Big 4, others roll back salary cuts, clear staff bonuses
Mumbai: Prominent professional services firms including the big four – Deloitte, PwC, EY and KPMG – have started rolling back salary cuts and paying bonuses to their staff following firms signs of recovery after months of the Covid-19-induced slowdown.
“Revenues have started coming in now, so it’s only fair that we extend that to our executives,” said the chief executive of a large firm, who did not wish to be identified.
PwC, for instance, has reinstated salaries of all its employees, except some senior partners, said a person in the know, while EY India has paid bonuses to all its employees.
Bigger professional services firms, including BDO and Grant Thornton, and even niche firms such as Dhruva Advisors, had taken measures to save costs in the wake of the pandemic. In most cases, the leadership teams or the top partners had decided to take salary cuts, but in some cases the measure was extended across the board.
“In the past few months, we have continuously monitored the dynamic business environment and recalibrated our approach and decisions keeping the best interest of our clients and people in mind. We have recently announced promotions, compensation revisions and bonus payouts for our people,” said a PwC spokesperson.
KPMG, Deloitte and EY did not respond to ET’s queries.
PwC was the first among professional services firms to slash salaries of its partners in India. PwC India told its employees in March that it was deferring promotions, increments and bonuses for all its employees because of the impact of Covid-19 on its cash flows.
“We have worked out some interim measures which include deferment of promotions, increments and bonus till a point in time one gets certainty around business,” PwC India chairman Shyamal Mukherjee wrote in a LinkedIn post at the time.
Most professional services firms held back bonuses for some time. In some firms, the bonuses of senior partners were capitalised – that is, added back to their capital pool.
The pandemic has taken a toll on the revenue of all professional services firms. Some leading lawyers and consultants, who charge clients by the hour and are now working from home owing to Covid-19, have seen their fees slashed across assignments as cash-strapped clients renegotiate and question the time actually spent on the job.
Many corporate law firms, which charge Rs 20,000-75,000 per hour, have slashed hourly rates or reduced the number of hours billed under pressure from clients, said industry trackers.
“Apart from that, many clients had delayed payments that were due in February, so most large firms were also facing working capital issues,” a senior partner in a large firm said on condition of anonymity.
Meanwhile, most large firms started saving on real estate costs. KPMG, Deloitte, EY, PwC, BDO, Grant Thornton and Mazars, among others, surrendered a large portion of their office space to save costs.
“We don’t see all the executives coming back for the next six months and real estate is a pure cost that we can avoid right now,” said the India head of a multinational firm, who did not wish to be identified.
For the first time in 20 years, the large professional services firms were under pressure, so much so that they reduced their partner revenue targets. Partners in leading consultancies and law firms take home 25-33% of the money they make for the firm. This arrangement also meant that when the revenues were hit, the partners were also asked to put in additional capital in some firms.
( Originally published on Nov 07, 2020 )