Transfer Pricing Career Advice: Life After the Big 4
Introduction
For many Transfer Pricing specialists working in consultancy firms, a time comes in their careers when the grass seems greener on the other side of the fence. Especially now when TP is high on the International Tax agenda, many companies decide to build up their own in-house TP teams instead of relying on external consultants which considerably increases the demand for TP specialists.
A temptation to “hop over the fence” is especially strong for professionals who spent all their career working for consultancy firms and now wonder how different would it be to work in the in-house TP role. Similarly, people working for in-house tax teams very often start to consider moving to one of the consulting firms as these also increase their ranks in order to meet the surge in demand for TP advice.
In some cases, the decision to move to the “other side” is dictated simply by a desire to progress the individual’s career but very often such decisions are influenced by the differences between the in-house and consultancy work environment and the specific characteristics of working in each type of role. Working in consultancy is still regarded by many as more challenging and stressful due to tighter deadlines, constant need to fulfil ever-changing clients’ requirements and persistent pressure to attract new business. In contrast, many will argue that working in-house can become tedious after a while and lack the exposure to different technical aspects that consultancy roles tend to offer. In addition, many businesses treat the consultancy firms like “talent incubators” and try to attract the best and brightest to join their businesses or simply wait for their employees to achieve their tax qualifications before “poaching” them to save on their own staff training and development costs.
All this puts considerable pressure on consultancy firms to revisit the benefits offered to their staff and offer similar perks as in-house TP roles but also forces in-house hiring managers to find more ways to attract TP talent from the consultancy firms. First and foremost, if you are managing a team in one of the consultancy firms, you’ll want to ensure that it’s not drained from the best talent purely because they’re attracted by some features of the in-house role that might be easy to replicate. In contrast, if you manage the in-house tax team, you’ll want to attract the best talent (which very often can be found in consultancy) by knowing what advantages the in-house TP roles can offer.
While it’s impossible to say if it’s better to work in consultancy or in-house TP, having experienced both working environments before, we developed an appreciation of the different set of core skills nurtured and required to succeed in each one as well as understanding of main differences between them. By discussing such differences, we hope to provide a useful guide on how to attract or retain your best TP talent. Beyond TP technical considerations, we find differences in three key areas discussed below.
Type of work
Generally, most consultant TP projects are born out of a desire to either get expert advice or to alleviate a lack of in-house TP resources. Therefore, working in a consultancy sometimes involves doing either quite repetitive compliance work (think TP documentation projects for over 10 countries!) or quite complex/high stakes TP work such as preparation of APAs/assistance on disputes, technical financial modelling, TP risk reviews, etc.
Working on the client facing side in a consultancy environment can often feel frustrating due to the significant data/information limitations and strong time pressures on important projects. The old adage that “client is king” makes it difficult to question some of the client’s decisions and confronted with clients that can appear to be slow in responding and change their minds inexplicably (we’ve been on both sides of this phenomenon now – it can be frustrating for both sides!) very often slows down a project to a grinding halt making it very difficult to deliver high quality work.
On the other hand, it can be really exciting every month to start working on high profile projects or solve unusual problems where there is no one “right answer”. The work can be a bit more theoretical, delving deep into TP technical considerations but offers enormous opportunities to gain new TP knowledge in a very short time. Such projects involve trying to digest and interpret new legislation fast and present insight and pitches for work to clients. Depending on how a consultancy TP team is structured and your personal specialisation, working in the consultancy should also mean the types of projects you’re working on are varied across industry.
In addition, working in a consultancy usually means having a few direct managers on different projects at any given time. This can result in stressful and tricky situations juggling competing demands from each manager while they are unaware of the requirements and deadlines of ongoing work with the other managers.
Working in-house is a completely different kettle of fish. In-house roles can involve TP policy work i.e. monitoring TP rules, proactively managing TP risks and keeping an eye out toward the future; or TP implementation work i.e. TP calculations and reporting management. The type of work is usually more practical, focusing on risk management and policy implementation. It may also be much narrower by industry as your only “client” now is the company you work for. However, within the company itself, the role is typically broader and less defined than working on a client project in a consultancy and you would typically come into contact with non-tax people much more often when working in-house.
In-house roles require you to be a TP advisor to business. Anything that merits a TP consideration or presents a TP risk in the part of the business you’re looking after will require your attention. There are fewer significant, complex TP issues on a monthly basis unless there are a ‘perfect storm’ e.g. several tax audits and business restructurings going on at the same time. In general, there are many more day-to-day TP tasks to take care of. These can include monthly TP reporting cycles, monitoring TP legislation, business and finance processes, and also sometimes even dealing with non-TP people telling you how TP should be done.
On a positive note, there are usually no dreaded time-sheets to fill out in-house, less frequent time pressures and everything just seems to happen in a little bit in less of a rush. Being within the company, you will always have access to more data/information and have a much better appreciation of your organisation’s risk appetite, previous TP decisions and opinions of key stakeholders in tax or the wider business. If there are any gaps in TP knowledge, external consultants can potentially be engaged to help out with projects but subject to budget restrictions. However, ultimately the “TP buck” stops with you as reliance on consultant advice won’t necessarily save you if there is a problem, as their advice is typically laden with disclaimers and scope limitations.
Company environment: entrepreneurial spirit vs collaborative business support
Unless you’re quite junior, you’ll experience an entrepreneurial spirit and mindset while working in consultancy TP. Metrics such as chargeable hours and charge-out rate recovery percentages on projects are designed to encourage revenue generation and increase efficiency. There can be a considerable amount of pressure on employees to meet their targets and compete with their peers. The time and chargeable hour pressures can mean that the environment is more stressful and it could be more challenging to find enough time for learning, development or socialising.
Being able to successfully navigate in this entrepreneurial environment of competing deadlines, performance metrics, short vs long term priorities and still managing to keep clients happy is a key skill which can be developed while working in consultancy. Although industry conditions and TP legislation have an impact, there can be a real sense of accomplishment from successfully managing and growing your P&L from projects, especially at the more senior levels where you have more of an impact on winning the work.
As an in-house practitioner, TP is much more collaborative and much more about finding compromise and building consensus. Working in an in-house environment makes you much more conscious of how TP considerations interact with other parts of the business. You will be required to input from a TP perspective into wider tax decisions, proposed reporting processes, and budgeting decisions, but the final decision should be the overall best option for the company taking into account TP and all other areas it affects. While working in-house, it is therefore important to develop an appreciation for the priorities and requirements of other key functions which affect these decisions. For example, in banking, regulatory requirements are often an important consideration influencing many decisions made within the business.
In our experience, in terms of working environment, there is also a difference in terms of the level of socialising expected in-house versus working in consultancy. A consultancy role will usually place more demands on time outside the office to be spent networking with clients and teambuilding within the TP or between teams working in other areas of tax. Consultancy TP teams are almost always much bigger than in-house TP teams with more company arranged social events while in-house TP teams are usually smaller and made up of more senior people with fewer social events.
Career development
Over the last few years, with the emergence of BEPS Action Plan and increased attention on transfer pricing from tax authorities, we have been fortunate to work in an environment where there is a greater demand for TP professionals. This has meant more opportunities for progression and greater pay, but also probably more pressure to work longer hours and be more efficient on the job.
In consultancy, the days are generally less predictable, there is less work-life balance and also lower pay (with the exception of senior director/partner levels) and as a result, the staff turnover rate tends to be much higher as people leave to seek out better work-life balance and pay. However, the teams are bigger and progression opportunities tend to be much better defined than in-house. At any given time, provided you have proven yourself to be operating at promotion level, there is a greater chance for building a strong business case backing your promotion to the next level. In-house promotion opportunities can be more limited, as staff retention rates are higher and often other team members need to move on in order to create a strong business need for promotion.
At more junior levels, the access to funding of professional qualification schemes such as ICAEW, ACCA or CIMA is also an important consideration. Some in-house roles may offer the option to do such qualifications alongside work but some may not. However, majority of consultancy firms established a fully funded professional qualification programs which have successfully been running for many years. This does not necessarily mean these will be better managed than in-house, but the existence of full funding for pursuing professional qualifications can go a long way towards bridging the salary gap at junior levels.
Advice for TP managers
As mentioned earlier it is very difficult to say what the best approach is to both attract and keep the best TP specialists. However, we hope that this article offers some insight into the possible reasons why the grass may sometimes appear to be greener on the other side to both consultancy and in-house TP specialists.
