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To close gender compensation gap at UK banks, agility pays off

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To close gender compensation gap at UK banks, agility pays off

When it comes to the gender compensation gap at U.K. banks, it pays to be small.

The latest U.K. statutory data shows that smaller lenders are having more success in closing the pay gap between men and women than larger, more traditional banks.

Among 10 lenders with more than 1,000 employees, Sainsbury's Bank PLC has had the most success in closing its median hourly pay gap, which narrowed to 38.5% in 2018/19 from 45.3% the year before — a 6.8-percentage-point improvement. Metro Bank PLC reduced its gap by 3.7 percentage points, while Virgin Money PLC's gap was reduced by 3.4 percentage points.

The figures measure the difference between women's and men's median hourly wage. The U.K. government has, for the second year, required all firms with more than 250 employees to publish this information.

In comparison, the country's traditional — and far larger — banks saw their median hourly pay gap widen. HSBC Bank PLC's rose by 1pp, while Barclays Bank PLC's was up 0.6 percentage point and NatWest Markets PLC's was up 0.3 percentage point. However, at HBOS PLC the gap narrowed by 0.1 percentage point, while at parent Lloyds Banking Group PLC there was no change.

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Smaller banks 'more agile'

The companies that have low pay gaps tend to be the smaller ones, said Innes Miller, chief commercial officer at paygaps.com, an Edinburgh-based consultancy that advises and works with companies on gender data gap reporting.

The challenger banks tend to be newer, smaller and more agile, he said, which makes things easier.

"They've got more of an opportunity to deliver gender quality at an earlier stage," he said.

For the long-established banks, it will take time.

There is a lot of work to be done given the size of the banks in the U.K, and annual gender pay reporting is not enough to address the issue, Miller said.

Strategic priorities

Banks also need to consider giving quarterly updates to their boards each quarter to ensure they are reaching their gender pay targets.

"Any change has to start at the top," he said. "The CEO has to take responsibility for it, the executive team has to be accountable; they have to be given clear targets."

In general, banks have not yet made gender equality part of their strategic priorities, according to Geraldine Healy, professor of employment relations at Queen Mary University of London.

It would focus minds if banks made bonuses dependent on how much progress was made on this front, and regulation could also play a part, she said.

We may see change if rules are put in place that require organizations to detail how they plan to close the pay gap, and explain why they haven't if they fail to meet targets, she said.

If firms do not have "a jolly good reason," financial sanctions should perhaps be applied, she said.

According to Mostak Ahamed, a lecturer in finance at the University of Sussex who has conducted gender pay gap research with Healy, certain banks are guilty of strategically promoting some women and don't have any overall strategic agenda.

Some banks, such as Sainsbury's Bank, have improved. A company spokesperson said bonuses for senior executives are linked to gender diversity targets, and that the bank seeks female candidates for job shortlists and is creating more part-time roles.

Foreign-owned banks

Among the foreign-owned banks based in the U.K., J.P. Morgan Securities PLC and UBS AG reported the biggest year-over-year increases in their median hourly pay gaps — 14 percentage points and 17.3 percentage points respectively — although they said the figures should not be taken at face value.

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Switzerland-based UBS said it had consolidated its figures for UBS AG and UBS Business Solutions and said its pay gap had actually narrowed by 1 percentage point, taking into account those figures. The bank's median hourly fixed pay gap was 24% in 2018, compared to 25% in 2017.

U.S.-based JPMorgan said its overall U.K. entities, which comprised five companies in 2018 and six in 2017, gave a more representative picture of how the bank was progressing on closing the gender pay gap. According to the bank's overall figures, its median pay gap was 25.7%, up 0.1 percentage point on the year.

"While we are committed to engaging and developing women at all levels, we currently have more men than women in senior roles, and consequently, we have a 'pay gap,'" the bank said in a statement.

"We have more work to do, not only to increase women's representation at all levels, but to advance more women into management and leadership positions across the firm. The business is ... committed to expanding advancement opportunities for women."

Paygaps.com's Miller said gender pay equality would become increasingly important for publicly quoted banks because investors are becoming increasingly demanding when it comes to environmental, social and governance criteria.

"There are more stakeholders to consider over and above just the government," Miller said. "You have your existing employees [and] prospective employees, but more importantly as a listed company, investors, and increasingly the asset managers are putting an ESG lens across all of their investments. It doesn't just apply to the ESG funds anymore."

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