Data analysis key to closing gender pay gap in financial services

An increasing number of financial services firms are setting targets and establishing regular reporting in order to track progress in internal and external recruitment.

However, despite some companies managing to narrow their median hourly gender pay gap (GPG) by between 1 and 2% in the last three years, across the sector the GPG remains wide.

Slow movement

Analysis carried out by Pinsent Masons, the law firm behind Out-Law, of the GPG data submitted so far by financial services companies for 2020-21 shows that women are paid nearly 27% less per hour than men. This is below the sector national average of 33.2%, as reported by the Office for National Statistics for 2020.

The data also shows a 52.6% difference, on average, in the mean bonus payments to men and women, which is significantly higher than the samples for other sectors.  

To date, approximately 258 employers in the financial services sector have reported their gender pay gap for 2020-21.  There are significant variations, though, across the sector, with one firm having reported the highest hourly median pay gap of 59.5%, which is one of the highest pay gaps across all sectors considered and significantly higher than the sector average, whilst another reported that the hourly median pay gap for its female staff exceeds that of the male staff by 11%.

It is also of note that some financial services companies have made bigger strides in closing the GPG than others. For example, one firm has improved its median hourly pay gap by 15.8 percentage points, going from 41% in 2017/18, to 25.2% – below the sector's national average.

Positive action

Within the financial services sector, there is a still a lack of equality in the number of men and women in senior positions, despite progress made by many companies to support the progression of women into senior roles. However, it has been reported that for some companies, there are now more women than men in junior and lower paid roles.

It is said that, despite progress, it is still more challenging to recruit female talent into technical roles.

Data and gender analysis is being used by companies to help internal and external recruitment with some firms being particularly proactive. For example, one large insurance firm has taken steps to conduct an external market survey and annual compensation review to ensure consistency and fairness in equal pay. The company is specifically targeting societal expectations and behaviours by implementing policies, such as a parental leave policy giving employees an average time off of 95 days.

There is a focus by various companies on the recruitment process and implementing gender neutral language in job descriptions in order to attract more female applicants. A handful are even using gender-decoding software.

Some companies are ensuring that there is female representation on interview panels to allow for balanced decision making. Other companies are also ensuring a gender balanced shortlist of candidates.

Financial services companies are also introducing school and university initiatives to encourage more girls to take an interest in the sector, with some seeking to broaden their reach by not requiring a specific degree or discipline at recruitment.

Others are monitoring the proportions of male and female employees at the promotion stage and ensuring there is transparency with employees of the promotion process and outcomes. Leadership training, mentoring and sponsorship programmes appear to play a key role in financial services companies seeking to promote more women to senior leadership roles.

Flexible working is also a common theme amongst the companies in the sample in order to attract more female employees, especially since the impact of Covid-19 on working practices. Companies are also more readily exploring job-share roles, in addition to flexible working. 

Some companies are using role models in order to highlight senior male employees who are also working flexibly, as well as visible representation of senior female employees. Others introduced paid family leave during the pandemic in response to school closures and recognition of employees' caring commitments.

Various companies have set up employee networks or held events in order to dedicate their commitment to diversity and inclusion and as a way of supporting and raising awareness of issues, such as gender, 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.

Another positive initiative within the financial services sector has been the Women in Finance Charter, which over 330 firms had signed up to as of March 2021.  The 2020 annual review of the charter analysed the progress of 209 charter signatories and found that, whilst 70% had met or were on track to meet their targets for female representation in senior management, the rest had either missed their 2020 deadlines or were falling behind on future targets. This is in marked contrast with the annual review for the previous year, which found that 80% had met, or were on track to meet targets for female representation in senior management. More worryingly, the 2020 annual review concludes that most of the firms that had missed or were falling behind targets had already done so before the pandemic hit – so this decline in progress appears to be due to factors beyond the Covid-19 pandemic.