The People Bulletin

Women in some of the leading UK finance companies receive around 80% less in performance related pay than male colleagues, according to the Equality and Human Rights Commission’s Finance Sector Inquiry, published on 7 September 2009. The findings are based on data from a questionnaire sent to 50 companies employing 22.6% of workers in the sector. The majority of women taking up new jobs in these companies still start on lower average salaries than men and an unusually high proportion of workers in the sector fall into the 25 to 39 age group – the age at which women tend to have childcare responsibilities. Key findings of the report include:

• Women employees earned an average of £2,875 in annual performance related pay compared to 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 who responded, women received significantly lower performance related pay on average than men in 94% of cases.
• In 86% of responses, 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.
• Only 23% of cases report that they have undertaken an equal pay audit.

The finance sector provided 1.3m jobs in the UK in 2008 and employed 4% of the workforce. Further details of the report are available from the Commission at: www.equalityhumanrights.com/legislative-framework/formal-inquiries/inquiry-into-sex-discrimination-in-the-finance-sector/

It remains to be seen what the finance sector will do about the recommendations in the report which include appointing a board member to champion the issues and drive change, undertaking annual equal pay audits and publishing the data and ensuring maternity, paternity and parental support schemes are in place and effective. A week before the Commission published its findings, The Economist highlighted some research just published in the Proceedings of the National Academy of Sciences by Paola Sapienza of Northwestern University, near Chicago (www.economist.com/sciencetechnology/displayStory.cfm?story_id=14301951).

This suggests that ‘it is not a person’s sex, per se, that is the basis for discrimination, but the level of his or her testosterone. Besides being a sex hormone, testosterone also governs the appetite for risk’. A piece of qualitative research on a group of MBA aspiring bankers found that men and women with similar levels of testosterone displayed similar risk preferences. And when the subjects’ career progress after graduation was monitored, more men than women chose a risky job in finance, correlating with the higher levels of testosterone in these individuals. So while the scope for earning performance-related bonuses in the finance sector remains inevitably linked to risk appetite (despite the lessons learned from Lehman et al), the Commission may have to wait some time before it sees much change…