FINANCIAL SERVICES
Commission finds women in leading finance companies receive 80% less in bonuses
Women in some of the UK’s leading finance companies receive around 80% less in performance-related pay than their male colleagues, an inquiry by the Equality and Human Rights Commission has found.
This disparity is a major factor behind the massive gender pay gap in the finance sector - with women working full-time earning 55% less annual gross salary than men. This compares to a pay gap of 28% for the economy generally.
The report reveals that nearly all women taking up new jobs in these companies still start on lower average salaries than men, suggesting the gender gap is being further entrenched by recruitment patterns.
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The EHRC also suggests that the sector’s age profile may be a key factor blocking women’s success. An unusually high proportion of workers in the sector fall into the 25-39 age group - the age at which women tend to have childcare responsibilities.
The report highlights how a lack of transparency over pay and working conditions, direct discrimination, long working hours and the difficulties faced by those with caring responsibilities all contribute towards the significant difference between what men and women earn.
Key findings
Findings from the data supplied to the Commission include:
Women earned an average of £2,875 in annual performance-related pay compared with an average of £14,554 for men - a gender pay gap of 80%.
A gap in annual basic pay between women and men of 39%. However, this gender pay gap rises to 47% for annual total earnings when performance-related pay, bonuses and overtime are taken into account.
Among the organisations that responded, women received significantly lower performance-related pay on average than men in 94% of cases.
In 86% of responses to the Commission, women who had started their jobs in the last two-and-a-half years had lower starting salaries on average than men starting in the same period.
Significant “in-grade” gender pay gaps in at least half of all job grades/categories, where men and women are assumed to be doing the same or equivalent work, were found in 63% of cases.
Less than half of cases report making some effort to address the pay gap and only 23% report that they have undertaken an equal pay audit.
There were examples of good practice in some of the organisations questioned, with one employer reporting that they made data on average bonus payments by gender available to employees. Another offered a “maternity buddy” system to support pregnant women and those on maternity leave.
Background
The Commission’s report, Finance Sector Inquiry, includes data from a questionnaire sent to 50 companies employing 23% of workers in the sector. The inquiry is the first time this type of data on gender pay gaps in the sector has been collected, with the Commission using its statutory powers to require companies to provide evidence of their working practices and policies including pay, job evaluation and audits.
The Commission has now begun the third phase of its inquiry which will involve collaboration with finance companies, employees, industry associations, leaders, regulators and trade unions to develop more targeted solutions to the gender inequalities identified in its report.
The finance sector
The finance sector provided 1.3 million jobs in Britain in 2008 and employed 4% of the workforce.
Women made up 51% of employees between 2003 and 2008.
The gender pay gap for annual gross earnings (i.e. all earnings, irrespective of hours) was 60%, much higher than the economy-wide figure of 42%.
Based on average full-time annual gross earnings, the gender pay gap in finance was 55%, compared with 28% overall.
Based on average full-time hourly pay (excluding overtime), the gap was still comparatively high at 40% versus 17% for Britain generally.
These statistics are from research commissioned as part of phase 1 of the inquiry and published by the Commission in April 2009. It included an analysis of Labour Force Survey and the Annual Survey of Hours and Employment.
--> Employment and Earnings in the Finance Sector: A gender analysis, by Hilary Metcalf and Heather Rolfe, Research Report 17, 2009, Equality and Human Rights Commission.
Inquiry terms of reference
The Equality and Human Rights Commission is carrying out an inquiry into sex discrimination in the financial services sector under section 16 of the Equality Act 2006. The terms of reference are to:
1. Inquire into the gender pay gap and pay trends across the financial services sector.
2. Inquire into the extent and nature of sex discrimination in relation to recruitment, terms and conditions, promotion, career paths, retention and workplace culture across the financial services sector.
3. Examine measures used by employers and other organisations to address sex discrimination and inequalities in pay and status and to assess the effectiveness of such measures.
4. Assess and analyse the differential impact of job losses in the sector.
5. Consider any other matters as appear to the Commission to be relevant to the above.
6. Make such recommendations as are appropriate.
Gender pay gaps (from questionnaire responses)
The gender pay gap for annual performance-related pay of 80% and the average performance related pay for men and women are based on 42 responses.
The gap in annual basic pay between women and men is 39% (based on 50 responses). However this gender pay gap rises to 47% for annual total earnings when overtime and performance-related pay, including bonuses, are taken into account (based on 49 responses).
Among the organisations that responded, women received significantly (a gap of at least 5%) lower performance-related pay on average than men in 94% of cases.
Job evaluation for surveyed organisations (from questionnaire responses):
One third of cases undertook job evaluation (22 responses).
The practice of job evaluation was positively associated with a lower gender pay gap in annual basic pay and annual total earnings.
Recommendations
The inquiry has delivered a number of key recommendations. These include to:
1. Appoint a board member to set the tone, “mainstream” the issues and drive change.
2. Implement a staff training and communications programme on gender equality and diversity and on equal pay to influence the understanding and behaviours of decision-makers within the organisation.
3. Incorporate equality and diversity into organisational and individual objectives.
4. Develop and carry out non-discriminatory job descriptions and analytical job evaluations that are flexible enough to meet the business’ needs but that set a clear framework for recruitment, promotion, pay and reward structure.
5. Undertake annual equal pay audits and publish the data.
6. Make sure maternity, paternity and parental support schemes are in place and are effective.
7. Monitor the implementation and effect of policy on gender equality.
A final word
“The financial sector has the potential to play a central role in Britain’s recovery. But it has to address this shocking disparity of rewards. For business to thrive in the new economy it simply can’t afford to recruit and reward in the way it has done in the past.
By bringing down arbitrary barriers, and changing practices that, intentionally or not, inhibit women’s success, financial firms have the chance to boost morale, bring on new talent, and maximise the potential of their existing employees.
I’m encouraged by the firms which are developing transparent pay policies and flexible approaches to work. But there aren’t enough of them. The many need to learn from the few. At a time when shareholders have become alert to the dangers of 'groupthink' and potential employees and customers value transparency and fair treatment it’s clear the enlightened few have a competitive advantage.” - Trevor Phillips, Chair of the Equality and Human Rights Commission.
Want to know more?
Title: Finance Sector Inquiry, Equality and Human Rights Commission, September 2009.
Survey sample: A questionnaire was sent to 50 finance organisations around Britain, most of which employed more than 250 employees. In all 44 companies provided useable data, including 12 holding companies, and these companies made a total of 72 returns, referred to as “cases”.
The questionnaire results were analysed for the Commission by a team at the University of Strathclyde Business School. However, they cannot be generalised to the finance sector due to the size and nature of the sample. Supplementary evidence was drawn from a call for evidence, seminars with legal advisers, trade unions and staff associations, and interviews with industry representatives, led by the inquiry evidence panel.
Availability: You can download the 108-page report, free of charge, in PDF format here.
The Equality and Human Rights Commission is a statutory body established under the Equality Act 2006, which took over the responsibilities of Commission for Racial Equality, Disability Rights Commission and Equal Opportunities Commission. It is the independent advocate for equality and human rights in Britain. It aims to reduce inequality, eliminate discrimination, strengthen good relations between people, and promote and protect human rights. The Commission enforces equality legislation on age, disability, gender, race, religion or belief, sexual orientation or transgender status, and encourages compliance with the Human Rights Act and international treaties. It also gives advice and guidance to businesses, the voluntary and public sectors, and to individuals. To find out more visit www.equalityhumanrights.com.