Insurance companies are reviewing the potential impacts of the UK government’s proposed mandatory pay gap reporting on ethnicity and disability, raising concerns around data quality, employee privacy, and reporting thresholds.
The International Underwriting Association (IUA), which represents London Market insurers, has submitted its response to the consultation on the Equality (Race and Disability) Bill.
The government plans to introduce legal requirements for large employers - those with 250 or more staff - to report differences in pay based on six key metrics. These include mean and median hourly pay, bonus pay, pay quartiles, and the percentage of employees receiving bonuses.
According to the IUA, its members support the goal of greater transparency but stress the importance of safeguarding employee data and ensuring reporting frameworks are practical.
Voluntary self-disclosure of ethnicity and disability remains a key limitation, the association said, with low participation rates potentially skewing results or making individual salaries traceable in small datasets.
“Privacy is a vital consideration, especially when participation rates are low,” said Nafisah Hussain, senior public policy executive at the IUA. “Grouping data broadly may limit its usefulness but breaking it down could result in unintentionally identifying individuals.”
Some member firms argued that the reporting threshold should be set at 1,000 employees instead of 250 to mitigate the risks of identification, especially where datasets are limited.
Beyond raw figures, the IUA noted that pay gap data can produce incomplete conclusions. For example, increased hiring at junior levels - intended to support long-term development - may temporarily widen gaps despite being part of broader inclusion efforts.
As People Management reports, the consultation also seeks employer feedback on whether to require reporting of overall workforce composition and non-disclosure rates. It proposes using a binary classification - white British vs ethnic minority and disabled vs non-disabled - for published pay gap comparisons, based on thresholds of at least 10 individuals per group to preserve anonymity.
The consultation, which closed yesterday, suggests enforcement will fall under the Equality and Human Rights Commission and use the same mechanisms as gender pay gap compliance. Reporting would occur annually via the government’s existing online portal, with different snapshot dates for public and private employers.
Organisations are advised to review diversity data systems early, audit for collection gaps, and assess data protection protocols. Since ethnicity and disability information qualifies as special category data under UK law, any internal analysis or disclosure must meet strict processing and consent standards.
Will mandatory pay gap reporting change how employers address equity and transparency? Leave your thoughts in the comments.
