FT PwC Australia slashes jobs after tax leaks scandal
More than 300 roles cut and 37 partners accelerate retirement as Big Four firm restructures its business
PwC Australia is cutting 329 roles and 37 partners are leaving the firm as part of the latest overhaul of its operations in the wake of a damaging “tax leaks” scandal.
The Big Four firm, which employs about 7,000 people in the country, has been embroiled in scandal for more than a year over the sharing of confidential information about legislation designed to clamp down on tax avoidance. The firm used it to try to win new business, and the information was fed into PwC’s global network.
The scandal has prompted government inquiries into the country’s powerful consulting and auditing sector and drawn intense scrutiny of the relationship between the public sector and firms including PwC, EY and KPMG.
PwC Australia was one of the largest in the firm’s international network, generating A$3bn (US$2bn) in revenue in the financial year prior to the tax leaks being made public. It has since hived off its lucrative government consulting business into an independent firm and lost some contracts, including with the bank Westpac, an audit client for two decades.
The latest round of job cuts — which comes on top of about 350 made last year — will hit its consulting operations, but PwC stressed that all lines of business including support functions would be affected. The 37 partners have agreed to accelerate their retirement as part of the latest overhaul.
PwC’s staff were told of the cuts during a call on Wednesday morning.
It is the latest action since Kevin Burrowes, a veteran of PwC’s global network, was parachuted in as chief executive of PwC Australia last year to restore its reputation.
“This has been a very challenging and complex process, but an important one, as we realign our business structure with our new long-term strategy,” he said on Wednesday.
PwC Australia intends to kick off a series of roadshows to unveil its new strategy in the coming months and will make promotions and appoint new partners in July following the reset.
Its partners this month voted in favour of appointing an independent chair of its governance board as well as two independent board members, an unusual move for the normally insular consultancy firms.
A new remuneration system has also been proposed, in which a portion of the salary due to members of the leadership team will be held back and then not paid out if cases of misconduct arise.
PwC remains under political pressure to release a report about the use of the tax leaks data outside Australia and to name six overseas partners who used the information.
KEY POINTS
Embattled professional services firm PwC Australia will swing the axe in a second round of major job cuts in as many years, with 329 staff and up to 37 partners to be forced out.
The job cuts represent about 5 per cent of the firm’s 7000-strong staff and are being done as part of a broader restructure aimed at cutting $100 million in ongoing costs amid a slow consulting market. The partner cuts also represent about 5 per cent of the more than 750 partners at the firm.
PwC Australia CEO Kevin Burrowes, pictured at the Senate inquiry into consulting in February, has decided to lay off nearly 400 employees. Alex Ellinghausen
Partners were briefed on the closely-held plans, known internally as Project Maple, in a partner webcast held at 5pm on Tuesday. Staff were informed on Wednesday.
As part of the restructure back office and other support functions that have been split between the firm’s three divisions – consulting, assurance and financial advisory – will be centralised. The aim is to create more oversight of the firm’s operations and simplify the business.
The firm is also increasing its management leadership team to include a chief information officer and a chief financial officer.
July promotions still on track
The 329 job losses will come from all three divisions but mainly from reducing the number of duplicated support positions and from the firm’s consulting arm. PwC also said up to 37 partners will be forced into early retirement over the next nine months.
The affected staff will be informed over the coming days and, where possible, provided the opportunity to apply for any new roles created by the restructure.
This new round of staff cuts comes after the firm cut roughly 350 staff last year amid its tax leaks scandal and about 250 during COVID-19. The largest recent cut by a big four consulting firm was made by Deloitte during the pandemic, when the firm cut 700 staff.
Despite the grim news, PwC is still scheduled to admit new partners into its ranks in July, after pausing all such promotions since mid-2023. The firm will also carry out a round of mid-year staff promotions and is committed to bringing on its most recent graduate hires.
The firm has also been buoyed by its February financial results and continues to plough funds into high-demand advisory areas such as cloud, digital, risk and regulation.
The restructure comes as the firm’s leaders are working through a cultural overhaul and new ways of rewarding personnel. The firm’s leaders will soon run a series of internal roadshows to outline the new strategy.
‘Difficult day’
“This has been a very challenging and complex process, but an important one, as we realign our business structure with our new long-term strategy,” PwC Australia chief executive Kevin Burrowes said in a statement.
“I’m extremely proud of the contribution every individual at PwC Australia makes to this firm and their ongoing commitment to producing exceptional results for our clients.
“We acknowledge that days like today are especially difficult for those affected, as well as their teams and colleagues. I can assure you that we will work closely with impacted individuals to ensure they are aware of their options and next steps.
He said the reorganisation would make the firm more “simplified, efficient and centre-led.”
The broader consulting market has been hit by a reduction in private sector demand due to the slowdown in M&A activity and companies reducing their spending on external advisory services. Industry insiders who had originally hoped that the private sector market would pick up by Easter are now not expecting an uptick until August at the earliest.
$100m in cuts
At the same time, the public sector market for advisory services has also suffered a downturn due to the political fallout of the PwC leaks matter and a federal government push to reduce the use of consultants and contractors.
PwC is not directly affected by the public sector demand slowdown as it no longer supplies services to the sector after selling its government consulting business to Allegro Funds for just $1 last year.
The firesale was made after PwC was cut off from winning new Commonwealth work when the extent of the tax leaks scandal was revealed. Allegro created a new firm called Scyne to target government work comprising about 100 former PwC partners and about 1200 former staff.
The Australian Financial Review has been told that PwC is attempting to cut $100 million in ongoing costs from the firm’s operations. That indicates that Project Maple, which is examining every area of the firm’s operations, will also involve other sweeping cost-cutting measures and leaves open the possibility of further job cuts at a later stage.
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Paul Smith edits the technology coverage and has been a leading writer on the sector for 20 years. He covers big tech, business use of tech, the fast-growing Australian tech industry and start-ups, telecommunications and national innovation policy. Connect with Paul on Twitter.Email Paul at psmith@afr.com
Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom.Connect with Edmund on Twitter. Email Edmund at edmundtadros@afr.com.au
Embattled consulting firm PwC is slashing its staffing levels again as it restructures a business that continues to get crunched by the fallout from the tax leaks scandal.
PwC announced it would make 329 roles redundant over the next nine months, and up to 37 partners would be accelerating their retirement from the firm. The moves follow a review of its remaining business after the forced spin-off of the consulting firm’s government arm which has named itself Scyne Advisory.
“The purpose of this review was to ensure the firm is positioned for future success and long-term growth; therefore current to medium-term economic and market conditions were also taken into account,” it said.
PwC, one of the big four accounting firms along with EY, Deloitte and KPMG, has come under immense pressure this year, and was forced to spin off its lucrative government business for $1 after partners at the firm allegedly used confidential government tax plans to help multinational companies avoid the new scheme.
“This has been a very challenging and complex process, but an important one, as we realign our business structure with our new long-term strategy,” PwC Australia chief executive Kevin Burrowes said.
“At its heart, this reorganisation will make the firm a more simplified, efficient and centre-led business, enabling us to continue delivering the highest quality of service to our corporate and private-sector clients.”
The latest round of job losses adds to the 340 staff sackedin November last year as its core consulting business was hit by the tax leaks scandal and general economic conditions.
“We acknowledge that days like today are especially difficult for those affected, as well as their teams and colleagues. I can assure you that we will work closely with impacted individuals to ensure they are aware of their options and next steps,” Burrowes said on Wednesday.
PwC employed more than 8000 people – including more than 900 partners – before the scandal. About 1200 staff and 100 partners joined Scyne Advisory last year.
The latest cuts come just days after longtime PwC client Westpac announced the replacement of PwC as its auditor. The firm generated more than $70 million in fees with the bank over the last two years.
While the trouble centred on PwC’s tax practice, not its audit business, the scandal triggered a damning report into the culture of the whole organisation and led to questions about its suitability as an auditor for some of Australia’s biggest companies.
The drain of business is also hitting partner pay levels, which dropped 12 per cent last year, and are expected to drop a further 30 per cent this financial year as PwC bears the full brunt of revelations that a number of senior partners had used confidential government advice to drum up work from multinational companies and help them pay less tax.
Read more:
- Secrets and lies: The undoing of global giant PwC
- The consulting sector faces a reckoning
- Carlton boss Sayers rejects blame over PwC scandal
