PwC Australia cuts partner pay as revenue tumbles on economic slowdown and tax fallout
The embattled consulting firm has slashed partner pay for a second year running following a sharp fall in revenue for the financial year, which saw employee turnover surpass 30 per cent.
PwC Australia partners’ income has dropped sharply for a second year in a row, amid a slowdown in professional services spending and the fallout from the embattled consulting firm’s tax scandal.
The challenging period weighed heavily on PwC’s underlying revenue, which dived 26 per cent to $2.48bn over the 12 months to June 30 from $3.4bn a year earlier, as it faced employee turnover of 32 per cent.
Annual profit fell more than 24 per cent following the scandal over PwC sharing confidential Treasury information – and past failures in professional, ethical or leadership responsibilities.
Reduction in revenue and profit was primarily driven by the sale of its government consulting business in November 2023 for just $1 to Allegro – it now operates as Scyne Advisory – as well as slower demand for professional services.
PwC Australia chief executive Kevin Burrowes did not comment on the financial results directly, but said the group had implemented ambitious and meaningful actions which were improving the firm.
“While it will be marked as a period where we had to confront deeply troubling past failings, it is also the year we began our comprehensive reinvention journey and commitment to change,” he said.
“Our clients are operating in a time of rapid change, and we have reset our strategy to support them to find solutions to the biggest and most complex issues they are facing today.
“I am immensely proud of the progress we have made, recognising there is a lot more to do.
“I am so proud of our people for their resilience and commitment to clients.”
PwC’s revenue decline was greater than its rivals. KPMG reported a 3.9 per cent decline to $2.39bn, EY Australia slumped 5.5 per cent to $2.81bn and Deloitte slid 2.4 per cent.
In the 12 months to June 30, annualised partner pay declined by 12.7 per cent to a range between $332,117 and $3.378m. This meant that partners who remained at the same grade experienced an average income drop of 12.3 per cent.
The firm expects to lift partner income this fiscal year, with a target of $352,000 to $3.315m for Mr Burrowes.
He has come under fire after he failed disclose that PwC International awarded him an additional $1.2m as a top-up payment. He only told partners about his $4m pay packet in late June in a 400-person Zoom call.
The firm paid $33m in incentive payments to staff in the financial year, down from $47m in the prior fiscal year and $75m in 2022, while PwC increased base pay across the business by an average of 5.4 per cent from July 1.
The number of partners at PwC fell from 882 in the 2023 financial year to 655 this year, with 22 people made partners over the 12 months to June.
Employee turnover was 32 per cent over the past financial year, which included redundancies to address a change in strategic focus, as well as economic and business headwinds.
It does not include employees who transferred to Scyne Advisory.
Total headcount was 6726 employees after PwC announced 329 job losses earlier this year as part of a “simplified, efficient and centre-led” restructure.
Revenue from PwC’s consulting business reduced by nearly 56 per cent to $400m. It noted that the June quarter saw an uptick in revenue and demand for services, and this has continued into the start of the new year.
Assurance revenue fell 13 per cent to $770m, while financial advisory, which supported corporate and private clients to generate value through transactions, booked a 4.4 per cent fall in revenue to $985m.
There were no acquisitions by PwC in the past year, but it offloaded its investment in the New Zealand and Southeast Asia consulting practices in December 2023.
PwC also sold its 49 per cent share in PwC Indigenous Consulting in August to Deloitte.
During the reporting period, the firm made progress on its commitments to change. It has completed 36 of the 47 actions set out following Ziggy Switkowski’s independent review.
PwC has been at the centre of a storm after it was revealed to have relied on confidential government tax information to construct strategies for clients to circumvent new tax laws in Australia.
The firm’s former head of international tax, Peter Collins, was banned for his role in the scheme, which saw him share confidential briefings from a consulting process with Treasury.
A review of the international elements of the scandal by law firm Linklaters cleared six staff identified as having received confidential information shared by Mr Collins, noting they “should have raised questions as to whether the information was confidential”.
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