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The gender pay gap in Financial Services

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Equality may be a word commonly used in the workplace today, but discourse doesn’t guarantee progress – and the stats are worrying. Analysis of the latest gender pay disclosures shows that men continue to be paid more than women across most UK organisations, “the difference in pay was found to be 9.4%, the same level as when figures were first public… in 2017/18” (BBC: 2023 8 out of 10 firms pay men more than women). At best, UK companies seem to be stagnating.

Research shows 79.5% of employers had a gender pay gap that favoured men in 2022-23. While this has fallen in some sectors, Financial Services had an average gap of 22.7% - the highest after educational employers (UK Finance: 2023 News in brief). Further research by PwC shows the median average pay gap sat at 12.1% across all UK sectors – but it was a whopping 26.6% for Financial Services (PwC: Gender pay gap and diversity in financial services).

Perhaps even more worryingly, HSBC, Goldman Sachs, Morgan Stanley and Standard Chartered all reported a widening gap between what they paid women and men in 2022, according to data reviewed by Reuters. “All four banks said in their gender pay gap reports that the figures reflected the under-representation of women in senior roles and that they were taking steps to address this” (Reuters: 2023 HSBC, Goldman gender pay gaps widen in UK as finance makes slow progress).

So how does the pay gap actually work?

The 1975 equal pay act means employers are required by law to pay professionals in the same role the same salary; it isn’t employers simply deciding to pay women less because they’re women. The situation is covert, multifaceted and often unconscious; but in its essence (and as admitted to above) the gap exists because men across the board can often occupy better paying professions, as well as positions of seniority in those professions.

But why?

Horizontal and vertical bias

Horizontal gender bias is the distribution of men and women across industries and sectors. What roles do the words ‘women’s jobs’ conjure? Is it care work like nursing or teaching? Likewise, does ‘men’s work’ conjure images of engineers, STEM professionals or brokers?

Vertical gender bias works similarly – it’s the distribution of men and women across the hierarchy of a specific profession, workplace or industry. In the past, women in boardrooms may have famously shared the awkward experience of being asked to get drinks or take notes. Why? Is it because a leader or c-suite professional looks like an older man in our collective conscious?

It’s easy to justify these biases with numbers. After all, stereotypes often exist because of the numbers. If women want to be seen as leaders or occupy roles not socially assigned to them, why don’t they? The danger lies in the confirmation bias that follows the above. When the group that is the subject of the social bias/stereotype internalise it, they can end up trapped by it. As young professionals prepare to enter the market, they envision a career trajectory. But if you can’t see yourself ever getting to a certain place, you simply won’t work towards making it a reality. This manifests in people only pursuing careers they believe are open to them in the first place.

Social bias leads to confirmation bias, which in turn leads to a self-perpetuating, restrictive cycle of keeping certain people in specific places.

The motherhood and partner penalty

To add to the above, things get more complicated when looking at motherhood and cohabitation. The New York Times put it well, “The big reason that having children, and even marrying in the first place, hurts women’s pay relative to men’s is that the division of labour at home is still unequal, even when both spouses work full time” (New York Times: The gender pay gap is largely because of motherhood).

When looking at an uneven division of labour, raising children can be a factor. But according to research even those who choose not to have children often earn less, because women are more likely to pass up job opportunities in order to move or stay put for their husband’s job. Then when children are introduced, not only have some women missed job opportunities but they often take fewer intensive jobs in preparation for children – knowing that the bulk of the (unpaid) responsibility will fall to them.

“One person focuses on career, and the other one does the lion’s share of the work at home,” said Sari Kerr, an economist at Wellesley College, Massachusetts. Statistically women spend on average one hour more a day on unpaid work than men do, with that jumping to as much as three hours in some European countries (Eurostat: How do women and men use their time – statistics). This unequal division of unpaid labour takes its toll on the professional lives of women – sapping energy, stifling potential and fuelling the pay gap.

Those who decide not to have children may also experience bias, whereby they’re overlooked for promotion on the basis that they may one day change their mind and deprioritise work as a result (Justifying gender discrimination in the workplace: The mediating role of motherhood myths). “Cognitive bias may occur when an employer disadvantages women by assuming that they will conform to a stereotype. An employer assuming that mothers will work fewer hours after they have children is an example of how stereotyping is dangerous” notes one research piece (University of Rhode Island: The motherhood penalty).

So, what can employers do to address the gender pay gap and support women?

Support professional women

The complexity of the pay gap stems from the multiple factors causing it, some of which are social issues beyond the scope of businesses. However, there are some powerful ways organisations can tackle the problem - introducing and promoting paternity leave is the biggest. For the institutions without a paternity policy, the first step is clear. For those with paternity leave already in place, the World Economic Forum advises employers to actively encourage new fathers to take it. “Men cite fears of being discriminated against professionally, missing out on pay rises and promotions, being marginalised or even mocked as reasons [for not taking paternity leave]” says one report (Family Tree: Paternity leave – why aren’t more men taking it?) and yet when surveyed, 80% of dads said they’d want much more time with their children (World economic forum: 2022 The motherhood penalty: How childcare and paternity leave can reduce the gender pay gap). It’s clear, businesses need to actively promote paternity leave as a viable option for their male employees.

Similarly, childcare and flexibility are paramount. Retailer Patagonia created on-site childcare facilities for employees and saw retention rates skyrocket. In a post Covid climate flexibility is a non-negotiable, particularly for financial businesses promising to bridge the gap.

Perhaps most importantly, employers need to understand the challenges women may be facing, listen to any concerns and work on ways to drive equity. The World Economic Forum urges employers to “allow women within your organisation to discuss what's working and what's not – give them a direct line of communication to the top as well as the resources they need” (World economic forum: 2022 The motherhood penalty: How childcare and paternity leave can reduce the gender pay gap). Creating safe open spaces to discuss personal situations case by case is a direct way to combat the biases and challenges driving the gender pay gap.

Open the door and show that it’s open

From as early as school, a lack of representation and the horizontal biases that plague gender, ethnicity and certain socioeconomic backgrounds directly influence career trajectories. It’s easy to tell girls they can be c-suite finance professionals if they want to be, but unless girls can see that it’s a viable career pathway, doubts will linger.

Remedying this isn’t a complicated process. Working in partnership with schools and colleges to organise open days and workshops for the talent of the future is a powerful way for businesses to address the widening pay gap. Further down the line, internships and development programmes aimed specifically at women is another effective way to encourage open and honest conversations and provide support.

Ultimately, the numbers are clear; there are still challenges with the gender pay gap across the Financial Services profession and time alone isn’t fixing the issue. Companies across Financial Services need compliant policies, support mechanisms and cultures which encourage open conversations and empower employees to challenge the status quo.

For advice and support with your hiring strategy or if you’re looking for a new opportunity, speak to an IDEX Financial Services specialist today.


BBC: Paternity leave, which comes with multiple benefits, is more widely offered than ever before. So, why aren't more men taking it?

BBC: 2023 8 out of 10 firms pay men more than women

Eurostat: How do women and men use their time – statistics

Family Tree: Paternity leave – why aren’t more men taking it?

Justifying gender discrimination in the workplace: The mediating role of motherhood myths

New York Times: The gender pay gap is largely because of motherhood

PwC: Gender pay gap and diversity in financial services

Reuters: 2023 HSBC, Goldman gender pay gaps widen in UK as finance makes slow progress

UK Finance: 2023 News in brief

University of Rhode Island: The motherhood penalty

World economic forum: 2022 The motherhood penalty: How childcare and paternity leave can reduce the gender pay gap