- Men’s median hourly pay in the UK’s financial sector was 24% higher than women’s, as against the average of 11.6% across all sectors, shows UK government data.
- On average, women in finance earned 37% less in bonuses than men, compared with 35% across other sectors.
- Many companies are taking steps to narrow the gender pay gap, such as setting targets to put more women in senior positions – but last year, 21% of financial firms failed to achieve such goals.
Despite its exit from the EU in January 2020, Britain boasts a large and thriving financial services industry, which accounts for 8.6% of its annual GDP – but it has less to shout about in respect of that sector’s gender pay gap.
Exclusive Capital Monitor analysis of new UK government data shows that the male-female pay differential in finance was more than twice as wide as in other sectors last year, despite new regulations seeking to address this issue.
Across the financial sector, the median hourly pay for women was 24% lower than for men, compared with the national average of 11.6%, according to figures based on reporting from all companies in the UK with a headcount of 250 employees or more. This means that women in finance earn £0.76 for every £1 that men earn.
Sector-wide figures, of course, disguise myriad blemishes. Hence Capital Monitor has devised a new tool to show how any of the companies’ gender pay gap compares with the country-wide average. Above the x axis is the distribution of gender pay gaps for all UK companies, and below it is the distribution purely for the financial sector.
While some institutions report on their group-wide gender pay gap using individual calculations, this data presents the company breakdowns for individual subsidiaries as they are reported to the government. As such, they may not always align with company reports.
A wide gender pay gap does not necessarily imply that women are paid less for the same jobs – which would be illegal under the 1970 Equal Pay Act. Rather, it suggests that men tend to dominate the highest-paying jobs.
Women working in finance occupied just 29% of the most lucrative jobs across the sector in 2021, with the rest of the top spots (71%) occupied by men, the data reveals. At the other end of the pay scale, women occupied 58% of the lowest-paid jobs in the financial services sector, compared with just 42% of men. In addition, women in finance earned 37% less in bonuses than men, compared with 35% in all other sectors.
Underlying causes
While the gender pay gap in finance shrank very slightly, from 25.3% in 2017 (when companies were first required to disclose) to 23.5% in 2020, it has since risen to 23.9% in 2021. One likely cause is the disproportionate impact of the pandemic on women in work.
Women’s jobs are 1.8 times as vulnerable to the Covid pandemic than men’s, according to a 2020 analysis by McKinsey. Accordingly, while women make up 39% of global employment, they now account for 54% of overall job losses.
One reason for this is that the coronavirus crisis has significantly increased the burden of unpaid care, which is disproportionately carried by women, the analysis finds. A potential knock-on effect of women taking on unpaid care while working from home is that it could prevent them from taking up better paid or more senior positions.
Such challenges – along with the wider issue of how to boost the number of women in senior positions and therefore narrow the pay gap in the UK’s financial sector – have been recognised by the UK government. In 2016, it established the HM Treasury’s Women in Finance Charter.
Now with over 400 signatories, the Charter requires financial institutions to set targets for the number of women in senior management positions, with the aim of redressing the balance.
Heading in the right direction?
In general, financial institutions are making progress in narrowing the gender imbalance within senior management positions. According to the Charter’s March 2021 annual review of the 209 companies to have set measurable targets, 35% of financial institutions have already met their Charter targets, and 36% with future deadlines are on track to meet them. On the flip side, 21% missed their most recent targets, while 8% are not on track to meet them.
Despite this progress, female representation in the financial sector remains, on average, lower than recommendations for all other sectors. The most common target for financial institutions to set is to achieve 30% female representation in senior management, which is three percentage points lower than the recommendation for FTSE 350 companies overall.
Capital Monitor’s assessment of the targets of the largest 14 banks and asset managers by asset size, where both gender pay gap and female representation in senior management data is available, shows that while there is some progress being made, many financial institutions have a long way to go.
For example, the bank and the asset management firm in the sample with the largest gender pay gaps – Barclays and Ninety One – have among the least ambitious targets. This suggests it could be a long time before gender parity is achieved within these organisations.
In the below data, Capital Monitor has focused on the group-wide gender pay gap figures as presented in the individual company’s annual reports.
Three out of seven banks above – Lloyds, Nationwide and Standard Chartered – were not able to hit their own women in senior management targets as of last year. However, these three banks had more ambitious targets than most, both in this sample and overall.
Nationwide, which has the second-largest gender pay gap of the seven banks, has now increased its target to 50% by 2028 after it missed its original target of 37% by 2020.
Lloyds reported to the Charter that it missed its comparatively ambitious target of 40% women in senior management positions by 2020 because the pandemic led to a recruitment freeze that limited external hiring and promotions. The bank also increased its gender pay gap by one percentage point during that period.
While Standard Chartered missed its 30% women in leadership target by 0.5 percentage points, it did narrow its pay gap this year by the most significant amount among the top banks of four percentage points.
On the asset management side, Legal & General Group did not meet its relatively ambitious target of 40% – in part thanks to changes in contractor rules leading to it onboarding more men. However, by 2020, it had the highest level of women in senior management of all the institutions in the sample and reduced its pay gap by three percentage points since last year.
As there is no consistent link between the number of women in senior leadership and the companies’ gender pay gaps, it is impossible to tell whether these targets will be key to bringing about overall change.
Financial institutions in the UK should therefore be taking additional measures, as some are elsewhere, to narrow their gender pay gaps at an individual level – for example, implementing measures to make hiring processes more accessible or helping women to ascend to more senior positions.
Last year, just 40 out of 209 financial institutions made changes to flexible working arrangements to facilitate women employees during the pandemic, according to the Charter’s 2021 review, while 44 provided female leadership programmes and training.
Such measures must become the norm if the financial sector wishes to take the gender pay gap more seriously.
