EY Rolls Out Double-Digit Pay Hikes to Recruit New CPAs
Ernst & Young LLP will reset base salaries for its accounting recruits starting this fall with pay raises of more than 10%, the Big Four firm said Friday.
EY also plans to keep increasing starting salaries for two additional years as well as boost pay for other early-career accountants. The higher wages are part of a $1 billion, three-year commitment by EY to attract and train incoming accountants for the artificial intelligence era.
Bigger paychecks from firms like EY that dominate the market will set the pace for higher wages across the industry, pressuring mid-tier and even smaller regional firms to step up and boost their entry-level pay.
EY wants to woo top students from US business schools to supply skilled staff needed to shoulder an increasingly complex workload, while also combating a shrinking pool of accounting graduates, said Dante D’Egidio, vice chair of assurance for EY Americas, in an interview Friday with Bloomberg Tax.
“Over the last several months, we realized that we needed to make some big investment here to move the needle quicker,” D’Egidio said.
EY’s investment in compensation and technology accelerates efforts among the Big Four firms to close a wage gap between what recent accounting graduates earn and the paychecks of their peers who studied finance or management.
A generational shift coupled with waning interest in accounting careers has sparked a talent crisis for an industry that plays a crucial role in capital markets and the broader economy. Regulators have called on firms to increase pay while industry leaders look at addressing the shortage by expanding paths to the CPA credential.
New Generation, New Skills
Skills for accountants today go far beyond knowing debits and credits to also understanding the technology tools their clients use and how geopolitical risks affect clients’ business. The investment also provides more training to help the firm’s professionals meet those challenges, D’Egidio said.
Other efforts aim to rotate young staff across assignments so they can pick up more skills earlier in their careers.
“We’re looking to build future leaders and that means giving people broad experience when they come to the firm. That requires investment,” D’Egidio said.
The firm’s commitment builds on $3.5 billion in compensation and bonuses it has doled out over the last three years, said Ginnie Carlier, vice chair of talent for EY Americas.
EY’s competitors have also steadily boosted wages in recent years, including targeted increases for new recruits.
Recent hires can also expect to see pay increases that go beyond typical cost-of-living adjustments to reflect the new base salaries. About 2,600 incoming tax and audit staff will benefit from the pay scale changes, which will vary by role and location, Carlier said.
The firm hasn’t said yet how much of the $1 billion in funding would go toward compensation and other benefits. But its planned technology investment includes training and tools for staff to build on a $1.4 billion commitment EY’s global arm made last year.
A Step Forward
Efforts to boost entry-level pay, however, could take several years to achieve the goal of expanding the pool of prospective accountants and ease the talent crunch.
“I don’t think we’re going to see an immediate impact on our pipeline challenge,” said Jerry Maginnis, a former KPMG office managing partner and a senior adviser to Centri Business Consulting LLC. “If the rest of the big firms follow suit, we’ll see the benefits two to three years out from this.”
The profession has shed more than 340,000 accountants and auditors since the start of the pandemic. Accounting graduation rates have been shrinking since 2016 while Baby Boomer retirements are set to rise, threatening a deeper staffing shortage.
A complex mix of factors have contributed to declining interest in accounting careers, including long hours during busy audit and tax filing seasons and competition with better-paying technology and business fields.
To reverse the trend, state regulators are weighing adjustments to education requirements that are considered a costly deterrent for students who might otherwise choose to pursue accounting.
Still, salaries loom large. An industry task force last month urged employers to boost pay, among other remedies.
EY’s plan to increase entry-level wages is “a gigantic step in the right direction for all firms,” said Steve Saah, executive director for Robert Half’s finance and accounting practice group. “The talent shortage is impacting all businesses, and dedicating financial resources to draw more people to the profession and retaining them there for a long career, is a must.”
Ripple Effects
Higher payroll costs come with a downside, forcing firms to make tough decisions like whether to raise client fees or cut other expenses.
Some may push even more work to offshore service centers in India or the Philippines where labor is cheaper, said Joe Tarasco, CEO of Accountants Advisory Group.
Recent Big Four wage increases have begun to reverse a decade or more of stagnant growth, but students continue to choose other career paths, said Elizabeth Almer, accounting professor at Portland State University.
“It’s still an open question whether their salary increases have made these salaries attractive to prospective accounting majors and competitive with other fields,” Almer said.
Compensation should reflect the extra-long hours junior accountants work compared to peers in many other business fields plus modern CPA licensing rules that require a fifth year of college, said Liz Kolar, executive vice president of exam preparation company Knowfully Learning Group.
“Catching up would still be behind,” Kolar said. “All things equal, accounting graduates would still get less per hour.”
-With assistance from Nicola M. White