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Sluggish IPO market, poor business chill accounting firms

By Bi Xiaoning (China Daily)
Updated: 2008-12-03 08:01

The sharp fall in initial public offerings and other businesses has forced many accounting firms in China, including the big four international giants, to start cutting jobs for the first time in many years.

Ernst & Young has laid off 50 to 100 auditors at its Beijing office, a source at the firm said.

There has been a spate of departures from the firm last week. Many of those who have left are manager assistants who are yet to obtain professional qualifications.

A few senior managers transferred from the firm's offices in Hong Kong and Malaysia have also left and many of those who have stayed on are now worried about their future at the firm, the source said.

On Sunday, Nov 16, a group of auditors at KPMG were told to cancel their appointments and return to the office the next day. On what was known in the firm as "black Monday", this group of about 70 to 100 professionals were asked to resign "voluntarily" by Nov 21 at the latest.

Most of the auditors in this group had worked at the firm for less than three years, a source at KPMG said. There are 12 audit teams in the Beijing office with about 100 members each. The teams have been forced to downsize by axing four to five members.

KPMG has offered a "N+2" termination compensation program to those who were told to resign. "N" refers to the staff's serving years in the company and "N+2" multiplied by the monthly salary will be the total compensation package, said the source.

The accounting firm is also not expected to renew staff contracts that are due to expire in January, the source said. However, there will be no changes to the standard program of recruiting fresh graduates.

The other two international firms, PricewaterhouseCoopers (PwC) and Deloitte are not known to be laying off staff. But sources at these firms said there has been an increase in the number of auditors who are not being assigned auditing projects. Quite a few of these so-called "idle" people have been asked to avail their leave.

According to market researcher Zero2IPO Group, the number of IPOs in China fell by more than 70 percent to 28 in the third quarter, with the total capital raised falling more than 80 percent, from a year earlier.

Globally, it will continue to be negative next year in the human resource sector, especially for the auto, finance and construction industries, said China Miner Gorman, chief operating officer of Society for Human Resource Management, the world's largest human resource management firm.

"It is time to take action to boost staff morale and the employers should be cautious before embarking on large-scale layoffs," she said.

Currently, the "big four" have no plans to curtail campus recruitment. An email to PwC staff in October stated, "there will be no reduction in graduate hires. We are not going to make short-term, knee-jerk decisions to cut hiring, which we will regret in future years."

PwC also confirmed earlier in November that it plans to hire about 2,000 graduates in China next year.