UK financial services firms ‘still have a long way to go’ to close gender pay gap

Analysis carried out by Pinsent Masons shows that the financial services sector continues to have one of the widest average GPGs compared to other sectors. This is particularly prevalent when considering the number of women in senior positions compared to the number of men in higher paid roles.

However, firms across the sector are applying a data-driven approach to make effective change and close the gender pay gap.

Gender pay gap reporting requirements

UK employers with more than 250 employees have been required to publish annual mean and median pay gap data since 2017. The figures reflect firms’ gross hourly pay gap for men and women, as well as the mean and median gender bonus gaps, represented as a percentage.

Companies must also publish data on their male and female employee split within each quartile of their pay distribution, ordered from lowest to highest, along with the proportion of men and women who have received a bonus during the previous 12 months.

It is also advised that firms publish a narrative in order to provide context to their figures, although this is not officially required by the reporting obligations.

The latest financial services gender pay gap data

Approximately 507 employers across the UK financial services sector reported their gender pay gap in 2023-24. On average, the median hourly pay gap is sitting at 21%. The highest hourly median pay gap reported in 2023-24 is 61.8%, which is significantly higher than the sector average.

Many companies have improved their median hourly gender pay gap by up to 2% since the reporting obligations were introduced in 2017. Others have demonstrated a huge improvement, for instance, one company has decreased its median hourly pay gap by over 24% from 44.6% in 2017-18 to 19.8% in 2023-24. This is hopefully a sign of things to come in the UK financial services sector, despite the average still being less favourable overall compared to other sectors.

The figures also show that there is a 40.18% difference in the mean bonus payments to men compared to women, an increase from 30.56% as reported in 2022-23. The difference in the median bonus payments between men and women is 28.9%.

Underlying causes of the UK energy sector gender pay gap

The financial services sector continues to have one of the widest average gender pay gaps compared to other sectors. Many companies within this sector still identify a lack of equality in the number of men and women in senior positions.

Many companies are targeting this directly by setting goals to increase the number of women in these positions. However, it has been reported that, for some companies, there are now more women than men in junior and lower paid roles.

What steps are financial services firms taking to address the gap?

Employment law expert Anne Sammon of Pinsent Masons said: “As the financial services sector continues to be one of those with a more significant gender pay gap, we can expect continuing focus on this issue. The FCA and PRA published consultation papers outlining new proposals to increase diversity and inclusion, which included a potential requirement to share relevant data with the regulator and the possibility of Senior Management Functions holding accountability for diversity and inclusion, back in September 2023 and we are still awaiting the outcome of this. Given this emphasis, firms are likely to want to ensure that their policies and processes are robust prior to the introduction of any new rules or requirements from the regulators”.

To tackle these issues, companies are continuing to set targets and establish regular reporting to track progress in internal and external recruitment. Gender analysis by companies has been said to shape talent development offerings. Abrdn UK has set a target to be gender-balanced by 2025 and ensure 40% women, 40% men and 20% any gender representation in their senior roles and the board by 2025. The company identified that a key factor behind the gender pay and bonus gaps is the distribution of more men in senior roles and more women in junior roles across the business and targeted those areas specifically to close the gender pay gap.

There continues to also be a focus by various companies on the recruitment process and implementing gender neutral language in job descriptions to attract more female applicants. Some companies are even using gender decoding software, with other steps including ensuring that there is a female representative on interview panels to allow for balanced decision making.

Other companies are also ensuring a gender-balanced shortlist of candidates. For example, Barclays Bank Plc has reported using recruitment partners to actively identify external female talent where possible. Investec Bank has also placed a particular focus on recruitment, policies and practices. The firm also actively encourages “conversations about flexible working and has created a more agile environment that is responsive to the needs of individuals”.

In terms of performance management, some companies are also reducing or removing self-assessment elements of reviews, as research has shown that self-assessment can increase gender disparity. Some companies are also monitoring the proportions of male and female employees at the promotion stage, and ensuring that there is transparency with employees on the promotion process.

Leadership training, mentoring and sponsorship programmes are also playing an important role in financial companies seeking to promote more women to senior leadership roles. Companies are also increasing leadership accountability to ensure that those in senior roles are accountable for diversity, equality and inclusion progress within their companies. For example, Barclays are providing their leaders with insight packs to track progress by business area for gender and ethnicity. Progress against gender and race at work ambitions are also discussed as part of business performance reviews.

Various companies have set up employee networks or held events to dedicate their commitment to diversity and inclusion and raise awareness in the workplace. Such groups are also being used by some companies to understand the needs of employees and how flexible working could look in the future.