Five ways to reduce the gender pay gap in financial services companies

The gender pay gap in financial services is well known to be larger than other industries. But with reporting now mandatory in Ireland, what does it mean for financial service companies, and what can they do to close the still-persistent gap in compensation?

The National Strategy for Women and Girls 2017-2020 included legislation to address the gender pay gap in Ireland. It defines the gender pay gap as the difference in average hourly wages between men and women, regardless of seniority, within an organisation.

In 2021, Ireland passed the related Gender Pay Gap Information Bill, which requires companies employing more than 250 people to publish data related to the gap, including the percentages of men and women receiving benefits and bonuses. The bill mandates that companies with 150 or more employees will need to report within two years and with 50 or more employees in three years.

The Irish legislation mirrors laws in place in the UK, which passed the Equality Act in 2010 and whose similar reporting regulations came into effect in 2017.

The data to date shows gaps persist

Financial industry data shows a persistent pay gap between men and women.

According to a recent TIC Finance report, in the UK banking sector, for example, women are paid 33.6 per cent less than men. Among the 49 entities within the industry with reported information, there were no firms where women were paid equal to men. Overall, 45.3 per cent of those employed in the studied firms were women.

According to the report, sixty-two per cent of those in the lowest pay quartile were women, and men received 44 per cent more in bonuses than women.

In a separate report, PwC noted that while there has been progress in other sectors, financial services has one of the most significant gaps in the UK. The PwC report noted that five financial services sub-sectors held the largest pay gaps and that the median gap was 26.6 per cent, compared to 12.1 per cent in all other sectors in the UK. In fact, the sector has seen negative progress in the past four years.

Closing the Gender Pay Gap in Financial Services

Closing the pay gap will take commitment from financial services companies. There are several initiatives companies can take.

1. Use Data to Make Informed Decisions

The reporting requirements are an essential tool at a macro level to quantify the gender pay gap. However, the same data analysis should drive decision-making within organisations.

Data provides powerful information that can help contextualise the numbers within a firm and industry-wide. External market surveys, done individually or within consortia, can determine whether your firm is being consistent and equitable. Annual compensation surveys can equally determine changes in policy and processes to close the gap.

Analysis can also help determine the causes of gender pay gaps. These insights, combined with narratives, can identify which actions or initiatives will close the gap faster.

2. Re-examine Structures

The data shows considerable gaps in the lowest-paid bands of employees. Firms should use reporting on the pay gap to identify issues and structures within the workplace that are problematic.

When considering workforce dynamics, finance companies should consider the gender composition (along with other diversity factors) of grades and divisions and how they correlate to pay. Employers are likely to identify discrepancies that can be addressed by changing those structures.

For example, companies can consider the difference in pay rates for employees who do similar jobs in different areas or strata of the workplace.

3. Address Bias in Hiring

To address the bias in hiring, be sure that hiring committees are diverse and inclusive and that all receive training in unconscious bias. Firms should also review job postings and descriptions to ensure that gendered language is removed and that all candidates receive the same questions and are evaluated using the same scoring method.

4. Institute Career-Advancing Programs

There are pivotal moments in a woman’s career where firms can take notice and focus efforts on retention, promotion and equity. Consider programs that promote and support the education of women seeking careers in STEM and business fields. Early on, pair women with mentors who foster relationship-building, career navigation and networking.

Ensure that women leaving on maternity leave have a plan outlined for their work while they are out. It’s also just as important to have a well-defined return plan that allows for a seamless return and ensures continuity for work, clients and projects.

5. Communicate Clearly and Transparently

Be transparent with your employees about the gender pay gap, the goals and steps to address it, and the progress towards those goals. Not only should progress (or lack thereof) be reported broadly, it should be contextualised within the industry and the country.

It's also essential to frame the gender pay gap within a broader context of diversity, equity and inclusion and related initiatives to create an inclusive workplace. To put the gender pay gap into greater context, check out Gender Equality in Financial Services: A Beginner's Guide.