Last week saw the deadline for companies with over 250 employees in the UK to report their gender pay gap.

The figures revealed that HSBC has a gender pay gap of 59 per cent, Lloyds has a 32.8 per cent gap, Legal & General have a 30.5 per cent and Aviva has 28.5 per cent.

While the gender pay gap in the UK was at 18.4 per cent in 2017, the gap was wider in the financial services industry with 31 per cent, according to the Office for National Statistics.

The gender pay gap captures the difference between incomes for the group of all women at a company, compared to the group of men. It is therefore not a like-for-like comparison. Instead, what it shows is the difference in distribution between senior and junior roles.

Promoting and enabling women to do well is not just a cultural matter but a financial one too. Research from the accountancy firm PwC has shown that in the UK, economic gender parity could add £188 billion to GDP.

McKinsey, a consultancy, found organisations that have gender diversity in their leadership are 15 per cent more likely to outperform their industry rivals. ‘It seems to me that it is a business no-brainer,’ Victoria Atkins MP, the minister for women, said at a recent parliamentary inquiry on women in finance.

How might the fact that companies have to show their gender pay gaps lead to actual change?

Shelley Leaney, director of private clients at Charles Stanley, says: ‘The disclosure of this information could focus the mind of those companies that need to do better but have unrealistic opinions of how well they are doing. The results can be sobering and bring about real change.’

Karen Wagg, a director of financial services at Redleaf Communications, says: ‘‘The immediate impact for women in finance has been two-fold. Firstly, in some companies it has brought diversity disparity at the top to the fore, leading to some genuine soul searching and action from executive committees.

‘Secondly, it has provided women in finance with ‘evidence’ that they can and are using in discussions with HR as they examine their pay, bonus and opportunities for progression.’

What is currently driving the gender pay gap in financial services, and what needs to change?

One decisive factor is the lack of childcare provision, and the fact that most men still don’t take shared parental leave. At the inquiry, Alison McGovern MP said: ‘the take-up of shared parental leave is horrifically low.’

She continued: ‘Men who have used shared parental leave have told us that they have encountered career progression issues. It is particularly acute in sectors such as financial services, where there is a culture of presenteeism’ – whereby performance is judged by being at the office for a certain number of hours rather than output.

Commenting on the current debate, Helena Morrissey, head of personal investing at  Legal & General Investment Management, said: ‘The response should not be to train women to be like (a certain type of) men. Pay and promotion should not be about he who shouts loudest but who contributes.’

Morrissey, who has nine children, added: ‘It’s not about helping women out during their child bearing years but about enabling us all to play multiple roles in life, together, with men.’ She added that the next generation of ‘young men and women expect work life balance – we need to enable this, not channel them down old-fashioned paths’.

Tali Shlomo, people engagement director at the Chartered Insurance Institute, believes to achieve more parity, ‘recruiters and hiring managers need to be challenged to make their recruitment more inclusive’. She says this includes the use of ‘blind CVs’ and unconscious bias training.

Shlomo is in favour of returnships ‘to attract women coming back to work who have raised children.’ As well as giving these women access to leadership training and further qualifications, so that they can then rise up to more senior roles.

The Treasury has set out a Women in Finance Charter for financial companies to sign to confirm that they are setting internal targets on gender diversity, and that the pay of senior executives is linked to the delivery of these targets.

Achieving those targets will largely depend on changing the culture and provision around childcare, presenteeism, hiring processes, bonus and pay decisions, as well as having incentives for senior managers to enable more women to succeed and thrive in the sector.

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This article was originally published in Money Observer on 9 April 2018: http://www.moneyobserver.com/our-analysis/how-to-close-gender-pay-gap-finance