December 2021 • Topic: Driving diversity • by Eivind Friis Hamre
This report is a unique analysis of the gender pay gap data at more than 400 firms from across the financial services industry highlights the slow progress made in tackling its large pay gap and the lack of women in the highest paid roles.
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What this report is about:
In April 2018, for the first time, all UK companies with more than 250 staff were required to report to the government on their gender pay gap – the difference in average hourly pay for men and women – and on the representation of women in each quartile of the workforce measured by pay. We analysed that data to produce a detailed report on the pay gap and female representation at a senior level across more than 400 firms at an aggregate and sector level.
This report looks at the latest round of gender pay gap reporting in October 2021 and analyses how much progress the financial services industry (and specific sectors within it) have made in addressing the gender pay gap and increasing the representation of women.
Our analysis does not name and shame individual firms but instead measures the changes in the pay gap and representation of women at different levels of pay in different sectors of banking and finance. While the industry and the majority of individual firms have made progress on both counts over the past few years, our main conclusion is that the pace of change is painfully slow and that a surprising number of firms have stood still or gone backwards.
This report addresses the following questions:
• How big is the gender pay gap and the bonus gap in different sectors of the financial services industry? How does the industry compare to UK business more widely?
• What is the level of representation of women in senior roles across the industry and in different sectors?
• How has the pay gap and representation of women changed between 2017 and 2020 across the industry and in different sectors?
Here is a short summary of ‘Slow progress: the gender pay gap in banking and finance’:
1. Slow progress: The financial services industry is making slow progress in improving its gender pay gap, despite political and social pressure on the industry and its public commitment to diversity. From 2017 to 2020, the mean gender pay gap improved by three percentage points from 31% to 28%.
2. Spot the difference: The reason progress is slow is because of the very small increase in representation of women in more senior (and higher paid) roles. Between 2017 and 2020, the distribution of women at different levels across the industry flatlined, with the only difference being a one percentage point increase in female representation in the top pay quartile from 28% to 29%.
3. Playing catch-up: As a sector, financial services is still far behind the national average. The mean gender pay gap in financial services (28%) is twice the national average (14%). If the financial services industry continues improving the pay gap at its current pace, it will reach the national average in 2034.
4. A wide sector spread: The high gender pay gap within financial services disguises the differences between sectors. While most sectors hover around the average for financial services, investment banks and wealth managers are major outliers with gender pay gaps of more than 35%.
5. Mixed progress: Every sector of the industry improved its pay gap, but the rate of change varies. While the gender pay gap at banks improved by five percentage points, the improvement in wealth management, consumer finance and diversified financials is effectively a rounding error (one percentage point over three years).
6. A steep pyramid: Women remain underrepresented at the top end of the industry compared with the rest of the UK economy. Women represent just 29% of staff in the highest pay quartile (compared with 40% in the wider economy) and 35% in the top half (versus 43%). Women account for less than a quarter (24%) of the highest paid staff in asset management and less than a fifth (17%) at investment banks.
7. Low representation: This problem is exacerbated by over representation of women at the bottom end of the pay scale. Nearly 60% of staff in the financial services industry in the bottom quartile are women.
8. A collective push: In positive news, the gender pay gap and senior female representation (by pay) improved in every sector. Roughly two thirds (65%) of all firms improved their gender pay gap and nearly two thirds (63%) improved representation of women in the top pay quartile.
9. Leaders and laggards: At roughly a third of all financial services firms that reported, the gender pay gap stayed the same or widened, and the representation of women stayed the same or fell. At one fifth of firms, both metrics deteriorated.
10. A clear correlation: The most effective way of tackling the pay gap is to increase representation of women at the top – 75% of the firms that improved their gender pay gap also improved the representation of women in the top pay quartile, and 77% of firms that improved the representation of senior women also improved their gender pay gap.