Tackling the financial services gender pay gap

Out-Law Analysis | 19 Apr 2018 | 12:07 pm | 3 min. read

ANALYSIS: The gender pay gap at UK financial services firms significantly exceeds the national average, according to the results of the first statutory gender pay gap reporting exercise.

Financial firms that are serious about closing the gap will therefore need to work harder than most to do so, with a particular focus on encouraging more women to work in the most senior and highly remunerated roles.

As of the reporting deadline of 5 April 2018, 394 organisations classified as operating in the 'financial and insurance activities' sector had submitted their reports via the government's gender pay gap reporting portal.  They each disclosed their mean and median gender pay gaps, mean and median gender bonus gaps and the proportion of male and female employees within each pay quartile.

A number of organisations appear to have been wrongly categorised as operating within this sector.  When they are excluded, the headline figures are a 27.2% mean gender pay gap in favour of men and a 23.1% median gap in favour of men.  This compares to a UK-wide average mean of 18.4%. The gender bonus gap figures tell a similar story: a 49.5% mean and 29.0% median gap in favour of men.

Although the reporting regime is "very simplistic and can give rise to misleading figures", the statistics are nevertheless "very telling", according to financial services employment law expert Jon Fisher of Pinsent Masons, the law firm behind Out-Law.com.

"Of the 372 firms we believe should correctly be classified as operating in the financial services sector, only 12 reported a mean pay gap in favour of women, and only 11 reported a mean bonus gap in favour of women," he said.

"In our experience, women are not paid less than men for doing the same role. The pay and bonus gaps exist because there are fewer women in the senior roles which come with substantial remuneration packages. According to their year's reports, the average representation of women in the top quartile of earners is 29.1%, whereas in the lowest quartile it is 57.1%. Firms which are keen to close the pay gap will need to focus on removing barriers to talented women progressing to the most senior roles," he said.

These issues are not unique to employers in in the financial services sector. Many employers, regardless of industry sector, reported a historical lack of women in senior roles when taking up the opportunity to provide a link to more detailed information on their own websites. As of March 2018, 205 UK financial services firms had publicly committed to improving gender representation in senior roles by signing up the government-backed Women in Finance Charter, which commits them to setting public gender diversity targets, among other actions.

"There is an obvious link here with the emphasis that financial regulators are currently placing on diversity at senior levels," said diversity and inclusion expert Stuart Affleck of Brook Graham, which is owned by Pinsent Masons.

"In its recent discussion paper on cultural change, the Financial Conduct Authority (FCA) explored the need for financial firms to take action to improve both gender and ethnic diversity at the top of the business. A new Prudential Regulation Authority (PRA) requirement for insurers to have a diversity policy for their boards came into force this month. It is clear that the need to have an effective diversity and inclusion strategy should be high up the agenda for all financial services firms," he said.

"The press interest in this year's reports has caught many by surprise. However, next year's reports will be subject to even greater scrutiny, by employees, unions, shareholders and the media, to see whether the gaps are narrowing," said financial services employment law expert Ben Brown of Pinsent Masons.

"Those reports will be based on April 2018 pay, so it is too late for firms to influence the figures which need to be reported by next April. What they can do is to implement effective diversity and inclusion plans to address the issues, so that they can be seen to be proactive, in addition to having a compelling narrative to counter any adverse reaction to next year's reports," he said.

Jon Fisher and Ben Brown are financial services employment experts at Pinsent Masons, the law firm behind Out-Law.com. Stuart Affleck is a diversity and inclusion expert at Brook Graham, which is owned by Pinsent Masons.