Employment Rights Bill: Equality Action Plans

What do employers, HR specialists and employment lawyers have in common?  Lots of things, obviously, but at the moment, all of those groups will, like us, be watching with interest as the Employment Rights Bill makes its way through the legislative process.

As the most wide reaching reform of employment law in the UK for decades, there are a myriad of changes for employers to work through, but one that is of particular interest for us at PathLight is the obligation to publish Equality Action Plans, which employers who want to be ahead of the game will be ‘soft launching’ in 2026.

Why? Well, from 2027, employers with more than 250 UK employees will be required to publish more than just gender pay gap numbers – they’ll also be expected to explain what they’re doing about the gap, far more comprehensively than has been seen to date in the (currently voluntary) narrative that employers can publish alongside their pay gap figures.

For many organisations, that will feel like a significant shift.  It’s one thing to be transparent about numbers, but quite another to have to publish and be accountable for about what you are doing and intend to do to improve outcomes for (and therefore narrow pay gaps between) specific groups.  For those of us who spend our lives looking under the bonnet of workplace culture, the new obligations are a welcome reflection of our understanding that calculating and publishing numbers on their own don’t move the dial.

What the Bill requires

Under the current framework, employers with 250 or more employees must publish specific gender pay gap data annually on the government’s reporting service. There is no legal requirement to publish a narrative or plan, even though many employers choose to do so voluntarily.

The Employment Rights Bill changes that by enabling regulations that will require employers with the requisite number of employees to develop and publish an equality action plan, alongside gender pay gap data.  The detail – format, frequency, required content, senior sign-off and sanctions – will sit in secondary regulations. But the direction of travel is perfectly clear:

‘We will require large employers to detail the evidence-based actions they are taking to improve gender equality, and support employees during the menopause.’

If you’ve been producing a glossy gender pay gap narrative with minimal analysis and some generic commitments, this is the point at which you might want to take a deep breath and buckle up for the ride…

Really understanding your gender (and in due course, ethnicity and disability) pay gap

A compliant equality action plan is going to require evidence-based actions – and that means understanding why your gap exists in the first place.

What does that mean in practice?  Yep, it means data.  You need to take steps to understand where you are right now, then put in place actions to improve, and measure those actions so you can track the improvement.  Data, data, data – something that we at PathLight have been advocating for and using with our clients since the very beginning.  In fact, one of the reasons why we started our business was frustration at the number of providers in this space who don’t start with data – because how can you possibly tell what initiatives are having a positive effect if you don’t know where you are to start with, or what you need to address, or you don’t measure impact?

So, what should you be measuring?  We recommend aligning your datapoints with the employee lifecycle, so:

• Recruitment and hiring – who is applying for roles at your organisation? Who is eventually getting in the door, into which roles, on what starting salaries?

• Progression and promotion – who moves, how quickly, and who stalls? When do they stall?  Can you tell why they stall – what are the barriers?

• Pay and reward structures – where do you find discretionary decisions (market adjustments, retention awards, ‘this person is a flight risk’, this person is just a ‘really good guy’)?  Can you demonstrate how that discretion is exercised?  Is it consistent, or does it vary? Are your pay increases and bonuses applied truly on merit, without any bias? Do you have guidance for managers on how to make these decisions?

• Performance and potential assessments – do particular groups consistently receive lower ratings in annual performance cycles? Is your talent pipeline full of particular types of people (and not others)? Are you looking at performance and potential consistently for everyone, or does it vary depending on (for example) gender?

• Exits – who is leaving?  When are they leaving?  Why are they leaving?  Are there trends? Career stages where certain groups diminish or disappear?

Where this is heading next: race, disability and beyond

Although the new duty focuses on gender equality (which incidentally, is the characteristic that we work on with clients most often because this is where need and impact most often intersect), the Government has already signalled that it does not intend to stop there. Alongside the Employment Rights Bill, ministers have committed to bring forward a separate Equality (Race and Disability) Bill, which is expected to mandate ethnicity and disability pay gap reporting for large employers on a similar model to the gender pay gap regime currently in place (although some changes will inevitably be necessary to measure multiple characteristics against each other, unlike the binary approach that is currently taken in relation to gender).

It doesn’t take a huge leap of imagination to see what might come next:

• Gender equality action plans in the next year or so, with a statutory focus on pay gaps and menopause.

• Ethnicity and disability reporting duties next, which will raise questions about whether there should be parallel action plans for those gaps – with the logical answer, if there is a desire to drive real change being ‘yes’.

• Increasing conversations about intersectionality, where outcomes in the workplace are shaped by multiple characteristics at once.

Forward-looking organisations will use the coming months not just to put in place gender action plans, but to build or finesse a single, coherent inclusion and equality strategy that can adapt as the legal framework evolves – covering gender, ethnicity and disability but also other protected and non-protected grounds (neuro-divergence, socio-economic background) that are proven to impact on career progression.