Although Big 4 audit fees have increased so much in the last several years clients wrote a strongly worded letter to complain about it, PwC UK told its 25,000 staff last week that things will be tight this year. “Challenging” market conditions mean smaller raises (if they get raises at all) and bonuses. Oh yay.
The firm’s junior auditors were told on a webcast last week that the pay band for one cohort would be frozen while others would increase by 3 or 6 per cent, resulting in real-terms pay cuts, firm insiders told the Financial Times. UK inflation stood at 8.7 per cent in May.
The presentation followed a memo to employees in which PwC’s chief people officer Ian Elliott said pay rises would be smaller than last year when it gave out record increases to retain staff in the face of a hot labour market and soaring inflation.
One junior auditor told the FT they were “shocked” that pay was being frozen for many senior associates in the audit division and that they and others might quit as a result. PwC’s most junior auditors are paid between £26,000 and £34,000 a year depending on location, an insider said.
Quick recap on PwC UK partner pay the past few years:
- 2019: £765,000
- 2020: £685,000 (fuck you, Rona)
- 2021: £868,000
- 2022: £1,000,000 thanks in part to the £1.83 billion ($2.2 billion USD) sale of a business providing tax advice for companies moving staff overseas to US private equity firm Clayton, Dubilier & Rice
Two weeks ago, Financial Reporting Council chair Jan du Plessis told FT audit firms should — and can — pay their junior auditors more. “There has been a significant increase in profitability at all the audit firms. They have the resources available to increase the pay levels of more junior people that they want to attract into their firms and it’s up to them whether they want to do so,” he said. Guess PwC UK leadership didn’t see that article. Suck it, du Plessis.
The rest of the FT article lines up with what we’re seeing here on our side of the world: too many folks on the bench and firms being too generous with performance reviews, the latter being a result of firms intentionally taking it easy on people last year to hang onto talent and historically low attrition preventing the usual churn baked into firms’ business models.
While parts of the business were growing strongly, Elliott said in his memo that “the market has been challenging”.
There would be a similar number of promotions to last year (which are typically accompanied by big automatic pay rises attached to seniority), he said. But while the bonus pool would be bigger this year, average individual awards would be smaller because staff numbers had grown, he added.
Some PwC divisions have also significantly increased the number of staff being placed on “performance improvement” programmes, according to people at the firm. These programmes are typically used by consulting firms as a prelude to removing a proportion of employees each year.
They were less prevalent as the sector battled to hire and retain staff to keep pace with post-pandemic demand for advice on deals and ways to adapt business models to the rise of online commerce.
A PwC insider told the FT that one team had gone from having only a small fraction of staff whose performance was under review last year to as many as 15 or 20 per cent this year.
“Following record pay increases last year, we have again invested in salary uplifts across our business,” said PwC to FT. “Our decisions are informed by the firm’s performance, external market conditions and the investments we make in response to client demand.”