July 2018 • Ecommerce reports • Topic: Driving diversity • by William Wright
Our unique analysis of the gender pay gap data at nearly 400 firms from across the financial services industry highlights the wide range in the pay gap, bonus gap, and levels of female representation in different sectors of the banking and finance industry – and sets a benchmark to measure future progress.
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For many firms in the financial services industry, gender pay gap reporting has been an uncomfortable and complex exercise, made more so by media coverage conflating the pay gap with unequal pay and targeting firms with the widest pay and bonus gaps and/or the lowest levels of female representation.
This report does not ‘name and shame’ individual firms but instead measures the pay gap, bonus gap, and female representation in different sectors of banking and finance. The report uses the data on gender balance at different levels of the industry to create a powerful profile of female representation at different levels of seniority in different sectors. And it aims to provide a clearer understanding of where we are today and a benchmark for different sectors of the industry; to measure progress over time; and to highlight the challenges ahead.
Under gender pay gap reporting in the UK, for this first time this year all entities with more than 250 employees were required to submit data on the following four factors by the beginning of April:
– The mean and median hourly pay gap between men and women
– The mean and median bonus gap
– The percentage of men and women receiving a bonus
– The gender balance in each quartile of the workforce as measured by pay
Throughout the report, we have used the mean hourly pay gap and mean bonus gap in our calculations, as we believe this is a more accurate indicator of the pay gap in financial services. This report addresses some of the following questions:
– How big is the gender pay gap and the bonus gap across the financial services industry and what are the differences between different sectors?
– What does the data tell us about the profile of female representation at different levels across different sectors of the industry?
– What is driving the differences between sectors?
– What can financial services firms do to begin to address these challenges?
Here is a short 10-point summary of the report:
1) A structural problem: the financial services sector performs worse than the rest of the economy on every aspect of gender pay gap reporting. The average pay gap is more than double the national average of 14%, the average bonus gap is nearly three times the national average of 20%, and the representation of women in the top quartile by pay is significantly lower than in the wider economy.
2) A wide range: the high average pay gap in financial services disguises a wide range between different sectors. The highest average pay gap is at the 27 investment banks is in our sample, while in more consumer-facing sectors such as insurance or consumer finance the pay gap is significantly lower.
3) The bonus culture: the bonus gap is far bigger than the pay gap in every sector of financial services (in part because of a different methodology for measuring it) and ranges from 47% in the best performing sector to 65% in the worst. Three quarters of staff in financial services receive bonuses compared with a third of employees in the wider economy.
4) Tough at the top: women represent little more than a quarter of employees in the top quartile by pay in financial services, significantly lower than the rest of the economy – and in some sectors this falls to one in five or less. At nearly three quarters of firms, women represent less than a third of the highest paid staff.
5) A steep climb: the data from gender pay gap reporting enables us to create a powerful pyramid of female representation at different levels of the workforce in each sector. While most sectors broadly match the national average at the lower end of the pay scale, the pyramids for asset management and investment banks are particularly narrow towards the top.
6) Top heavy: the most common explanation for the wide pay gap in financial services is the low representation of women in senior positions where pay is often very high. However, there is only a weak link between the size of the pay gap and levels of female representation across our sample, suggesting other factors play a role.
7) A glass ceiling: across the industry and in every sector there is a sharp fall in female representation between the upper quartile by pay (ie. the second highest paid quarter of staff) and the top quartile of about a third. This suggests there is a structural problem in women progressing from the mid-level to the very top.
8) A poor start: women represent a slightly lower proportion of the total workforce in financial services than in the wider economy but in some sectors the gap is much wider: in one sector less than one in three staff are women.
9) Reaching the summit: the low level of female representation in the top quartile by pay across the financial services industry is flattered by the even worse gender balance on executive committees at the very top of the industry when you compare the gender pay gap data with our previous research.
10) The challenges ahead: how the financial services industry can address the gender pay gap is beyond the scope of this report and will take many years. A good starting point is for firms to understand why they are where they are today; to work out what is driving it; to fully understand if and why they want to address it; and to identify if and how any accidental or deliberate policies in recruiting, training, promoting, retaining and rewarding staff may be affecting the pay gap, bonus gap, or the level of female representation at their firm.
The starting point for this report was a dataset of 10,417 organisations in the UK that had submitted their gender pay gap data to the UK government by 24th April this year. We manually identified 446 financial services firms in that sample, and made adjustments to the data from larger firms that submitted data on multiple entities. We then allocated these firms to nine different sectors of the financial services industry, and included nearly 50 professional services firms as a comparison.
We analysed the pay gap, bonus gap, and levels of female representation in the following sectors: asset management, banks, consumer and business finance, diversified financials (including payment systems, credit cards, exchanges, brokers and trading platforms), insurance companies and brokers, investment banks, and wealth management firms (including private banks and private client stockbrokers).
The full report:
The full report Understand the gender pay gap in banking and finance includes the following:
1) A summary of how the financial services industry compares with the wider economy on the pay gap, bonus gap, and levels of female representation.
2) Analysis of the pay gap in different sectors of the financial services industry (and the range within each sector).
3) Analysis of the bonus gap in different sectors of the financial services industry, and its relationship to the pay gap (and the range within each sector).
4) Unique ‘pyramid’ profiles of female representation at different levels of seniority (top quartile by pay, upper quartile, lower quartile and bottom quartile, and across the whole workforce) in different sectors of the financial services industry.
5) Analysis of how these profiles compare with female representation on boards and executive committees in different sectors.
6) Analysis of average levels of female representation in different sectors of the financial services industry (and the range within each sector) across a) the top quartile by pay b) the whole workforce and c) the bottom quartile.
7) The correlation between the pay gap and the low levels of female representation in the top quartile by pay in financial services and the rest of the economy.
8) Analysis by sector of the drop-off in female representation from the upper quartile and the top quartile by pay.
9) Analysis of the increase required in each sector to reach a notional target of female representation 33% in the top quartile by pay.
10) An appendix of firms included in each sector
And 10 questions to stimulate debate on Understand the gender pay gap in banking and finance