MUMBAI: For a newly minted partner in one of the Big Four professional services firms, becoming a stay-at-home dad had never crossed his mind. That, until last month.
He had joined the company as a partner in 2016, with a 30% pay hike, from a rival firm. With an eight-figure salary, a chauffeur-driven, high-end German car and a penthouse in a tony Bengaluru neighbourhood, it looked like a perfect job. He is now on gardening leave – a six-month cooling-off period that a partner must observe after leaving a job.
Another executive from a Big Four firm in Mumbai has found a liking for Marathi plays, as he is also on gardening leave and has lot of free time. “I never knew plays could be so much fun,” he said.
Suddenly several partners and senior directors at top consultancy firms, including at the Big Four of Deloitte, PricewaterhouseCoopers, EY and KPMG, are discovering different facets of life, and it’s not the case of self-actualisation or even burnout.
With the dust around goods and services tax settling, and their clients getting the hang of the tax framework and handling the issues internally, these consultancy firms are witnessing slowing down or plateauing of revenue from a practice that has been a major driver of business and employment growth in recent years.
At least 20 partners and as many as 50 directors in top firms have either quit or will leave in the coming months, as they are
unable to take the pressure on generating revenue, industry insiders said.
ET spoke to CEOs, tax heads and senior partners at several firms. While many of them avowed that there was pressure on revenue in the sector, most claimed that it was faced by their rivals and that they were unaffected.
A KPMG spokesperson said while the indirect tax revenue in the industry appeared to have plateaued, the practice for the firm was growing strongly. A PwC spokesperson said the company was building data analytics capability around GST to provide integrated solutions and that indirect-tax practice remained an important growth engine for it. EY and Deloitte did not respond to request for comment.
Insiders point out that between 2015 and 2018, revenue for large professional services firms from GST-related services grew at 50% annually. This has driven job opportunities, salaries and promotions for professionals in their indirect-tax verticals.
But now, the growth is estimated at about 10% on an average.
Many partners and senior directors who were lured from competitors, and in some cases other departments, with lucrative salaries and midterm raises are looking at potential job losses, as the GST framework becomes simpler, reducing the requirement of experts to handle it.
At multinationals, partners are given revenue targets and they get to take home around 30% of the revenue they generate. A large number of them have failed to achieve their targets this year, said people in the know.
The total revenue from GST-related services is estimated at Rs 1,000 crore for the top 10 firms, including six multinationals – the Big Four, BDO and Grant Thornton. The top six had hired close to 3,500 people, including almost 100 partners, to handle GST services that bring them around Rs 850 crore a year.
Utilisation, or the amount of time a professional spends doing billable work, has reduced to 60% or less now from as high as 95% around the time of GST rollout in July 2017, said insiders.
“It’s the case with every market in the world; there are mainly three stages of revenue growth after a new tax framework is introduced. First the phenomenal growth stage, then the plateau and then the gradual decline,” said the tax head at one of the Big Four firms.
“Now what we are left with is the compliance work in GST. The days of 40% and 50% jump in revenue are gone. We had increased the team size due to the sudden growth, now some of the partners will have to go,” the India head at one of the multinational firms told ET.
Senior people in the industry said they were also facing pressure due to the increasing adoption of artificial intelligence and automation.
“Automation is also a big disruptor,” a senior partner heading a GST team said. “So, while earlier adding people meant adding revenue, now one doesn’t need to add as many people to add revenue. So not only are we hiring less people, the revenue pressure is felt by those who are in the system,” he said.
“The upside lifted many boats during the GST launch euphoria, but the ones who stayed wise, not splurging on the short-term urge to increase headcount, aren’t facing revenue pressure,” said Suresh Nandlal Rohira, partner, Grant Thornton India, before adding that his firm was not facing any pressure.
Many partners and directors who have seen a spurt in their salaries in last few years are exploring new things now.
“I will just take it easy for now. I hope to plan a family,” one of them told ET.
“People who didn’t have time to have kids are now thinking about that,” said another. “Those who have kids are looking to take them to Disneyland.”
[“source=economictimes.indiatimes”]