Women in the City - Treasury Contents


3  Gender pay gaps

28. Women will not progress if companies do not value them as much as men. The Equality and Human Rights Commission (EHRC) conducted an inquiry into the financial services sector. Its report, published in October 2009 found:

    […] women working full-time in the finance sector earn 55% less per year than men working full-time. This gap is twice as large as the average gap across the economy. The gender gap identified in bonus payments is a shocking 80%.[60]

A 2008 survey of Unite members also found evidence that "women are markedly lower paid than their male counterparts".[61] The ICAEW told us that male chartered accountants earn 50% more than females in terms of basic salary[62] and this difference increases when performance related pay is taken into account, where women earn 64% less than men.[63]

OCCUPATIONAL SEGREGATION VS IN-GRADE GENDER PAY GAP

29. There are two distinct aspects to the average gender pay gap. The first relates to occupational segregation, the fact women tend to do lower paid jobs in the City such as clerical and secretarial work. This makes the average salary of women lower than men, who tend to be well represented in management positions.[64] It is clear that the gender pay gap figures are hugely affected by the occupational segregation in the finance sector.[65]

30. The other significant issue is whether there is an in-grade gender pay gap, that is, a pay gap that between men and women doing the same job. The EHRC report contains disappointingly little research into the in-grade gender pay gap—less than one page in a report of over 100 pages. Although the report states that within equivalent grades women were paid significantly less than men, it gives no figures. In oral evidence Mr Phillips told us that the EHRC found evidence of an in-grade gender pay gap:

    We also discovered that there were pay gaps within band, that is to say, people doing the same work, the same level, roughly the same level of experience. Women were still earning less compared to men doing that same work.[66]

Mr Phillips told us that in the next phase of their inquiry the EHRC hoped to do more work on the in-grade gender pay gap.[67]

31. Most evidence about the gender pay gap did not split out in-grade gender pay gaps. However, the Chartered Management Institute provided figures which suggested there was an in grade gender pay gap. Even so, these figures are very highly aggregated and though they indicate that the gap exists they do not show its extent.

Table 1: Comparison of average salaries by grade from the Chartered Management Institute

Average salary (financial sector) £ Gender pay gap *
% (finance)
Female Male
Directors 126,704150,283 18.6
Function Head 74,17482,023 10.6
Team Leader 38,29742,478 10.9
Junior professional staff 19,71723,415 18.8

* The gender pay gap is shown as the additional average pay received by men expressed as a percentage of the comparable female salary.

Source: Table 1: Basic salaries for men and women at different management level—National Management Salary Survey 2009, see Ev 53

32. The EHRC found that the gender pay gap was not just a historic phenomenon. The Commission learned that in 86% of cases, female new staff earned less than their male counterparts.[68] Such a marked pay gap on entry suggested that the pay gap is widespread, and likely to persist. Regrettably, it also suggests that there may not always be objective justification for difference between male and female salaries.

33. The EHRC found that large gender pay gaps exist in the financial services sector. Women working full time earn 55% less than male full time staff. The pay gap for bonuses and performance related pay is even higher at 80%. However, these figures are largely driven by occupational segregation. The evidence may suggest that even when controlling for seniority, a significant gender pay gap exists in the City, but policy makers need a firmer evidence base than that currently provided by the EHRC. We trust the next stage of the EHRC's financial services inquiry will provide more rigorous analysis. We recommend our successor Committee continues to monitor levels and structures of remuneration in the City.

MONITORING THE PAY GAP

34. Since a lack of transparency will contribute to gender pay gaps, publishing information about pay disaggregated by gender may help to prevent them. In Australia and the US there are regulatory obligations about regular reporting to Government on women's workplace issues.[69] The ACCA told us:

    The regulatory obligation to report to government in Australia has driven monitoring and internal reporting on gender equality in all companies where this was not already a management focus. These developments have facilitated progress and external reporting.[70]

35. The EHRC report Financial Services Inquiry: Sex discrimination and the gender pay gap, found that companies with more transparent pay information had lower pay gaps. It recommended that firms carry out and publish equal pay audits annually after having discovered that organisations with more transparent pay information had lower gender pay gaps.[71]

36. Kat Banyard outlined what equal pay audits involve:

    What an equal pay audit does is simply assess jobs by grade. It compares the rates between women and men. If there is a gap, it looks at what is the cause of that gap. If there is no other reason apart from gender that is having an effect, an equal pay audit will lead to a plan of action. That is where we have seen the most change.[72]

Baroness Prosser believed that companies would not find it difficult to carry out such audits:

    it should be quite easy to produce the information. There are numbers of people who have argued, and I think there is a deal of support for this argument, that there should be such a report contained in a company's annual report.[73]

37. A significant number of private sector organisations and individuals supported equal pay audits.[74] Dr Altmann told us:

    I think the lack of transparency is another area where differences can occur without people actually being sufficiently aware of it. In that case, obviously improved transparency and requirements to disclose pay, especially at senior levels, should be very helpful and in and of itself, I believe, would make a difference to that.[75]

Clare Dobie, President of the City Women's Network, also supported the idea of greater disclosure of pay levels.[76]

38. While the idea of equal pay audits was widely supported, there were conflicting views about whether they should be mandatory. The Fawcett Society and Dr Altmann shared the view that mandatory pay audits are "an excellent idea."[77] Kat Banyard did not believe audits would be widely used without legislation.[78]

39. Mr Phillips appeared to agree with the Fawcett Society that action was needed:

    […] stop saying either that it is women's own fault or that things will just change with time because they will not. There have to be active steps taken to break down the structures that lead to the continuing and chronic disadvantaging of women[…][79]

However, he clearly did not consider making such audits mandatory as currently an appropriate "active step" to break down female disadvantage:

    We [the EHRC] think that over time more companies will begin to use them [equal pay audits]. We do not at the moment see the case for them being mandatory. We think that at the moment the priority is to ensure greater transparency around pay. [80]

40. On 19 January 2010 the EHRC announced plans to encourage companies to conduct audits and publish their results:

    Employers can choose from three quantitative measurement options: an overall single figure, or the starting salaries of male and female staff, or the differences between male and female pay by grade and job type. There is no "one size fits all" approach. The Commission will also offer the option of a narrative which would enable employers to explain the context […]

    The Commission will expect employers employing 500+ employees to use two or more options from this menu, in most cases a narrative plus one or more of the quantitative measures. The Commission will also expect employers employing 250 to 500 employees to opt for one of the quantitative indicators.

The Commission has suggested a successful voluntary regime will avoid the need for regulation to make such audits compulsory. Companies participating in such a scheme would also be unlikely to receive further formal requests for information.[81]

41. Clause 78 (Gender pay gap information) of the Equality Bill allows the Secretary of State to make regulations requiring private sector firms with more than 250 employees to publish information about gender pay differences. In oral evidence, Ms Harman told us that currently companies give their customers information about matters such as animal welfare but do not release information about the welfare of the staff employed by that company. She considered that publication of information about pay differences would allow consumers to take a provider's record in gender equality into account in deciding whether to deal with a particular company.[82] The regulations are affirmative, and so would need to be approved by both Houses of Parliament before coming into force.

42. There is evidence that equal pay audits can identify gender pay gaps and inform firms about the possible reasons behind them. This is especially important at entry level so that pay gaps do not persist. We urge City firms to follow the EHRC's recommendation to conduct equal pay audits and publish their results. We note that Clydesdale Bank has volunteered to carry out such an audit.

43. We note Mr Phillips's view that equal pay audits should not be mandatory. Any regulations requiring companies to publish information about gender pay differences will require Parliamentary approval. Government and Parliament will doubtless take into account the extent to which there is evidence that unjustifiable pay differences persist when deciding whether such regulations are appropriate. However, we suggest firms which are found guilty of discrimination at an employment tribunal should be required to carry out regular equal pay audits.


60   Ev 67 Back

61   Ev 46 Back

62   Ev 64 Back

63   Ev 64 Back

64   Ev 45-46 Back

65   Ev 74-75 Back

66   Q 158 Back

67   Q 160 Back

68   Equality and Human Rights Commission, Financial Services Inquiry Sex discrimination and the gender pay gap report of the Equality and Human Rights Commission, October 2009, p 33; see also Q 158 Back

69   Ev 38 Back

70   Ev 38 Back

71   Equality and Human Rights Commission, Financial Services Inquiry: Sex discrimination and the gender pay gap report of the Equality and Human Rights Commission, October 2009, p16 , (hereafter Financial Services Inquiry) Back

72   Q 9 Back

73   Q 167 Back

74   Ev 36,39,46,54,59 Back

75   Q 75  Back

76   Q 76 Back

77   Qq 52, 82 Back

78   Q 52 Back

79   Q 194  Back

80   Q 164 Back

81   http://www.equalityhumanrights.com/media-centre/voluntary-measures-proposed-for-publishing-pay-gaps/ Back

82   Q 241 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 3 April 2010