The firm's overall utilisation rate dropped from about 71 per cent in the last week of March to 66 per cent in the first two weeks of April, while audit kept steady at 78 per cent, a level it expects to maintain.

Rival big-four firms PwC and EY have also announced pay cuts, but only in underutilised divisions such as consulting and for which staff will also receive a commensurate reduction in hours.

The Deloitte auditor's letter also warned a hiring freeze and pause on overseas recruitment at Deloitte could compromise audit quality, which is under unprecedented scrutiny from the government and regulators.

A copy of the letter leaked from the firm has been circulated within the industry and posted online. Copies of the five-page PDF document have been shared with The Australian Financial Review via London and San Francisco as well as in Australia.

Salary cut to soften equity partner pay cut

"We feel like our partners are not doing enough to shoulder the [burden to] the firm," the letter said.

"There is no such shouldering of the impacts here down under as 'the health of the firm' is propped up by the reduced salaries of your people. Collective sacrifice should also translate to fairness in sacrifice."


Non-equity or salaried partners will take a 20 per cent annual pay, with their income not falling below $250,000. Employees' income will not fall below $65,000 under the cuts.

Equity partners are taking an annual 25 per cent pay cut. Based on 2019 income, this would see the income of the lowest paid non-consulting equity partners reduced to about $412,500 and the lowest paid consulting equity partner to about $450,000.

About half of the firm's 900-odd partners are salaried and half are equity partners, meaning they share in the profits of the firm.

In an interview on 2GB before the announcement, Deloitte chief executive Richard Deutsch said he was confident staff at the firm would see the sacrifice as fair.

“I believe people will be prepared to sacrifice an element of their salary if they trust in what the organisation is doing – if they can see that the owners are taking more pain than them,” he said.

However, the cuts to partner pay would be much worse if employees did not accept the proposed 20 per cent cut to their pay, as revealed in the Financial Review on Friday.

Partners were told it was "imperative" the firm cut $100 million from its salary bill or equity partners would be forced to take another 25 per cent hit to their income.

That meant, in effect, the staff pay cut would soften the pay decrease to non-consulting equity partners by at least $137,500 a year, and by at least $150,000 for consulting equity partners.


Legal to opt-out without reason

Big four firm KPMG has also announced a blanket reduction in pay without commensurate cuts to hours. Its staff also has pushed back against the move.

Although both firms have asked staff to offer reasons why they could not afford the pay cut, legally staff do not have to give any reasons for rejecting the offer.

Employment law expert Ian Dixon said staff could simply email and opt out of the pay cut without providing a reason.

He said that “high-flyers or those in essential or busy areas may be able to negotiate” but warned that opting out might be a “career-threatening move” regardless of the firm’s message that partners and staff were “all in together”.

Deloitte told staff about the salary cut at 4pm on Wednesday and gave them until Monday April 20 – the first day of a firm-wide shutdown – to opt out, a gap of about five days.

In contrast, KPMG has given staff until April 27 to opt out of its equivalent changes, or almost two weeks.

Deloitte, like KPMG, also pointed staff to a range of government programs aimed at helping those in financial distress.


Early super access available

One option presented to Deloitte employees was the ability to gain early access to superannuation for staff in financial difficulties.

“As a last resort, if you require further cash during the period, you may be able to access up to $10,000 of your superannuation in both 2019-20 and 2020-21," information available to Deloitte staff about financial management advised.

A Deloitte spokesman said most employees had been receptive to the changes.

"We have held a number of forums where we have listened to our people’s views and we will continue to communicate openly with them," he said.

"We are pleased that a vast number of our employees have already communicated to us that they understand and are supportive of the steps the firm is taking."

The Deloitte auditor's letter said the audit division had "just endured one of the most understaffed 12 months in recent memory", adding to the pain of the pay cuts.

The author claims to have worked 20 per cent more than their required 45 chargeable hours a week between January and March, translating to more than 100 hours of overtime.


The letter claims the firm's record on pay equity is "not the strongest", citing staff push-back last year to news that incoming graduates at the firm would be paid more than auditors who had been there for almost two years.

The firm adjusted junior pay from January to better account for employees' work experience.