PwC has told its 25,000 UK staff to expect smaller pay rises and bonuses if not freezes this year because of “challenging” market conditions despite industry calls to catch up with stubbornly high inflation.
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 (€30,000) and £34,000 a year depending on location, an insider said.
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The announcement is at odds with an appeal this month by the chair of the UK audit regulator for firms to increase junior employees’ pay to combat concerns that the profession is unattractive to prospective recruits.
It comes as average profits for PwC’s UK partners, who own and run the business, soared to a record £1 million last year. Senior partner Kevin Ellis warned at the time that the figure was likely to be lower this year after half of the staff were handed bumper raises of at least 9 per cent last summer.
Consultants at several firms have said they are seeing a significant downturn in areas such as strategic advice with more staff “on the bench” with no projects to work on.
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.
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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 t said 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.
The return of performance improvement programmes to more normal levels reflects the more difficult economic environment, according to people in the industry.
Deloitte has been training its UK team leaders in performance management as part of Project Hudson, according to people at the firm. The number of employees affected would be in the “low hundreds” representing a fraction of Deloitte’s 28,000 staff, one of the people said.
The group said it was still hiring thousands of people and that reviewing performance was a normal part of its management. “There are no material redundancy programmes under way,” it said.
PwC said: “Following record pay increases last year, we have again invested in salary uplifts across our business. Our decisions are informed by the firm’s performance, external market conditions and the investments we make in response to client demand.”
UK consulting firms generally cut jobs less drastically and more slowly than in the US, where KPMG has announced a 5 per cent reduction in its workforce on top of a 2 per cent cut earlier this year. – Copyright The Financial Times Limited 2023
