Employers focusing on starting salaries and workload to ease pipeline pain

A shift is happening for new accountants, and I’m very happy to see it. Accounting employers have been raising starting salaries for those entering the profession, with the Class of 2023 seeing a 7% increase over the Class of 2022, an increase that is 3 percentage points above inflation.

While not nearly enough to get close to starting salaries of competing professions, it’s a start in what has to be a continuous focus on competitive compensation as accounting works on its appeal to top talent.

Further, CPA firm owners realize workload balance is increasingly important for our new generation of talent. Recent flash polling of the Top 500 firms outside the Big Four revealed that 57% of those employers will be addressing this issue in the next six months.

The profession has been facing a talent shortage, and it’s no secret that a major driver of this has been entry-level compensation in comparison to other fields that hire graduating business majors — fields like computer and information science, engineering, mathematics, and statistics. While lifetime earning potential for accountants is high (those who pass the five-year mark all the way up to partner bring home excellent salaries), without attractive and competitive initial offers, it has been difficult to entice new graduates.

Work overload and burnout are major contributors, as well. Those who experience sustained periods of overwork not only leave employers, but they also leave the profession. And many expose their negative experiences to others on social media, impacting the employer’s and profession’s reputation.

These two issues, perhaps more than any other, have constrained the pipeline. Not addressing them would further our talent decline.

The National Pipeline Advisory Group (NPAG), convened by AICPA Council, pointed in its final report to more competitive starting salaries as an essential step in gaining traction in the competition for students.

“Reversing the long-term accounting enrollment trends depends on the creation of a more attractive employee experience, including an immediate shift in starting salaries to be competitive with other majors and professions vying for top talent,” NPAG’s final report stated. “This must happen, along with more manageable workloads, more interesting work, and clearer advancement opportunities and rewards.”

So what does the Class of 2023 show us? Accounting graduates on average saw starting salaries of $65,086, up from $60,698 for the class prior, according to the National Association of Colleges and Employers.

While the increase is welcome news, we need to do more to propel accounting ahead of other fields that started ahead of us and also boosted salaries in 2023.

College freshmen and sophomores and high school students considering potential careers who review the salary data will see that majors like finance offer starting pay that is on average a little over $7,000 more per year than accounting. Or they may consider going into computer and information science, where the average starting pay of $91,411 is $26,000 higher per year than accounting.

The salary issue is significant at the entry level but also impacts retention. A Pennsylvania Institute of Certified Public Accountants survey showed that when current talent was asked to complete the statement “My desire to stay at my firm or in the accounting field would increase if …”, the leading response was “if there were higher salaries” (47%), followed by a cap on work hours (42%).

Navigating compensation changes and pay transparency can be overwhelming. HR consultants specializing in compensation can help employers study compensation and find needed adjustments to contemplate. The AICPA Private Companies Practice Section (PCPS) offers resources to assist CPA firms evaluating compensation. The PCPS Employee Compensation Toolset, developed and designed with the leadership and management coaching and consulting firm ConvergenceCoaching LLC, includes customizable tools to help evaluate compensation compared to the market and enterprisewide.

The flash polls the AICPA conducted with the largest 500 U.S. firms revealed that 88% of firms had increased starting pay in the past 12 months and 82% had increased pay for three- to five-year talent. We need to dig deeper into how competitive these increases were.

Roughly 45% of respondents overall indicated they planned to continue to raise starting salaries and three- to five-year salaries in the six months ahead. Meanwhile, addressing work volume is rising on the to-do list.

The data is encouraging. Let’s continue to build momentum.

— Sue Coffey, CPA, CGMA, is CEO–Public Accounting for the Association of International Certified Professional Accountants. To comment on this article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.