At a time when the audit firms are trying every trick
in the book to contain attrition, an all-time high 800 mid and senior
executives from the Big Four - EY, PwC, Deloitte and KPMG - including partners
and directors have jumped ship to join competition in 2016.
The audit firms have not only increased
gardening leaves which is sometimes six months to one year for senior
executives now but in the last one year they have become much stricter in its
imposition including holding back capital for an extended period, yet this
year the Big Four saw mass exodus not seen in the last 4-5 years.
While joining competition and poaching is common
among the Big Four where sometimes the entire team has moved from one firm to
another, the attrition number this year is about 30-40% higher than what was
seen in the last 2-3 years due to people demand driven by scaling up and
regulatory changes including GST, audit rotation and taxation (direct tax),
said industry sources. “With so much more movement happening today
companies are looking at gardening leave more seriously and imposing it more in
recent times to ring fence clients,” said Navnit Singh, chairman and managing
director of India for leading global executive search consultant Korn/Ferry
International.
The idea is to keep you away from clients and
markets while the company rebuilds relationships,” he adds. However, this is
not deterring senior executives to move sometimes with the entire team.
In October, about 200 plus executives, including
20 partners, were on their way out from KPMG to join Deloitte, which is looking
to strengthen its advisory practice team, the biggest such movement in the
audit and consultancy space in the last five years.
In September, PWC poached five top executives
including partners and directors from KPMG's private equity tax practice moved
with their teams. Among the Big Four, a partner normally heads a 12-13 member
team.
The last time the audit firms had seen such high rate of
attrition was about five-six years ago when such mass movement happened. The
firms are aggressively hiring also due to some regulatory change, said Industry
experts.
Every firm currently is increasing the size of
their GST teams. Also due to audit rotation many firms are strengthening their
audit teams. While some others like Deloitte are strengthening their advisory
practice as they are set to lose some marque clients from their audit practice.
While in the past several executives would leave
surreptitiously without the current employer knowing about his next employment,
with the poaching war heating up this year companies have become much stricter
in implementation when some senior executive or a star performer quits to join
a competitor. In many cases the firms are also holding back capital money which
is part of partners’ salary when they quit.
“The idea is to prevent the person who is
leaving from using information that they have gathered during their stay in the
company by extending the period of confidentiality,” said Poorvi Chothani,
managing partner of LawQuest, which helps clients with employment related
issues in India.
Gardening leave can be imposed if it is a part
of the employment contract however it is not necessarily an effective retention
tool, she said.
Attrition remains a big challenge as the competitors,
which again in most cases are the big four, are getting innovative to get
around the long gardening leave period.
In a recent case one of the senior partners in a
big four firms resigned to join a competitor. His firm has not only asked him to
serve a 12-month notice period but in all probability he may not get his
capital money or in best case scenario, his capital money will be disbursed two
years down the line.
“The partner will be paid a joining bonus which is equal to
his one year salary in the new organisation. This would take care of his
capital money part,” said a senior official in the new firm he is joining. This
would mean that when the partner joins the new firm he will already have some
money to invest the firm as capital money.
In desperation to attract talent, new executives
and partners joining the firms are offered similar terms of appraisals.
With a hope to attract the best talent from
competitors, the Big Four are tweaking terms in employee contracts wherein the
newly-joined partners and executives get fixed appraisals for the first two
years of joining, irrespective of their performance.
By Rica Bhattacharyya &
Sachin Dave, ET Bureau | Dec 24, 2016, 06.39 AM
IST
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