How PwC, Deloitte, EY and KPMG are cutting employee costs

As the consulting sector looks to navigate the challenging circumstances, the Big Four in India are making a number of adjustments to their employee costs in order to weather the storm.

The increments and promotions cycle for these companies is drawing close, pushing the advisory sector to devise a cost-cutting plan. Third-party spending was among the first costs to be cut by most businesses in the wake of the Covid-19 crisis, which was a significant blow to revenues for the consulting sector.

The sector has since been navigating a challenging scenario: hoping to retain its capacity while contenting with dwindling revenues. Back in April, the Big Four accounting and advisory firms – Deloitte, EY, KPMG and PwC – reacted by deferring employee appraisals and promotions, as well as cutting partner pay.

Deloitte

As the new payment cycle comes up in September, these firms have questions to answer. Deloitte has been the quickest to develop a detailed response, according to a CNBC TV report, while the others are still developing their plan.

Deloitte India held a conference call with its employees this week, sharing that it would continue with the performance bonus starting September, with the only difference being that it will be paid in installments. For Manager level advisors and below, the bonus will be paid out in two installments – one each in September and December.

Senior Managers and above will be paid in monthly installments over six months, starting September. “The decisions are based on our current visibility of cash flows because no one is really certain about how long this uncertainty will last. We hope to live by whatever we have recently committed,” stated the firm.

Deloitte will reportedly continue with its employee appraisals as usual, giving performance bonuses at the end of the year, and capping pay increments at 20% for 30 partners who have been promoted. The company will also continue with its performance-based staff cuts using the usual criteria.

“Even in these times, we will go ahead with promotions and performance pay in a prudent manner recognising the performance of our people and their commitment to serve,” said Deloitte.

KPMG

At KPMG, increments for the 2021 financial year have been deferred and promotions are yet to be handed out for the same period. “Like every other business, we are watching the situation closely. Our aim is to emerge stronger from the uncertain business environment and our decisions continue to reflect the needs of our business.” 

“While we expect our partners to make bigger sacrifices, we are committed to ensure that our rewards are competitive for all our people. We will evaluate and decide on the best possible options around the timing of increments, promotions and bonuses,” said a KPMG spokesperson to CNBC.

Partners at the firm have reportedly taken voluntary pay cuts of up to 20%. This is however nowhere near the sacrifice some other KPMG member firms have called for. In Australia for example, 99% of KPMG's employees accepted to take a 20% voluntary pay cut.

PwC

PwC's partners in India meanwhile have taken a pay cut of up to 25%, while the bonus for this year and increments for the next financial year have all been deferred.

Back in April, Chairman at PwC India Shyamal Mukherjee highlighted the firm’s commitment to its employees.“We will continue with all our efforts to keep our employees safe and engaged in this difficult period. We are very proud of our people for their understanding and support,” he said.

EY

Partners at EY, formerly Ernst & Young, have cut their pay by up to 20%, while the firm plans to distribute variable pay components over an extended period. The firm is still planning its increments and promotions.

A global challenge

The measures being taken by Big Four in India are consistent with their global practices, as the Big Four come to grips with a fallout of demand amid the Covid-19-induced downturn.

In Europe, many of the Big Four have enacted forced leave during the hardest-hit months, work reduction schemes and asked some of their employees to go on furlough.

In Australia, pay cuts are being issued across all segments of the organisation. KPMG and Deloitte cut pay for their employees without a reduction in hours, while EY and PwC forced a reduction in hours of up to 40%, although payments are being made accordingly.

The US has perhaps seen the most drastic measures being taken. Earlier this month, Deloitte cut 5,000 jobs in its US practice, extending all the way to directors and partner.