PwC ‘rule of three’ forces partners who leave in groups to pay
PwC Australia’s leadership is trying to stem a rising tide of partners leaving by enforcing a rule that obliges senior staff involved in a “group departure” to a rival firm to pay back the fees they generated in the previous year.
The agreement also gives PwC the power to force leaving partners to repay expenses such as the cost of “redundant office space” and other items caused by the departure.
Informally known within the big four consultancy firm as the “rule of three”, the clause is designed to deter groups of partners moving to rivals by making it financially onerous for leavers and the new firm trying to take them on.
The so-called ‘rule of three’ means departing PwC partners could be forced to repay a year’s worth of earnings if they leave in groups. Bloomberg
Partners are increasingly seeking to exit PwC as fallout from its tax leaks scandal affects their ability to win and retain clients. PwC has already moved to enforce other restrictions within its partnership deed, which allows the firm to withhold pay for a period and impose temporary restrictions on what partners can do after they leave.
The firm says partners, as part-owners of the firm, enter into the agreement voluntarily and the conditions are not dissimilar to the partnership agreements at other professional services firms. Being partners also means they are not entitled to the standard employment protections.
A senior partner at a consulting rival firm said PwC was displaying an unprecedented level of aggression to stop partners from leaving.
“They are threatening partners with restraints, withholding [income], financial penalties,” the senior partner said. “I’ve never seen anything like it.”
The senior partner said that some restrictions were
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