BDO is the latest major accounting firm to use the furlough rules to temporarily lay off 700 staff, freeze the quarterly dividend and cut partners’ monthly pay by 25%. Sara White reports
The move will see more than one in 10 staff on furlough while the 253 partners will have pay cut by 25% as the firm retrenches, saying that it need to ‘take steps to ensure we weather the crisis’.
The economic fallout from covid-19 was putting the accounting firm under intense pressure as global and UK business was battered by the covid-19 onslaught.
The Baker Street headquartered mid-tier firm moved to full remote temporary working on 23 March in line with government lockdown rules, ‘closing all UK offices to operate as a fully remote, fully connected workforce’.
In such a fast-moving situation, BDO had been watching the covid-19 situation closely and has now been forced to make the hard decision to reduce its staffing costs, slash partner pay and dividend payments, and freeze pay, recruitment and promotions in a bid to protect the long-term stability of the firm.
The BDO measures, announced 16 March, include:
- a reduction in equity partner draws of up to 25% and a freeze on payment of the quarterly dividend: partners will see a monthly cut in pay of up to 25% and payment of quarterly dividends will be frozen until January 2021. Average distributable profit per partner (PEP) was £602,000 for year end 28 June 2019;
- redeployment and re-training: with 1,000s of trained staff, BDO said it was ‘able to redeploy and re-train teams to support areas of our business that are busier than ever, for example forensics, global outsourcing and business restructuring.
- freeze on all pay increases, promotions and new recruitment;
- all offers to the 400 recruits who are scheduled to join BDO at the end of the year will be honoured.
In terms of furlough, BDO said its aim was to ‘protect the jobs of those people whose workload has now reduced and have been temporarily affected by Covid-19 by placing them into furlough.
This will affect around 700 roles, representing 12.7% of the firm’s 5,500 strong UK workforce. The furlough arrangements will be in place until 31 May.
Wages will be topped up by the firm from the government’s baseline maximum £2,500 figure available under the Coronavirus Job Retention Scheme furlough rules, whereby the state pays a grant to cover 80% of salaries of PAYE furloughed staff up to a monthly cap of £2,500.
BDO said: ‘We are expecting around 700 roles to be impacted by this until the end of May and our intention is to top up wages so that our people still receive 100% of their pay.’
Furloughed staff are made up of 470 first-year trainees who will use the time to study for their exams, which is permissible under the furlough rules, and 230 support staff.
It is also supporting individuals who voluntarily request a temporary reduction in hours, stating that ‘balancing childcare and work can be hard and we have already had requests for reduced hours. To help those individuals we’re publishing a flex-hours process by which they can temporarily adjust their working hours. This is a voluntary scheme’.
A BDO spokesperson said: ‘The covid-19 pandemic has had a fundamental impact on the world’s global economy. There is general consensus that we are either in, or about to enter, a severe global recession.
‘Governments around the world are introducing economic policies and support package to help businesses protect jobs.
‘BDO is not unaffected by the situation and we have had to take clear – but temporary – measures to ensure we can weather the current storm and protect jobs.’
A week in the time of covid-19
Just one week ago, BDO told Accountancy Daily: ‘As we manage the situation our focus is two-fold. Firstly, the well-being of our people and secondly to manage our business.
‘This second element is complex and involves us monitoring matters and communicating with our partners, people and clients on a real time basis. Any decisions, including for example a reduction to partner draw, will be made based on business performance.
‘We came into this crisis in good shape with a strong balance sheet so we will take the time to assess the situation, review the support measures the government has put in place and understand clients’ demands and needs.’
BDO, ranked #5 in the annual Accountancy Daily Top 75 Firms Survey, reported fee income of £577.7m for year end 28 June 2019, marking a 23% increase in revenue following the merger with part of Moore Stephens in February 2019. Pre-tax profit was £134m, up 22% on the previous year’s £109.4m. This strong growth was reflected across the majority of top 75 accounting firms in our annual market survey, published on 1 February 2020.
Pre-lockdown contingency planning
In the run-up to lockdown, BDO was taking every precaution to ensure the safety of staff and to maintain a full client service despite growing concerns about the Covid-19 situation.
In an interview on 18 March with Accountancy Daily just days before the complete lockdown, Paul Eagland, managing partner at BDO, said: ‘While all businesses will want to do all they can to help their people avoid being infected by and spreading Covid-19, the economic shock of dealing with this crisis could itself also cause health and wellbeing issues.
‘The government has pledged to do “whatever it takes” to support businesses, however uncertainty is notoriously difficult to manage.
‘Robust contingency planning and following some simple guiding principles can help us all minimise the negative health and economic impacts on our people and businesses.
‘It is essential to regularly review the business continuity plan. This will include identifying your fundamental objective during this period - for example BDO’s objective is two-fold; support our people and minimise business disruption.
‘Then explicitly agree the roles and responsibilities of the senior leaders, how they will make informed evidence based decisions, what their key priorities are and how they will communicate.
‘Finally, remember that each and every individual in the business will be experiencing their own personal challenges; their own reality - so personal engagement, as well as communicating clear corporate policies, is essential.’
Report by Sara White, editor, Accountancy Daily
First published 2020-04-16 20:43:20 +0100