As part of our series in the run-up to International Women’s Day 2024, our team is reflecting on the issues that affect women in the industries we operate within, and offering their advice on how we can inspire inclusivity and build a more equal future for all.
In this article, our Principal Consultant for Financial Services Alice Woodruff describes recently published data that highlights the disadvantage that women face as a result of the prevalence of the gender pay gap and offers steps that businesses can take to work towards pay parity.
The gender pay gap has a significant knock-on effect in all aspects of financial life for women: data released this week from the TUC (Trades Union Congress) has now revealed that, as a result of the gender pay gap, women in the UK effectively work without pay for nearly two months of the year, meaning that the average woman will effectively wait 52 days before they stop working for free. The data, which is calculated using median hourly pay using the Office for National Statistics Annual Survey of Hours and Earnings, has also shown that some sectors have an even longer wait than the overall average, with the longest wait being found in finance and insurance: the gender pay gap (27.9 per cent) is the equivalent of 102 days, or until 10 April 2024.
Equally, a recent report from the Pensions Policy Institute found women’s assets are less than two-thirds (62%) of men’s pensions by their late 50s, whilst headlines were made when it was revealed that women will need to work an extra 19 years to retire with the same amount of money in their pension savings as their male counterparts.
Another analysis that was recently conducted also found that, on average, it will take 42% longer for women to save for their first home as opposed to men as a result of what they term the ‘gender save gap’: since men start on a higher salary than women, they are immediately at an advantage and able to put more of their disposable income aside for the future. According to ONS data, the average weekly earnings for a 22 to 29-year-old man is £572, yet women of this same age group earn less at just £489 on average.
102 - The number of days women in the Finance and Insurance sectors effectively work for free.
The issue is a multifaceted one, with several factors at play: in general, women are less likely to be in employment than men, and those who are employed are more likely to work part-time (33%) compared to male colleagues (9%). The cultural onus is generally on women to become the primary caregivers when choosing who should give up working in order to provide childcare, which is certainly a contributing factor to the prevalence of women either leaving their careers entirely or returning on a part-time basis post-maternity leave, with 41% of women also reporting that taking a career break has negatively impacted their long-term financial prospects. Equally, the rising costs of childcare and other associated costs that go into raising a family will have a significant impact on their ability to put money aside for the future, with 57% of women reporting that they don’t have enough spare money each month to save or invest it.
41% - The percentage of women who reported that taking a career break negatively impacted their long-term financial prospects.
Moreover, there is evidence to suggest that there is a significant gender investment gap that is putting women at a disadvantage: analysis of HMRC data by AJ Bell Money Matters shows that the gender investing gap is largest among young people, with only 35% of young stocks and shares ISA investors being women. This gender investment gap narrows as we get older, but never reaches parity, peaking at 46% of women aged 65 and over. Equally, their report highlights that on average, women have less than half the levels of savings and investments than men, with women saving on average £180 per month, whereas men will save £306. While the organisation concedes that the disparity in pay is the primary factor in the difference in savings and assets, its main focus is on empowering women to educate themselves on investing opportunities to maximise the income that they do receive.
57% - The percentage of women who don't have enough spare money each money to either save or invest it.
However, the crux of the issue always boils down to the gender pay gap. Without drastic action, we will not reach pay parity for another two decades, and it is down to businesses to take action to improve and ultimately close their internal pay gap. Simple ways to do this are:
- Provide transparent paths to promotions and pay rises - The first step to closing the gap is to ensure that you have a clearly defined set of goals and targets for employees to achieve pay raises and/or promotions and that these are readily available for employees to make themselves aware of. Having transparent targets will ensure that the pathway to progress is unimpeded by gender, race, sexuality, or any other protected characteristic.
- Encourage open discussions around salary - By creating a culture of transparency, employees will feel empowered to discuss and negotiate their salary. Generally speaking, men will feel a lot more confident in negotiating their salary and package than their female counterparts. It is therefore essential to ensure that these avenues are clearly signposted and open to all employees across the business to engage with to ensure equality of opportunity.
- Analyse your internal bias - Whilst businesses must produce gender pay gap reports as a matter of law, the businesses that are serious about redressing their internal gap should consider going one step further. Alongside employee salaries, it’s good practice to assess the hours, employment types, and promotion history of each employee to identify if there are areas where unconscious bias may have played a part in creating an internal gap. By taking this approach, businesses can work towards addressing and remedying the gap and create a targeted plan based on the facts.
- Ensure your workplace is set up to accommodate everyone - It is very common for women to reduce their hours to part-time to manage the bulk of their caregiving and family responsibilities, which contributes significantly to the gap in pay. However, if firms can accommodate flexible working and make this the standard practice across the board, this will allow more women to continue working and fit their professional responsibilities around home life.
- Decide new hire salaries based on skills, not based on previous salary history - It is still relatively common practice for employers to request to know a candidate’s salary history when looking to hire someone new. However, the rationale around this is clearly a very outdated one and generally puts women (who are often already underpaid) at a significant disadvantage. Employers who decide their salary offering purely based on skill and merit offer a fairer process all around and have a higher chance of closing their internal gap.
