38.00
Asian (5): 13.90, 19.80, 23.40, 31.20, 36.50
Black (4): 13.60, 14.80, 16.10, 18.20
Mixed (1): 21.00
Prefer not to say (2): 17.20, 27.90. No answer (2): 15.60, 22.10

Results, calculated in Python:

Comparison with White	Group size	Mean gap	Median gap
All other groups combined	10	8.2%	8.9%
Asian	5	−9.9%	−12.2%
Black	4	31.0%	25.9%
Mixed	1	not calculated	not calculated

Four of 28 employees (14.3%) did not state an ethnicity. Pay quarters (7 employees each): upper: White 4, Asian 2, not stated 1. Upper middle: White 4, Asian 1, Mixed 1, not stated 1. Lower middle: White 4, Asian 1, Black 1, not stated 1. Lower: White 2, Asian 1, Black 3, not stated 1.

The binary gap of 8.2% combines a 31.0% gap for Black employees with a negative gap for Asian employees.

Step 6: Protect confidentiality with small numbers

The 2023 guidance cites statistical practice of 5 to 20 employees per group for internal use, and recommends at least 50 per group for published figures. The government proposed at least 10 per group for every calculation, including each pay quarter, and is still reviewing the number.

In the worked example, the binary comparison passes a threshold of 10 overall (14 and 10). But no pay quarter holds 10 employees, and the Asian, Black and Mixed groups are all below 10. At 50, nothing passes. This employer would keep them internal.

◆ Decision: what threshold for publication?

10 per group, as proposed. More can be published, but individuals are easier to identify.
50 per group, as the 2023 guidance recommends. Steadier figures, but smaller employers may publish only the binary comparison, or nothing.
Merge or suppress groups below your threshold. Merging keeps some information; suppressing is simpler. Check that no hidden figure can be worked out from published totals.

Step 7: Write the narrative

Explain each figure using your own analysis of jobs, grades, locations and part-time work, and avoid firm claims about causes you have not tested. Give the declaration rate, representation by grade and what you have already done. Calculate the same way every year.

Step 8: Build the action plan

Set measurable targets with a timescale. The 2023 guidance advises against a target of a zero gap, because gaps have many causes. Typical actions include raising declaration rates, tracking applications, shortlisting and appointments by ethnicity, and exit interviews. Positive action is lawful where it meets the conditions in section 158 of the Equality Act 2010.

◆ Decision: where to publish?

Internal only. Smaller groups and franker discussion, but no external accountability.
With your gender pay gap report. Matches the proposed duty and the planned single equality action plan covering gender, race and disability, but means publishing before the rules are final.
A separate report. More room for context, but may draw separate scrutiny.

Step 9: Apply the same approach to disability

The proposal is a binary comparison of disabled and non-disabled employees, using the Equality Act 2010 definition, with the same six measures and a declaration rate.

◆ Decision: which question?

The GSS questions for the Equality Act definition. Does the employee have a physical or mental health condition lasting, or expected to last, 12 months or more? Does it reduce their ability to carry out day-to-day activities (a lot, a little, not at all)? Yes, then "a lot" or "a little", counts as disabled. Closest to the legal test.
The 2018 voluntary framework question: does the employee consider themselves to have a disability or long-term health condition? Simpler but broader, so figures are not directly comparable.

Health data is special category data, and Schedule 1, paragraph 8 of the Data Protection Act 2018 applies on the same conditions as for ethnicity. Report the share whose status is unknown alongside the gap. Breakdowns by impairment type will rarely meet a publication threshold.

In the lumi reward benchmark, 75.6% of organisations do not run disability pay gap analyses, or pay equity analyses by disability status, at least annually, the common answer. 17.2% do so partially and 7.3% do (n = 262).

Checklist

Snapshot date and employee population agreed, in line with gender pay gap rules
Appropriate policy document and privacy notice in place for ethnicity and health data
Ethnicity question uses the GSS standard, with "prefer not to say"
Disability question chosen
Disclosure campaign run and self-service updating available
Payroll extract prepared: ordinary pay, bonus pay, hours, leave status
Groupings and comparator chosen and documented
Mean and median gaps, pay quarters, representation and bonus measures calculated
Every figure checked against your group size threshold
Narrative drafted, including declaration rates
Action plan with measurable targets and owners agreed

FAQ

Is ethnicity pay gap reporting mandatory in the UK? Not yet. On 25 March 2026 the government confirmed it will legislate to require employers with 250 or more employees to report ethnicity and disability pay gaps. It has not introduced a bill or set a start date.

Should we compare against White or White British? The proposed duty uses White including White Other. The ONS national series uses White British. Choose one, explain it, and keep it each year.

How do we treat employees who prefer not to say? Leave them out of the gap calculations, include them in the pay quarters as a separate group, and report the share who did not state their ethnicity.

What if a group has fewer than 10 employees? Do not publish figures for it. Merge or suppress it, and check it cannot be worked out from other figures.

Can we use our gender pay gap data? Yes. The method, pay definitions and snapshot dates are the same.

Sources

lumi reward benchmark, collection window 2026 H1, national figures: full findings
Race Disparity Unit, Equality Hub and Department for Business and Trade, Ethnicity pay reporting: guidance for employers (17 April 2023, updated 26 May 2023). https://www.gov.uk/government/publications/ethnicity-pay-reporting-guidance-for-employers
Office for Equality and Opportunity, Consultation on mandatory ethnicity and disability pay gap reporting: government response (25 March 2026; 857 responses). https://www.gov.uk/government/consultations/equality-race-and-disability-bill-mandatory-ethnicity-and-disability-pay-gap-reporting/outcome/consultation-on-mandatory-ethnicity-and-disability-pay-gap-reporting-government-response
Government Analysis Function, Measuring disability for the Equality Act 2010 harmonisation guidance (updated 26 April 2023). https://analysisfunction.civilservice.gov.uk/policy-store/measuring-disability-for-the-equality-act-2010/
Department for Work and Pensions and Department of Health and Social Care, Voluntary reporting on disability, mental health and wellbeing (22 November 2018). https://www.gov.uk/government/publications/voluntary-reporting-on-disability-mental-health-and-wellbeing
Office for National Statistics, Ethnicity pay gaps, UK: 2012 to 2022 (29 November 2023). https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/ethnicitypaygapsingreatbritain/2012to2022
legislation.gov.uk, Equality Act 2010, sections 39 and 158. https://www.legislation.gov.uk/ukpga/2010/15/contents
legislation.gov.uk, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. https://www.legislation.gov.uk/uksi/2017/172/contents
legislation.gov.uk, Data Protection Act 2018, Schedule 1, paragraphs 5 and 8. https://www.legislation.gov.uk/ukpga/2018/12/schedule/1

This guide is general information about UK employment law and practice as at the date shown. It is not legal advice. Take advice on your own circumstances.

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Cite this guide

David Whitfield, How to calculate and report your ethnicity pay gap. lumi, UK law as at 20 September 2026. https://lumihr.co.uk/guides/how-to-calculate-ethnicity-pay-gap

Last reviewed 20 September 2026 · This guide states the law at the date shown, with its sources listed. It is general information, not legal advice.