How Will the Pandemic Impact Pay Equity Within the Finance Industry?

The financial services industry is at a turning point. Though there is evidence to suggest that the global coronavirus pandemic could set back several years’ worth of hard-earned progress in closing the gender pay-gap in the sector, it has provided an opportunity to improve flexible working practices and opportunities.

With the suspension of gender pay-gap reporting in 2020, the recent equal pay claim against Asda in the UK Supreme Court — the largest ever in the private sector — has put a welcome spotlight on pay disparity. Diversity more generally is also front and centre in the FCA’s mind, with the newly appointed chief executive indicating that if there is not progress in the sector it may eventually become a supervisory matter.

Women in all sectors are already losing out as families are forced to juggle childcare and work and, while many employers have offered flexibility, it remains unclear as to when these challenges will end. For the financial services sector — notorious for having the worst average pay gap in the UK — the full impact of the pandemic may only be felt when pay rises and bonuses are considered next year.

Tackling the pay gap

While many firms may have been relieved that gender pay-gap reporting had been suspended for the year, it brings with it a danger that efforts towards parity will slide.

Reuters reported last year that, despite publicised initiatives to try to improve the issue, including implementing the recommendations from the Government’s Women in Finance Charter, mandatory mixed gender shortlists and flexible working initiatives, there had been a distinct lack of progress.

A large pay gap does not automatically mean that female executives in financial services are not receiving equal pay. However, it does confirm what is already well known: that the City has fewer women than men in higher-paid executive roles. If firms want to make a concerted effort to drive meaningful change when they come to report in 2021, this can only be achieved through improving gender equity at senior levels.

Although the challenges in addressing gender equity remain unchanged from those that existed pre-Covid, certain issues warrant renewed attention given the impact of the lockdown period and remote working, including:

• When promotion and bonus decisions come around, ensuring a sufficiently long look-back period to ensure performance is judged fairly and taking into account childcare-related challenges that may have impacted recent performance
• Ensuring clients and opportunities are distributed evenly — with remote working there is a greater danger of siloed working, so managers should be reminded to spread work across the team
• Recognising and addressing structural issues which may have a greater impact on women and the value attributed to their role, including the impact of prioritising financials when making promotion and bonus decisions, rather than looking at other measurable contributions
• Adapting mentorship and peer support opportunities for a remote workforce
• Adjusting internal processes and initiatives which help women who are remotely re-entering the workforce after maternity leave
• Being doubly mindful of unconscious bias, including well-meaning biases that might lead a manager to assume that an executive with children at home might not be able to take on a new client or transaction

A golden opportunity

The lack of ability to work flexibly in such high-pressured environments is often cited as a significant reason for women leaving the financial services industry as they climb the ladder. This in mind, firms should take advantage of the lessons learned during the pandemic to shift the gender dial. If firms are truly committed to closing the gender pay-gap, cementing new working practices into future plans to return to the office, while also factoring-in the disproportionate impact on their female workforce into remuneration and promotion decisions, will be vital.

With the pandemic said to have the potential to set women’s economic progress back half a century, the Asda case is a timely reminder, if we needed one, of the importance of addressing the issue. While financial services firms may be able to point to non-discriminatory material factors, such as senior executives focusing on different product areas or markets, often remuneration will be driven by previous financial performance.

As such, the risk of sex discrimination cases for firms which do not actively address the underlying reasons for any gender disparity remains very real, and firms must take note.

By Anna Birtwistle, partner, and Hannah Taylor, associate, at Farrer & Co