EY has told staff in the UK to expect less generous pay rises than last year and is launching a round of redundancies as it faces rising costs and a difficult economic outlook.
The Big Four accountancy firm is also asking graduates due to join the business next month to defer for a year.
Leaders at the Big Four firm’s British business, which employs about 18,500 people, also informed staff this week that bonus pools would be smaller than last year and would be split among a more limited group, according to people familiar with the matter. Bonus pools for some teams would be cut by more than half this year, the people said.
The firm will axe more than 5 per cent of its roughly 2,300-strong financial services consulting practice, with 150 jobs set to be cut in teams that advise on business transformation and risk management.
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The redundancies are far less severe than those seen at EY US, which announced in April that it would cut 3,000 jobs, or 5 per cent of its total workforce, citing “overcapacity”.
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EY Ireland said it was projecting another year of strong growth for the firm and indicated that there were no plans to curb pay or reduce its headcount.
A spokeswoman for the firm said: “Last year we delivered record growth in our business with revenues on the island of Ireland up 26 per cent for the financial year to June 30th, 2022, and we are projecting another year of record growth for this financial year. We remain firmly focused on… investing in and growing our world-class talent here in EY Ireland now and into the future.”
After an initial downturn at the beginning of the Covid-19 pandemic in 2020, EY and the wider professional services sector enjoyed bumper growth in 2021 and early 2022 and hired rapidly as companies sought advice on how to deal with challenges unleashed by the coronavirus crisis.
EY’s UK partners were paid a record average of £803,000 (€942,000) in the financial year ended June 2022, while bonuses for rank-and-file staff were raised by more than half to £110 million as demand for consultants soared.
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The decision to offer smaller pay rises and bonus pools will affect employees. Partners, who own and run the business, are paid out of the profits.
Advisory groups have been hit by rising costs and a cooling of demand from big companies for many of their services over the past year. PwC told its 25,000 UK staff in June to expect smaller pay rises and bonuses if not freezes this year because of “challenging” market conditions.
In a further sign of slowing growth, EY has asked about 200 graduates due to join its consulting business next month to consider delaying their start by a year in return for a “deferral payment”. A person close to the firm stressed that putting back the start date would be optional and that there had been only “limited” uptake.
Mandatory deferrals would affect only about 30 graduates in EY-Parthenon, the firm’s strategy division, the person added. The firm recruited almost 1,500 graduates and school-leavers in the 12 months to June 2022.
EY’s UK boss Hywel Ball told partners in April that the firm would report “strong double-digit” revenue growth for the financial year ended June 2023. Average partner pay is normally reported in October or November alongside the firm’s annual results but is expected to be lower this year, according to a person with knowledge of the matter.
In the past year, EY has been battling to cut expenses associated with hiring, travel for internal events, training and staff Christmas parties, according to people familiar with the matter.
UK partners were told in April to prepare for fresh cost-cutting following the collapse of Project Everest, a plan to split its audit and consulting divisions globally.
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EY said in a statement that it “continues to perform strongly” and that “the vast majority of our people will receive an annual pay rise and variable bonus payment this year”.
“EY’s UK financial services consulting practice has taken measures to align current resourcing requirements with market demand. Regrettably, a group of employees in this part of the business are now subject to a redundancy consultation process,” it added.
Staff were told that the redundancies and remuneration decisions were not related to Project Everest. – Copyright The Financial Times Limited 2023
