KPMG’s UK partnership is now less than half that of PwC, after the firm has lost its top ranking for the fourth consecutive year due to regulatory fines.
The number of equity partner at the Big Four company, who own and share the profits of the business, dropped 7 percent in the year up to October, to 467, after it failed in its latest round to promote any staff to partnership.
The firm’s UK partnerships dropped to their lowest levels in over 20 years. Those who remained will receive a larger share of the profits.
These figures show how KPMG has diverged in strategy and fortunes from other Big Four firms, PwC EY and Deloitte, in recent years. This is after being hit by a number of scandals and penalties, including an record £21mn fine due to failures in the auditing of collapsed outsourcing firm Carillion.
Since 2002, KPMG has been disclosing partnership figures. This is the first time that KPMG’s membership has dropped below 500 members.
PwC now has 1,057 equity partner firms, while EY, Deloitte and Deloitte each have 930, 714 and respectively after expanding their partnership in the last year.
Jon Holt, KPMG UK’s CEO, wants to improve the reputation of his firm and increase profits that have been lagging behind competitors. KPMG, which is the smallest of the Big Four with about 16,000 staff, has long trailed its competitors on average partner pay. In the year to September 2022, partners were paid an average of £757,000, the highest since the financial crisis.
This was still less than Deloitte PwC EY who paid on average £1.06mn in their respective financial years.
KPMG, despite the shrinking size of its partnership, has promoted dozens to the position of “salaried partners”, a post it introduced in 2020 that does not qualify for profit sharing. It has now 359 salaried partner.
EY and Deloitte have also introduced the salaried partnership role.
Chris Hearld is the chief operating and finance officer at KPMG UK. He said that the bonus arrangements for salaried partners are “linked directly” with the size of partner profits.
He said: “Having these two roles is a common approach across the market. It allows salaried partners to [join] the partnership and grow in their role while at the same being rewarded for the firm’s successes and beginning on a pathway to become an equity partner.”
In addition, salaried partnerships can also prolong the path to becoming an equity partner because they increase the number of promotions required to achieve that position. Not all partners who are salaried become equity partners.
KPMG was hit by 16 sanctions since 2018 either from the accounting watchdogs or industry tribunals. Total penalties and costs levied by the company during this time total more than £95mn.