EY cuts UK tax staff pay rises and bonuses after a year of hiatuses

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EY, one of the Big Four accounting firms, has cut pay rises and bonuses for thousands of its UK staff and laid off several partners in its tax division as it battles the market downturn.

The firm told its 4,400 tax advisory staff that their base salaries would rise by 2.2% as part of an annual pay review, people familiar with the matter told the Financial Times. That’s down from a 6% rise in 2023 and a 10% rise in 2022.

In recent weeks, employees have been told that the department's bonuses will be reduced for the full year through the end of June, and a handful of tax partners have been laid off, he added.

The less generous pay raises show that some of the UK’s biggest professional services firms are holding back on year-end payouts after a tougher time for the industry. Rival PwC gave most of its UK staff a 3% raise in July, down from a year earlier, the FT previously reported.

EY declined to disclose how much pay raises and bonuses employees in other departments received this year. Tax advice is generally a business area that is more resilient to market turmoil than other parts of the company, such as consulting and trading.

A person familiar with EY's compensation reviews said salaries and bonus payments vary across different parts of the business to reflect performance and market conditions in specific service lines.

Like other Big Four firms Deloitte, KPMG, PwC and EY, EY has faced a decline in demand for its services amid a more challenging economic environment. The firm also embarked on a cost-cutting drive last year after the collapse of Project Everest, a plan to split its audit and consulting divisions globally and cut hundreds of jobs in the UK.

The decision to offer smaller pay raises and bonuses will affect employees. Partners who own and operate the business are paid out of the company's profits. Last year, the average partner's salary was $761,000.

Some of the firm’s partners were warned in April that profits per partner could fall by as much as 15% in the latest financial year amid a difficult economic environment. EY’s UK business usually reports its annual results in October.

The firm is also in the process of appointing a new senior partner to lead its UK business after Hywell Ball announced his intention to step down in June.

Anna Anthony, managing partner for the UK financial services practice, Stuart Gregory, managing partner for finance and innovation, and Frank O'Keefe, market managing partner and head of EY's Ireland practice, are being considered as senior partners to succeed Ball, according to people familiar with the matter.

EY staff bonuses are calculated using a variable performance share system, where each employee is given a set number of shares based on their rank, people familiar with the matter said. The number of shares is then multiplied by the per-share value, a figure set by management each year, to determine the bonus paid.

According to one person, this has led to bonuses in EY's tax business this year ranging from $500 for junior staff to $4,000 for directors. Employees deemed high performers also receive additional bonuses, they added.

EY said its tax practice continues to grow, adding that salary increases and bonuses also vary based on individual and business unit performance.

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