KPMG has frozen pay for around 12,000 employees in the UK, as the gloomy economic climate hits demand for its services across the firm.
Bosses at the Big Four accountancy firm told staff across its four divisions in recent weeks that they would not receive a pay rise this year unless they were promoted, according to people familiar with the matter.
The move comes just weeks after KPMG — where UK partners last year earned on average £717,000 (€825,715) — launched a fresh round of job cuts and froze pay in its deals advisory arm following a prolonged slowdown in dealmaking.
Employees at the Big Four — Deloitte, EY, KPMG and PwC — are given a salary increase most years. UK inflation stood at 4.6 per cent in October, meaning a freeze will result in real-term pay cuts.
Bonuses will also be cut, with staff in KPMG’s 2,900-strong tax and legal arm receiving 55 per cent of the full amount that could have been paid, an insider said.
The pay freeze will not affect the firm’s graduate and apprenticeship staff, according to the people familiar with the situation.
The 12,000 figure includes staff who qualify for pay rises because they will automatically move into a higher band based on seniority without an official promotion — as is standard across the Big Four. KPMG partners will be largely shielded from the pay freeze as over half share in the firm’s profits rather than take a salary in the UK.
The decision marks the latest example of accounting and consulting firms tightening their belts amid challenging market conditions.
However, with the pay freeze now extended beyond KPMG’s deal advisory team to the entire firm, it suggests units that are typically more resilient during an economic slowdown, such as tax, have also been affected by the difficult environment.
In a pre-recorded video message sent this month, bosses in KPMG’s tax and legal business told staff the decision to freeze pay was taken because of ongoing “market uncertainty” and after the division failed to meet its revenue target for its 2023 financial year, an insider said.
The firm’s four business lines are audit, consulting, deal advisory and tax and legal.
All Big Four firms have announced redundancy programmes in recent months. PwC told its 25,000 UK staff to expect smaller pay rises and bonuses and potential freezes this year as a result of the “challenging” market conditions.
KPMG is seeking to repair its image after receiving several regulatory fines for its involvement in high-profile corporate scandals, including a record £21mn penalty in October for failures in its auditing of collapsed government contractor Carillion.
Including partners, KPMG employs 17,000 people in the UK, of which around 3,000 are graduates or apprentices on training contracts. It said it promoted 950 staff in its latest round of promotions.
KPMG said: “To attract and retain the best talent, we benchmark our salaries each year to remain competitive and we continue to invest in our people. In light of softened market demand this year, any pay increases have prioritised those who have been promoted.
“We will be rewarding eligible colleagues for their efforts this year with a bonus. However, reflecting the challenging economic and market environment, this will be lower than in previous years.” --Copyright The Financial Times Limited 2023
