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Accounting Faces Reckoning After Years of Sluggish Pay Growth

March 16, 2022, 8:45 AM

Companies and accounting firms are shelling out bonuses and boosting salaries to recruit and retain CPAs amid staff shortages and record turnover.

Salary offers have jumped as much as 25% for some roles in recent months. But it’s uncertain if the higher pay will make up for a decade of sluggish salary growth and a shrinking profession.

Competition for skilled accountants has forced the largest CPA firms to boost pay—including midyear raises that KPMG LLP announced in January —as employers adjust to the hot labor market. Firms have also offered flexible work, expanded paid leave, and other carrots to recruit fresh hires and convince others to stay on the job.

“The pandemic and the great resignation have really shone a spotlight on a problem that has been brewing for years,” said Liz Kolar, executive vice president of Surgent Accounting & Financial Education. “The accounting industry for some reason has just not moved with the rest of the country in terms of offering competitive salaries, and this has been going on for over a decade.”

Market Correction

The shift in power toward workers and away from employers has forced businesses to meet demands for more time off, remote work, and flexible schedules—not just wages—said Paul McDonald, senior executive director for staffing firm Robert Half.

“They are demanding perks and benefits that we haven’t seen before,” McDonald said of workers in accounting and finance.

At every career level—from campus recruits to CFOs—salaries are rising. Accountants changing employers can see wages increase 10% to 25% for certain roles. Employers also offer significant retention bonuses for staff who stay through the spring tax season, for example, McDonald said.

Pay is rising fastest among mid-level accountants and those who hold more strategic roles in the business. People who handle financial close and consolidations aren’t easily replaced, and companies are wiling to pay more to fill those roles quickly, said Jeramy Kaiman, head of LHH Recruitment Solutions West at the Adecco Group.

Once fiscal year 2021 bonuses are paid out, turnover may spike, Kaiman suggested.

“Some of this is a market correction for years when salaries were only modestly increased but in many cases workload was increasing at a more rapid rate,” Kaiman said.

According to Robert Half salary guides, average starting pay for first-year auditors in 2022 was $55,000—unchanged from 2011 despite 10 years of slow but steady inflation growth.

While starting salaries haven’t budged, the average pay for accountants and auditors has increased steadily in recent years. In 2014, accountants and auditors earned $69,145 on average, compared with $81,255 five years later—a more than 17% jump, according to U.S. Census data.

Still, other related financial fields offered more: Budget analysts took home $88,267 and financial analysts made $115,352 on average in 2019, the data show.

Shrinking Pipeline

A shortage of new accountants is the main driver of the rapid rise in salaries, Kaiman said.

The number of accounting graduates peaked in 2012 and the total number of employed accountants has dropped since 2019. The downward slide in available professionals has exacerbated pandemic staffing challenges and record high turnover.

The profession offered steady and financially rewarding work before the 2008 financial crisis, when wages were frozen or cut. But accounting employers never made up for that lost ground, while other sectors did—resulting in a widening pay gap, said Elizabeth Almer, accounting professor at Portland State University.

“Students are making economically rational decisions,” Almer said. Faced with mounting housing costs and student loan debt, they opt to pursue other fields, she said.

Demanding schedules expected of workers also has contributed to recent turnover as the hours worked have outpaced what accountants consider to be fair pay.

Accountants’ busy season is no longer a once-a-year marathon of 80-hour workweeks. Now accountants may grind through two or more busy seasons a year, thanks largely to staffing shortages. “It absolutely wears them down,” said Kolar, the executive with Surgent.

“They don’t want to work multiple busy seasons in one year and spend all that time, that investment in time, and not get the return in terms of the work life balance and the salary,” she said.

Big Four Adjust

The largest four U.S. accounting firms have offered repeated rounds of wage increases during the past two years and offered other perks to retain staff and be competitive when looking to fill open roles.

KPMG announced in January that it had raised wages midyear as a retention tool staff, following similar steps by Deloitte LLP and PwC LLP, which also gave midyear pay raises in the past few months.

Similarly, Ernst & Young LLP said it provided mid-cycle bonuses this year and will provide its next round of pay raises in August—two months earlier than normal. The raises come on top of perks like reimbursement for commuting and pet care costs and other “select market adjustments,” part of $2 billion the firm has pumped into base compensation increases and bonuses over the last two years.

EY and Deloitte, which funneled $1 billion into compensation over the last year, also expanded mental health benefits and increased a well-being subsidy. All four firms offer some variation of remote and flexible work, but PwC last fall offered a full-virtual option to expand its reach of potential new hires and as a retention tool.

With no end in sight for the competition for accountants, firms can turn to technology, especially automation, to bridge the talent gaps, relieving pressure on staff and helping them log off sooner, said Teresa Mackintosh, CEO of financial close provider Trintech.

“You can’t keep just escalating wages or making the higher offer or offering perks and things like that. That just only works for so long,” she said.

Mark Masson, partner and head of Axiom Consulting Partners’ professional services practice, agrees that rising wages will only partially address the recruiting challenges facing the accounting profession without rethinking what that career path looks like and the nature of the highly manual work it still involves.

“The next year or 18 months you’ll probably see that crisis abate a little bit,” Masson said, “but it’s still a reckoning on the profession.”

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Kathy Larsen at klarsen@bloombergtax.com