(AUSTRALIA) – PwC Australia is taking measures to curb partner departures by implementing a rule that mandates senior staff engaged in a “group departure” to repay the fees they generated in the prior year.
The rule also allows PwC to recover expenses related to the departure, including costs associated with redundant office space.
This informal policy, known as the “rule of three,” is intended to discourage groups of partners from leaving for rival firms by imposing financial burdens on departing partners and their new employers.
The move comes as an increasing number of partners seek to leave PwC amid fallout from a tax leaks scandal that has impacted the firm’s ability to acquire and retain clients.
PwC has already enforced other restrictions within its partnership agreement, such as withholding pay and imposing temporary limitations on partners post-departure.
The firm maintains that these conditions are consistent with partnership agreements in other professional services firms and that partners, as part-owners, enter into the agreement voluntarily, which means they do not have the standard employment protections.
PwC’s stringent clauses for departing partners
Some industry experts view PwC’s actions as unusually aggressive in attempting to prevent partner departures.
One version of PwC’s partnership agreement includes a section titled “group departures,” outlining the punitive measures partners have agreed to.
The most severe clause requires departing partners to repay an amount equal to the aggregate fees generated from any clients of the firm in the 12 months preceding their departure. The calculation and amount are determined at the discretion of the firm’s board.
Departing partners must repay expenses related to their departure, including redundant office space, equipment, and support services.
An independent assessor appointed by Chartered Accountants ANZ determines the total expense bill. PwC has also imposed restrictions on departing partners, preventing them from working with clients advised by any partner in their business unit over the past three years.
Finally, partners may have between 50% and 100% of their salary withheld during their six-month notice period for up to one year.
The tax leaks scandal that triggered these measures involved PwC partners using confidential government information to help clients circumvent tax laws, including a partner who was assisting Treasury in designing those laws.