Professional services firm PwC has informed its 25,000 employees in the UK to expect reduced pay rises and bonuses, and even potential freezes, due to what it describes as “challenging” market conditions. The announcement comes despite industry calls to address the persistently high inflation rates.
Junior auditors at PwC were recently informed through a webcast that one group’s pay band would be frozen, while others would receive modest increases of 3% or 6%. As a result, many employees may face real-terms pay cuts, especially considering that UK inflation reached 8.7% in May.
This communication from PwC followed a memo from the company’s chief people officer, Ian Elliott, stating that this year’s pay rises would be smaller compared to the previous year. Last year, PwC offered significant increases to retain staff amidst a highly competitive labor market and soaring inflation.
According to insider sources, the news of pay freezes for many senior associates in the audit division came as a shock to the affected employees, and some may consider leaving the firm as a result. PwC’s most junior auditors earn between £26,000 and £34,000 per year, depending on location.
This announcement contradicts the recent appeal by the chair of the UK audit regulator, who urged firms to raise the pay of junior employees to address concerns about the unattractiveness of the profession to prospective recruits.
Interestingly, while PwC’s UK partners, who own and manage the business, saw their average profits reach a record £1 million last year, senior partner Kevin Ellis warned that this figure would likely decrease this year after half of the staff received substantial raises of at least 9% last summer.
Consultants at various firms have reported a significant decline in areas such as strategic advice, leading to more staff being without projects to work on. PwC’s memo acknowledged the challenging market conditions, noting that although certain divisions were experiencing strong growth, overall, the market had been difficult.
PwC expects a similar number of promotions as last year, typically accompanied by significant automatic pay rises based on seniority. However, due to the increased number of employees, the average individual bonus awards will be smaller this year, despite the bonus pool being larger.
Within PwC, some divisions have observed a notable rise in the number of staff enrolled in “performance improvement” programs. These programs are often used by consulting firms as a precursor to removing a portion of employees each year. However, during the post-pandemic period, these programs were less prevalent as the sector grappled with hiring and retaining staff to meet the demand for advice on deals and adapting business models to the rise of online commerce.
Insiders at PwC revealed that one team saw a significant increase in the proportion of staff under performance review, from a small fraction last year to as much as 15% or 20% this year. This resurgence of performance improvement programs aligns with the more challenging economic environment faced by the industry.
Deloitte, another prominent consulting firm, has been training its UK team leaders in performance management as part of Project Hudson. Although the number of employees affected will be relatively small, in the “low hundreds,” it represents only a fraction of Deloitte’s 28,000 staff.
Both PwC and Deloitte emphasized that their firms are still actively hiring and stated that performance reviews are a regular part of their management practices. They clarified that there are no significant redundancy programs currently in progress.
PwC defended its decisions by stating that, following record pay increases last year, the firm has again invested in salary uplifts across the business. The company considers various factors such as its performance, external market conditions, and investments made in response to client demand when making these decisions.
Compared to the United States, where KPMG recently announced a 5% reduction in its workforce on top of a 2% cut earlier this year, UK consulting firms generally implement job cuts less dramatically and at a slower pace.
