U.K. Lawmakers Slam Professional Firms on Gender ‘Loophole’

Updated on
  • Linklaters, EY among firms excluding partners from pay figures
  • Labour spokeswoman demands resubmitted data by April 4 cutoff
There’s more to the U.K.’s gender pay gap than meets the eye

U.K. politicians are demanding law and accounting firms revise figures on how male and female staff are remunerated amid criticism that their partnership structures let them understate the gender pay gap.

British companies with more than 250 employees have until April 4 to provide authorities with data on how they pay staff. Among those to report so far, professional-services companies including Linklaters and EY have shown much narrower gender gaps than banks, like Barclays Plc. But that’s partly because those firms class their top-earning partners as owners rather than employees, enabling them to be excluded from the figures.

“These firms appear to be abiding by the letter of the law, but not the spirit,” Nicky Morgan, the lawmaker from the governing Conservative Party who chairs the U.K.’s treasury committee, said in an emailed statement. “They’re taking advantage of an apparent loophole. Partners are leaders and role models in their firms. They should know better than to exclude themselves.”

The Equalities and Human Rights Commission, which operates at arm’s length from the government, has the discretion to punish employers that don’t comply with the data requirements. Dawn Butler, the opposition Labour Party’s shadow minister for women and equalities, said professional firms should face sanctions if they don’t resubmit figures more in line with the spirit of the law.

"The distinction between partners and other lawyers is an irrelevant distinction for these purposes,” Shami Chakrabarti, the opposition Labour Party’s shadow attorney general, said in an email. “The bottom line is that people are being remunerated for the same work at different levels on account of their gender.”

Narrower Gap

Spokesmen for EY and Linklaters declined to comment. A spokesman for Pinsent Masons wasn’t immediately available.

Asked if it was concerned about the professional firms’ figures, the EHRC issued a statement saying it had “mechanisms in place to identify questionable data,” without commenting specifically on the figures it had received.

Law firms Linklaters and Pinsent Masons have reported that female employees earn 23 percent and 22 percent less on average, respectively, than their male colleagues. The gap at EY is 20 percent. That’s less than half as wide as the figure reported by Barclays for its corporate and investment bank, which indicates female staff were paid an average of 48 percent less than male employees.

Jayne-Anne Gadhia, the chief executive officer of Virgin Money Holdings U.K. Plc, who has led a government review of women in finance, told Bloomberg News that excluding of high-earning professional partners from the data is "outrageous." Her company posted a 33 percent gender pay gap, which Gadhia said needs to improve.

Why Women (Appear to) Earn Less Than Men in the U.K.: QuickTake

This is the first year that British companies have been required to submit the data. Charles Cotton, an adviser on compensation policy at the Chartered Institute for Personnel and Development, said companies will likely be called on to report data on the age and ethnicity of their staff in future.

“Most businesses will have wanted to make sure they are compliant with the law, but we can already see the Government Equalities Office refining their guidance for best practice,” Christina Blacklaws, vice-president of Britain’s Law Society, said in an email.

A Home Office official said in a statement the U.K. is one of the first countries to require all large employers to publish their gender gap and bonus data.

Partners and Limited Liability Partnership “members are likely to meet the definition of employees, but are not counted for the actual gender pay calculations,” the official said. “This is because their pay is based on profit sharing, which cannot readily be compared with regular pay.”

— With assistance by Suzi Ring

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