KPMG scraps early retirement policy age of 58

13 April 2021 Consultancy.com.au 3 min. read
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Following a similar move by EY last year, and criticism from the government, Big Four professional services firm KPMG has scrapped its early retirement policy – citing community expectations and the changing shape of its partnership.

Professional services firm KPMG has dumped its controversial ‘expected’ retirement age of 58 following widespread criticism. The board-led decision comes on the back of an eight-month review launched in August of last year, when fellow Big Four firm Ernst & Young dropped a similar policy and Deloitte was taken to court by a partner seeking over $3 million in compensation.

“The board was explicit that we needed to change,” said KPMG Australia chairman Alison Kitchen on the decision. “The shape of the partnership is changing, with many partners joining from outside the firm, or from within but later in their careers. Partner expectations are also evolving, with more partners wanting to work longer. Community and client expectations are shifting, too.”

KPMG scraps early retirement policy age of 58

As the first test case of its kind among the Big Four in Australia, current Deloitte audit partner Colin Brown took the firm and outgoing boss Richard Deutsch to court last year alleging age discrimination in that Deloitte had tried to push him out of the partnership at 62. The case is ongoing, but sparked public scrutiny of the practice and a round of commentary on its legality.

The issue, however, has been bubbling away for much longer. A leaked email from early 2018 from KPMG’s general counsel to CEO Gary Wingrove (also soon to be replaced) notes the defence that partners are aware of the retirement policy upon joining as not applicable under the relevant age discrimination act. EY at the time also decided to maintain the firm’s dubious retirement practice.

“We recently considered the relevance of the retirement age and it was determined that it continues to operate as an appropriate marker to help partners plan and transition their lives financially and professionally,” another outgoing CEO, EY’s Tony Johnson, said at the time. "Partner retirement and transition is also fundamental to effective succession planning across the organisation.”

Since then, EY has reversed its decision, dropping a clause for an expected retirement at 60 in its partnership agreements, which immediately focused the heat on KPMG. Some of that pressure came directly from the federal government, including veiled procurement warnings from then finance minister Mathias Cormann, putting at risk what is now a $250 million cash cow in government contracts.

“In considering our approach to the review of voluntary retirement provisions, fairness was an underlying principle, together with competitiveness to recruit and retain the best talent, and alignment to community expectations,” Kitchen concluded in a statement.“The changes are in the best interests of both existing and future partners, and strengthen our firm over the long term.”