Compensation and Market trends Interim reports 2015 - Internal Audit

SBarclay Simpson Market Report - Internal Audittable government positive for recruitment

At the start of 2015, we reported a confident recruitment market where 78% of internal audit departments anticipated they would need to recruit in 2015. Real earnings had finally started to turn positive and with low inflation and even a short spell of deflation, earnings in both the wider economy and internal auditing were starting to accelerate. Earnings growth is continuing. It is supported by a buoyant economy, a strong UK employment market that is experiencing record levels of employment, and unemployment trending relentlessly down.

At the start of the year more general concerns were the lack of productivity growth in the UK economy and uncertainty surrounding the upcoming general election. Uncertainty, from whatever source, stalls the type of corporate and personal decision making that a fully functioning recruitment market requires. The removal of that uncertainty and a stable government is a positive development for the internal audit recruitment market.

Financial services continues to dominate

The banking and broader financial services sector continues to dominate the internal audit recruitment market. This will no doubt continue at least until the regulatory inspired expansion in the number of internal Auditors comes to an end. In the meantime, whilst the sector is growing again, we can only speculate about what making banks safer has done to productivity in the sector?

Earnings up

Average salary increases in internal auditing have exceeded those in the wider economy. We expressed surprise last year that the average increase was only 4% in both 2013 and 2014. This has increased to 5.5% in 2015 and, in a low inflation environment, is a good result for internal auditing. Within this figure, account needs to be taken not only of the salary increases resulting from promotions, but the surprisingly high 18% of internal auditors who reported that their salary did not increase.

Bonuses down

Although salaries have increased, bonuses have not. Whilst more internal auditors report they are receiving a bonus, the value of this benefit has declined. This may simply reflect the ongoing curtailment of the bonus culture within banking. Average employer pension contributions are flat whilst what are lumped together as the other financial benefits of employment are up. Notwithstanding the average salary increase of 15% achieved by internal auditors changing jobs, down from 16% in 2014, career development remains the primary driver for those who have moved.

Steady demand and realistic compensation

The internal audit recruitment market, no doubt reflecting developments in the wider economy, is enjoying steady demand. Apart from some of the excesses that the acute shortages of specialist internal auditors in banking and financial services cause, the compensation internal auditors are currently benefiting from is broadly realistic and sits squarely within what we would describe as historic norms.

VACANCIESBarclay Simpson Market Report Internal Audit 1

Vacancy generation falls back

The number of vacancies generated in internal auditing fell back in the first six months of 2015. Whilst there are bank internal audit departments still looking to expand and the consultancy sector is growing, the key driver in the generation of vacancies - internal auditors looking to move between employers - has slowed.

In explanation, after the Euro crisis in 2011, many internal auditors who would have otherwise changed employer and created vacancies, did not. The recruitment market effectively stalled. Once confidence returned, late 2013 and the whole of 2014 saw a period of catch up which boosted the number of vacancies. In 2015, the internal audit recruitment market is now experiencing more natural levels of turnover and therefore vacancies.

No one would pretend that securing the services of fully competent internal auditors is easy, particularly given historically low levels of unemployment. There is, however, currently a greater degree of realism as more companies are prepared to consider alternatives to their ideal candidate. For example; internal auditors from mid-tier rather than Big 4 consultancies; internal auditors from Europe rather than the UK and internal auditors with experience from outside their preferred sector.


Rate of placements

Rate of placements improving

To provide a better insight into the dynamics of the recruitment market, this graph plots the rate at which placements have been made across the last four years. It reflects the rate at which vacancies are being filled.Barclay Simpson Market Report Internal Audit 2

At the start of 2015, our Employment Survey indicated that 67% of internal audit departments were finding candidates difficult to source and 73% were having difficulty recruiting. This situation has eased slightly, particularly given that the rate at which vacancies are currently being generated, which although still high, has fallen back from the peaks experienced in 2014. Then, 32% of internal auditors reported they had changed job in the last 12 months, against 29% in 2015. In addition, the  salary increases internal auditors are achieving through changing employer has fallen, indicating marginally less stress in the recruitment market. As a consequence, the rate of placements has continued to improve.

However, attracting internal auditors with the necessary interpersonal skills remains a key challenge. Communication is so vital to internal auditing and hard to develop that it remains an area that is difficult to be flexible about and companies remain reluctant to recruit internal auditors who do not meet their expectations. As recruitment consultants we do not take issue with this.

Internal auditors more content

Outside of banking the demand for internal auditors is currently more evenly balanced against their supply. Many of those internal auditors that put off moving and internal audit departments that delayed recruitment in 2011 and 2012 in response to the Euro crisis have since caught up. Internal auditors in the UK are now working in an economy that is benefiting from stable government, steady growth, rising employment and an economy that has yet to hit the constraints that economic expansions ultimately come up against. More internal auditors feel adequately compensated and on average are benefiting from significantly better salary increases than the wider working population.

Skill shortages and immigration

Shortages of internal auditors are being met by a greater reliance on EU experienced internal auditors. The Big 4 are also again sponsoring Tier 2 visa workers. This may involve enlightened self interest as such internal auditors cannot automatically transfer their employment away from their sponsor. The fierce debate between the business lobby experiencing skills shortages and those concerned about the immigration and the ability of the UK’s infrastructure to cope remains unresolved.

With less than 2% of the internal auditors who responded to our survey reporting they are not working, unemployment is low. However, over 50% of these people have been seeking work for over 6 months and a more substantial majority reported they were finding it more difficult to secure work than they anticipated. We have made the point before that standards in internal auditing are continuing to rise and those who do not meet them will struggle to get offers.

Regional development needs encouragement

We are aware that two distinct internal audit recruitment markets have developed in the UK - the London banking and financial services market that sucks internal auditors in from all over the South East and even further afield and the rest of the internal audit recruitment market which is not dominated by London.

For much of the UK, certainly outside the central belt in Scotland, the North West and West Yorkshire, the concentration of internal departments and therefore opportunities can be extremely thin, a point made more than once from the comments section of our survey. This disadvantages both employers and employees and almost becomes self fulfilling as internal auditors move away because there are no jobs, while departments relocate because there are no locally available internal auditors. It is not helped by the fact that internal auditing has become more specialised with deeper pools of expertise required. The government has clearly woken up to the challenge of a disproportionately dominant London and is increasing steps to actively promote regional economic development.

Appetite for part time work

An issue that is clearly made in the comments section of the internal audit survey and in our other corporate governance surveys, is the value many people attach to being able to work flexibly and, given ever extended commuting times, being able to work locally. There is also an appetite for part time work which in our experience has encouraged many internal auditors to resign from full time positions and work as contractors. For some internal auditors the time available to them outside of work is more important than money. For others, seeking another job for career development reasons does not always mean a bigger job but simply a qualitatively better one.

Women becoming better represented?

An interesting finding from our survey is the current and future gender make up of internal auditing. Whilst the percentage of respondents to our survey who were women rose from 22% to 25% in 2015, when analysed, 14% of women had worked in internal auditing for less than 2 years against only 4% of men. In fact, in absolute terms more women responded that they had worked in internal auditing for less than two years than men. Clearly if that trend was extrapolated into the future, notwithstanding that women tend to stay in internal auditing for a shorter time, the male bias in the profession may be in the process of shifting substantially.



There has been little let up in demand from the banking sector, where 76% of bank internal audit departments reported an increase in their recruitment budgets at the start of the year and our survey shows the average salary increase achieved by internal auditors moving jobs in the sector to be 20%.

The landscape in banking is changing with many banks moving away from the universal banking model, separating “noncore” businesses and making strategic decisions about the areas they will specialise in.

Given the shortage of internal auditors with the skills required, banks need to be creative. Some, as they look outside traditional pools of potential recruits, are considering business managers and controls officers. More candidates with specialist banking experience are coming to London from Western and Eastern Europe, especially at Associate and AVP levels. Other banks, as they look to reduce costs, are outsourcing to Eastern Europe with locally based teams providing additional resource to London as and when required.

As banks have sought to minimise reputational risk and regulatory fines, we are seeing demand in Compliance and Financial Crime Audit and, in the struggle for profitability, auditors with Capital, Liquidity and Funding knowledge, including Basel 2.5/3.

At 23%, salary increases achieved by internal auditors moving in the asset management sector has outstripped those in banking. The number of internal auditors employed in the sector continues to grow, largely in response to increased regulation. This has compensated for consolidation in the asset management sector where, in response to increasing costs, groups have merged or been taken over. Co-sourcing remains popular and the Big 4 are increasing salaries in their search to recruit experienced asset management auditors.

The wealth management and private banking sectors are also recruiting strongly again in response to regulatory pressure. Stable government is also helping create a positive environment. Demand across the wider asset management sector is set to remain strong throughout the remainder of the year.

The insurance sector is buoyant. 76% of departments reported increased recruitment budgets at the start of the year with 71% reporting it difficult to recruit. This is spilling over into salaries and the average salary increase achieved by those changing job is currently over 20%.

Recently qualified auditors with insurance sector internal audit experience are in highest demand as are more senior recruits with Solvency II experience. There is also significant demand from companies in the Lloyds market as many smaller groups look to consolidate their in-house audit expertise.

Recruitment remains problematic. Candidates with in-demand generic skill sets will frequently attract multiple offers and, when roles and companies are not dissimilar, salary will often be the deciding factor.



The average salary increase achieved by internal auditors changing jobs in the commercial sector is 15%. Closer analysis reveals that increases have been higher from companies outside of the FTSE 100. By way of an explanation smaller UK centric groups may be benefitting from greater flexibility to vary the salaries they are able to offer.

Demand from multinational groups has been robust, particularly at Lead Auditor and delivery focused Audit Manager level. Given the shortage of Big 4 qualified accountants, they have been prepared to consider mid-tier candidates as well as European internal auditors willing to relocate to the UK. CV to interview conversion rates are increasing and European auditors tend to be more flexible in terms of travel, whilst also bringing 2nd or even 3rd language skills that multinationals can utilize.

Companies most likely to be successful in their recruitment are those prepared to be flexible in their requirements, who adopt line management led recruitment processes, who are able to move quickly with minimal ‘touch points’ and are then able to swiftly make realistic offers.



Demand is starting to recover within the public sector. After such an extended period of inactivity, there is only so long the integrity of an internal audit department can be maintained without either effective internal or external recruitment.

Our employment survey at the start of the year indicated that a surprising 50% of departments had been looking to recruit in the second half of 2014. At 9.2%, average salary increases from changing jobs are low but higher than in practice. Perhaps the biggest development in the sector is the establishment of the Government Internal Audit Service which will change the way Government is audited.


Average salary increases for those changing jobs in the consultancy sector are reported to be 8.7%. Within practice it is the mid-tier firms that are currently leading demand. This demand is strongest up to assistant manager level, predominantly public sector focused and evenly distributed across the UK. All mid-tier firms are acknowledging their need to offer to rebate study fees as part of the packages they offer part qualified candidates.

The Big 4 are currently more subdued although there is demand for IT auditors and financial services specialists. They face strong competition from companies in the financial services sector. The Big 4 generally look to differentiate themselves from mid-tier consultancies by the quality of work and the salaries they offer.


Demand for IT auditors remains strong across financial services, especially in banking. Demand is generally lower within commerce where most activity is within the telecom, retail and IT sectors. However, companies in these sectors like those in the commercial sector more generally are still failing to keep pace with salaries in financial services. The Big 4 have returned to the recruitment market across all levels with a focus on delivery roles. A feature of their recruitment has been their focus on Tier 2 and EU candidates. Retention bonuses has also become a feature of their compensation packages.

Demand for IT auditors remains London centric although the Edinburgh financial services sector and the Big 4 nationwide are notable exceptions. Key skills in-demand are a mix of IT audit and data analytics / data mining within financial services. When these skills are unavailable, companies are often prepared to take candidates with pure data analytics experience. Within commerce, IT audit and change skills are most in-demand.

Whereas most vacancies in the latter half of 2014 were applications focused, there has been more demand for IT infrastructure auditors in 2015. Smaller companies in both financial services and commerce require strong technical IT auditors to move into broadly based roles encompassing applications, infrastructure, data and change.

Cyber security is a key focus and there will almost certainly be more cyber security experts working in IT audit over the next 12 months.



Demand for contractors has increased. Whilst the majority of demand is still coming from the financial services sector, the commercial sector is also experiencing an uptick in demand. Vacancies have been varied with a broad range of levels and scope. The resulting shortage of contractors is pushing rates higher with 62% of respondents to our survey reporting that their current rate represents an uplift. In fact, 74% of contractors report they are satisfied with their current rate.

Within financial services, there is demand from across banking and notable demand from the asset management and insurance sectors for regulatory project focused contractors. There is also demand for front office product experience where expertise is sought to complete reviews rather than employing more expensive consultancy groups. Some top tier investment banks have begun to offer retainer bonuses to ensure contracts are completed, which is in stark contrast to last year when rates were being cut. Premium rates are also being paid by a number of niche financial services groups.

Many roles are BAU as companies use contractors as a ‘stop-gap’ whilst permanent recruits are sought and even to provide cover where extended notice periods need to be worked by incoming permanent recruits.

The majority of roles have been London and South East based but with increased demand from the central belt in Scotland, the North West and North East. Contactors employed on day rates are becoming more common with fewer companies employing contactors on less popular fixed term contracts.


Our Mid-Year Report provides an in depth section on salaries and compensation, designed to give a much fuller picture of overall remuneration packages. Most internal auditors are keen to know their market worth. This is not always easy to address. Two otherwise similar internal auditors may enter the recruitment market and accept materially different salaries. We provide this caveat because we are aware that the internal audit recruitment market is sufficiently diverse that it defies simple categorisation. However, internal and computer auditors and their employers want guidance and this is what we attempt to provide.

As recruitment consultants we are involved in the negotiations that take place between employers and prospective employees. We are aware that whilst salary is usually the most important factor, there are a number of others that go to make up total remuneration. In addition to the data we gather from the placements we make and the recruitment work we do, including contact with internal audit and human resources departments about salary and other benefits, we have also conducted a Compensation Survey to provide specific detail on all different types of remuneration within internal audit. This is a survey of internal auditors registered with Barclay Simpson and was conducted in June 2015.

To read the full report, follow the link here.



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