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Lack of transparency thwarts efforts to close pay gaps

Author: ICAEW Insights

Published: 17 Mar 2023

Financial services are among the least likely to publish salary data, despite moves toward encouraging greater pay transparency.

Talking about money, especially salaries, has long been taboo in the UK. But in recent years, societal attitudes and legislative changes in favour of greater pay transparency have seen more and more organisations embrace the benefits of publishing pay rates.

And yet despite offering some of the most favourable salaries and bonuses, organisations in the financial services sector are among the least likely to publish salary data, despite being the sector most likely to use performance-based pay, a recent report has found.

In a global survey of more than 500 businesses around the world, conducted by reward consultancy 3R Strategy, 76% said they did not publish data on salary ranges. For the financial services sector, just 11% said they published data on salary ranges. Only engineering, life sciences and technology sectors provide less pay transparency than financial services.

Being open about pay engenders greater employee trust that salaries align with skills, experience and performance, and that higher salaries are not just the preserve of the best pay negotiators. 

Evidence also suggests that men are better at asking for a pay rise than women, leaving potential for a gender pay gap. Undisclosed pay data can create tension and resentment among the workforce.

Publishing data on pay has become increasingly popular in recent years, allowing employees to compare their salary with those of their colleagues, providing reassurance that they are being paid fairly. 

As part of the UK Equality Act 2010, the Gender Pay Gap Information Regulations came into force in April 2017, requiring employers with more than 250 staff to publish their gender pay gap figures by 30 March every year. 

In 2021, the UK government proposed enforcing ethnicity pay gap reporting. This remains voluntary, but a growing number of organisations including PwC, Deloitte and ITV, among others, voluntarily report their ethnicity pay gap.

Polly Tsang, Financial Services Regulatory Manager, ICAEW, says: “We would welcome the government’s efforts at increasing pay transparency in financial services and more generally. 

“US states such as New York, California and Washington already require the disclosure of salary range in job adverts and evidence shows listing a salary range on a job advert and not asking applicants to disclose a salary history allows candidates, particularly women, to negotiate pay on a fairer basis. This could have a significant impact in closing salary gaps and tackling pay inequality.”

Rameez Kaleem, founder of 3R Strategy, says: “Although the financial services sector has forecast a relatively low median pay increase for 2023, variable pay and bonuses are more prevalent in this sector and we have seen many financial services organisations providing one-off payments to their employees to support them with rising costs. The lack of pay transparency across various sectors is also interesting, and raises further questions.”

Salaries have been rising in some sectors this year, but they have not kept pace with inflation in most cases. Some economists say inflation has now peaked and will continue to fall gradually over the next two years. However, the benefits of stabilised inflation will not be felt immediately for households. 

Projected pay increases for 2023 are slightly higher than 2022, with the aerospace and defence sector indicating the highest budgets, according to the survey. The most prevalent salary increase budget reported for the UK was 5% – both for the median and upper quartile of the sample, 3R found. The lowest pay increase budget for 2023 was 3.5% for the charity sector.

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