EY has implemented smaller pay raises and bonuses for thousands of UK staff and let go of several partners in its tax division as the Big Four accounting firm grapples with a market slowdown.
Employees in its 4,400-strong tax advisory unit were informed that they would receive a 2.2 percent base salary increase as part of the annual pay review, sources told the Financial Times. This is a decline from the 6 percent rise in 2023 and the 10 percent increase in 2022.
Bonuses in the tax division will also be reduced for the year ending in June, according to recent communications with staff. Additionally, a few tax partners have been dismissed, the sources said.
These less generous pay packages reflect how some of the UK’s largest professional services firms are cutting back on year-end payouts following a challenging period for the industry. Rival PwC awarded most UK employees a 3 percent raise in July, a decrease from previous years, as reported by the FT.
EY declined to comment on the pay raises and bonuses received by staff in its other divisions this year. The tax advisory sector typically remains more stable during market turbulence compared to other areas of the firm, such as consulting and deals.
A source familiar with EY’s pay review noted that salary and bonus payments varied across different business segments to align with the performance of specific service lines and market conditions.
Like its fellow Big Four firms—Deloitte, KPMG, and PwC—EY has seen a decline in demand for its services amid a tougher economic climate. The firm also initiated a cost-cutting strategy last year following the collapse of Project Everest, a plan to separate its audit and consulting divisions globally, leading to hundreds of job cuts in the UK.
The decision to implement smaller pay raises and bonuses will impact employees across the firm. Partners, who own and operate the business, are compensated from the firm’s profits. Last year, the average partner payout was £761,000.
In April, some partners were cautioned that profit per partner could decrease by up to 15 percent for the latest financial year due to the challenging economic environment. EY’s UK division typically reports its full-year results in October.
The firm is also in the process of selecting a new senior partner to lead its UK operations, following Hywel Ball’s announcement in June that he intends to step down. Among the contenders for the role are Anna Anthony, UK managing partner for financial services; Stuart Gregory, managing partner for finance and transformation; and Frank O’Keefe, markets managing partner and head of EY’s Irish business, according to sources familiar with the matter.
Bonuses for EY employees are determined through a “variable performance share price” system, where each employee is allocated a specific number of “shares” based on their rank, sources said. The number of shares is multiplied by the annual share value set by management to calculate the bonus amount.
In EY’s tax division, this formula resulted in bonuses this year ranging from £500 for junior staff to £4,000 for directors, according to one source. High-performing employees also receive additional bonuses, they added.
EY stated that its tax practice “continues to grow,” noting that “pay rises and bonuses also vary based on individual and business unit performance.”