EY is the second Big Four firm to cut partner pay by 20% as a ‘prudent’ measure in the face of the covid-19 situation, but it says it hopes to avoid making redundancies or putting staff on furlough, reports Pat Sweet
Steve Varley, EY’s UK chairman and UK and Ireland regional managing partner, said: ‘The focus of our partners and people at this time is on helping the UK, our clients and other stakeholders to respond to the covid-19 situation and we want them to be able to do so in the confidence that we are doing everything we can to protect their jobs.
‘Covid-19 has inevitably impacted UK and global economies. Our business has remained resilient, but we have taken steps to look after our people and reduce and defer costs where possible.
‘Reducing partner profit distributions is a further prudent move in a time of economic uncertainty and will provide additional flexibility and improve financial strength.’
EY, ranked #3 in the annual Accountancy Daily Top 75 Firms Survey, reported fee income of £2.45bn for year end 28 June 2019, growing at a slower rate than its Big Four competitors.
The average distributable profit per partner was cut by £14,000 to £679,000 from £693,000 in FY18, seeing partner earnings cut for the first time in three years as distributable profits before tax increased by a modest 1% from £472m to £477m.
The firm stated that its partners ‘will do everything possible to navigate through the covid-19 situation with no redundancies amongst its 17,000 UK employees, no people furloughed and no reduction in employee salaries’.
EY will go ahead with some critical internal promotions to partner as usual in July.
The apprenticeship programme for graduates and school leavers, and internship programmes will not be affected and will be adapted where necessary to cope with a remote working environment. EY expects to recruit around 1,000 graduates and apprentices this year, and around 370 interns.
The Big Four firm has already taken a number of other actions to support staff in the UK as the Covid-19 situation has evolved. This includes doubling the period of special leave for those with caring responsibilities in emergency situations, and the extension of full discretionary sick pay to all employees, regardless of their length of service with EY.
Change of UK leadership from 1 July
The firm is currently transitioning to a new top management team as current chief Steve Varley is about to complete his eight-year term at the top of the firm.
He will be replaced by Hywel Ball from 1 July following his election as EY UK & Ireland regional managing partner and UK chair, succeeding Varley who is taking on a global role as vice chair for sustainability at the Big Four giant.
Ball is currently the EY UK&I managing partner of assurance and UK head of audit and has been with the firm for over 35 years and a partner for more than 20 years. He has been a strong advocate of the need to reform the listed audit market.
Earlier this week Big Four rival Deloitte also set out plans to cut partner pay and freeze salaries, among a raft of measures announced.
Mid tier BDO, the largest accounting firm outside the Big Four, furloughed 700 first-year trainees and support staff, and slashed partner pay.
Grant Thornton, ranked #6, moved early to make cuts, announcing 31 March that it would offer staff the option to take sabbaticals or reduced hours, as it did during the 2008 crisis, but there is still a likelihood the firm will make further announcements as covid-19 situation develops and larger professional services firms take the difficult decision to furlough staff and cut partner pay.
By Pat Sweet, additional reporting Sara White